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38 Cards in this Set
- Front
- Back
Corporate Governance
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the structures, procedures and policies established to protect the interest of the shareholders
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Top Management
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The CEO and other managers who have responsibility for the entire organization
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Board of Directors
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elected representatives of the shareholders with responsibility for hiring, directing, compensating ans evaluating top management
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Traditional View of the Corporation
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1. The Corp. is property of the shareholders
2. Corp. exists to achieve the objectives of the shareholders 3. the job of the Board of Directors is to supervise top management in the interests of the shareholders |
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The Autonomous Corporation
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1. Corporations are Social institution (with identity seperate from the individuals involved)
2. the primary objective of the corporation is to supervise and prosper 3. the job of the Board of Directors is to work with top management in determining the "best interests of the corporation" |
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Specific Issue of shareholder
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1. Executive Compensation (level, not connected to performance)
2. Failure to address problems that threaten the firm hostile takeover attempts and corporate responses that disenfranchise shareholders 4. failure of boards to detect/prevail illegal or improper acts by Top Managers 5. Decisions that "protect the firm" that disregard or victimize shareholders while protecting other parties |
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Why have some boards become tools of top management rather than protectors of shareholders interests
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1. chairman of the board is also the CEO
2, composition of the board of directors (inside directors, related outside directors, unrelated outside directors) 3. ability of the board to control nominations and elections |
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What can discontented shareholders do?
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1. sell their stock
2. change legal rules for corporate governance 3. file shareholder lawsuits |
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influence of pressure from institutional investors
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1. separate the position of chairman and CEO
2. reduce the # of inside directors 3. outside directors should be unrelated 4. Directors should limit the number of boards they serve 6. limit terms of service for directors |
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Differences between the contract model and the Tort model
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5 differences
1. principle 2. grounds for suit 3. potential defendants 4. potential plaintiffs 5. recovery |
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Contract model
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1. principle: courts have the authority to enforce contracts
2. grounds for suit: generally limited to failure to comply with obligations (warranty) 3. potential defendants: parties to the contract (usually the seller) 4. potential plaintiffs: parties to the contract (usually each plaintiff is sued individually because each purchase is a separate contract) 5. recovery: normally limited to economic losses |
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tort model
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1. principle: courts have broad authority to right "wrongs"
2. grounds for suit- defendant displayed; intent to harm, reckless disregard, negligence, strict liability 3. potential defendants: anyone with plausible responsibility. the principle of JOINT AND SEVERAL LIABILITY could be applied 4. potential plaintiffs: may be single party or a "class" of people who alleged the same harm (class action suits may be permitted) 5. Recovery: may include compensatory damages (economic, noneconomic) or punitive damages |
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Facts about puntitive damages
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1. puntitive damages may be requested by a plaintiffs attorney only after the jury has returned an award of compensatory damages
2. the judge is not required to allow puntitive damages, and in most cases does not 3. when the judge permits the jury to consider puntitive damages, they will normally return some award, often based on sympathy for the defendant 4. in many cases the plaintiff will not recieve the entire amount of the punitive award and in some cases NONE of it |
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Definition of Tort Reform
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includes a variety of changes that have been proposed or adopted in some jurisdiction to address specific problems
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problems that tort reform attempt to fix
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- reducing judicial backlog
-preventing fraud and extortion - restoring justice for small business - protecting consumer access to products and services - protecting the public from high costs associated with excessive jury awards |
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common subjects of tort reform legislation
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-strict "loser pays"
-replacing joint and several Liability with comparative fault for non-economic damages -limits on the size of punitive damages -limits on attorneys' fees in some cases -establish a magistrate system for specifc types of cases that are legally and technically complex |
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Changes that have affected the relationship
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1. globalization of industries and markets
-cost control, flexibilty 2. technological innovations -increased rate of change/shorter technological lifespans -elimination/creation of industries , industry segments and jobs 3. rising costs of benefits 4. diversity of lifestyle -affects value benefits to employee |
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Strategies for attracting/retaining good employees
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1. change benefit packages
