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Flashcards in chapter 9 Deck (34):
1

involves monitoring performance toward strategic goals and taking corrective action when needed via effective systems:

Strategic control

2

a sequential method of organizational control in which (1) strategies are formulated and top management sets goals, (2) strategies are implemented, and (3) performance is measured against the predetermined goal set.

traditional approach to strategic control

3

feedback loop from performance measurement to strategy formulation

control

4

Environment is stable and relatively simple
Objectives can be measured with certainty
Little need for complex measures of performance

strategic control

5

= a method of organizational control in which a firm gathers and analyzes information from the internal and external environment in order to obtain the best fit between the organization’s goals and strategies and the strategic environment

. Informational control

6

= a method of organizational control in which a firm influences the actions of employees through culture, rewards, and boundaries.

Behavioral control

7

= rules that specify behaviors that are acceptable and unacceptable

Boundaries and constraints

8

= policies that specify who gets rewarded and why

Reward system

9

Influences the actions of employees via:
Culture
Rewards
Boundaries

behavioral control

10

= a system of shared values and beliefs that shape the company’s people, organizational structures, and control systems to produce behavioral norms

Organizational culture

11

= concerned with whether or not the organization is “doing the right things”

Informational control

12

Focusing individual efforts on strategic priorities
Providing short-term objectives and action plans to channel efforts

boundaries and constraints

13

= concerned with whether or not the organization is “doing things right” in the implementation of its strategy

Behavioral control

14

Improve efficiency and effectiveness through rule-based controls, appropriate when
Environments are stable and predictable
Employees are largely unskilled and interchangeable

Minimize improper and unethical conduct via

boundaries and constraints

15

= the relationship among various participants in determining the direction and performance of corporations. The primary participants are (1) the shareholders, (2) the management, and (3) the Board of Directors

Corporate governance

16

= a mechanism created to allow different parties to contribute capital, expertise, and labor for the maximum benefit of each party

Corporation

17

have limited liability & can participate in the profits without taking direct responsibility for operations

Shareholders (investors)

18

can run the company without personally providing any funds

Management

19

are elected by shareholders & have a fiduciary obligation to protect shareholder interests

The Board of Directors

20

a theory of the relationship between principals and their agents, with emphasis on two problems: (1) the conflicting goals of principals and agents, along with the difficulty of principals to monitor the agents, and (2) the different attitudes and preferences toward risk of principals and agents.

agency theory

21

are owners of the firm (stockholders or investors),

Principles

22

are the people paid by principals to perform the job on their behalf (management)

are insiders with regard to the businesses they operate and thus are better informed than the principals

agents

23

= actions by large shareholders to protect their interests when they feel that managerial actions of a corporation converge from shareholder value maximization.

. Shareholder activism

24

are responsible for managerial rewards and incentives
Boards can require that CEOs become substantial owners of company stock

Boards

25

assumes that when one person holds both roles, he or she is able to act more efficiently and effectively

The unity of command perspective

26

Safeguards against corruption or incompetence
Removes conflict of interest, especially regarding CEO succession
Improves perceptions of legitimacy

agency theory

27

Provides clear focus
Eliminates confusion and conflict
Enhances a firm’s responsiveness
Enables quick decisions based on first-hand knowledge

unity of command

28

= methods that ensure that management actions lead to shareholder value maximization and do not harm other stakeholder groups that are outside the control of the corporate governance system.

External governance control mechanisms

29

= an external control mechanism in which shareholders dissatisfied with the firm’s management sell their shares

The market for corporate control

30

= the risk to management of the firm being acquired by a hostile raider.

Takeover constraint

31

= activities that enrich the controlling shareholders at the expense of the minority shareholders

. Expropriation of minority shareholders

32

= a set of firms that, though legally independent, are bound together by a constellation of formal and informal ties and are accustomed to taking coordinated action

Business groups

33

= conflicts between two classes of principals – controlling shareholders and minority shareholders – within the context of the corporate governance system

Principal – principal conflicts

34

especially common in emerging economies, and they differ from other organizational forms in that they are communities of firms without clear boundaries

business groups