2. Change work schedules -flextime, compresses work week, telecommuting 3. redefine career paths -foreign postings, lateral transfers 4. introduce outplacement programs -extend benefits and assistance for personnel who are displaced due to mergers, aquisitions or downsizing 5. Redefine Career Paths -foreign postings, lateral transfers 6. introduce outplacement programs -extend benefits and assistance for personnel who are displaced due to mergers, acqusitions or downsizing |
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what rights do shareholders have in a corporation
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1. to receive declared dividends
2. to vote on: BOD, acquisitions, charters 3. to receive annual reports 4. bring shareholder suits against company 5. to sell their shares of stock |
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way shareholder activism attempts to influence behavior of corporate boards
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corporate governance
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corporate governance
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the process by which a company is controlled or governed
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Reasons that have given rise to the consumer movement
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1. to prevent consumers from being abused by unfair prices
2. prevent unsafe products 3. prevent promotion of products known to be harmful to human health 4. complex products have complicated choices when consumers go shopping 5. services/products have becomre more specialized and difficult to judge 6. some businesses have ignored public saftey |
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Rights of consumers
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1. the right to be informed
2. the right to safety 3. the right to chose 4. the right to be heard 5. the right to privacy |
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the right to be informed
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to be protected against fraudulent and deceitful information, advertising and labeling and to be given facts to make an informed decision
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the right to safety
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to be protected against the marketing of goods that are hazardous to health
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the right to chose
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to be assured of access to a variety of products and services at a competitive price
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the right to be heardq
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to be assured that consumer interests will receive full and sympathetic consideration in the formulation of government policy
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the right to privacy
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that the information disclosed in the course of a commercial transaction, such as a health conditions, financial status, or identity is not shared with others unless authorized
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How Rights of consumer laws have been reflected in the goals of consumer laws
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- some laws are intended to provide consumers against possible hazards
- to promote competitive pricing and consumer choice - to protect privacy |
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changes businesses have advocated to reform product liability laws
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- most large class action suits were moved from state to federal courts
-limit punitive damages -require loser to pay the costs of winner -strict liability |
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what rights to employees have in the work place
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1. the right to organize and bargain collectively
2. the right to a safe and healthy workplace 3. the right to a secure job |
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what current issues with regard to employee privacy have created controversy
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1. privacy rights
2. electronic monitoring 3. romance in the workplace 4. employee drug use and testing 5. alcohol abuse at work 6. employee theft and honesty testing |
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what kinds of things can businesses do to strengthen the community in which they operate
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1. hire a community relations manager
2. economic development 3, crime abatement 4, housing 5. aid to minority enterprises 6. diaster, terrorism and war relief |
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globalization
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refers to the increasing movement of goods, services, and capital across national boarders. it is a process of an ongoing series of interrelated events
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factors of the acceleration of globalization
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1. technological innovation
2. transportation systems 3. the rise of major transnational corporations 4. the rise of major transnational corporations 5. social and political reform |
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benefits of globalization
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1. it increases economic productivity
2. globalization tends to reduce process for consumers 3. globalization also benefits consumers by giving them access to a wide rande of diverse goods and the latest "big thing" 4. for the developing world globalization also brings benefits |
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costs of globalization
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1. job insecurity
2. the environment and labor standards may be weakened as companies seek manufacturing sites where regulations are most lax 3. globalization prevents individual nations from adopting policies promoting environment or social objectives if these discrimiate against their products 4. erodes regional and national cultures |
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ways shareholder activism attempted to influence behavior of corporate boards
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1. instituational investors: have become mroe assertive in prompting the interests of their members
2. social investmetL the use of stock ownership as a strategy for promoting social objectives -stock screening -social responsibility shareholder resolutions 3. stockholder lawsuits-advance their interests by suing the company |