1 / 11

Management: Performance

MGT 427 - Corporate Governance. Management: Performance. Faisal AlSager. Week 9. Objectives. To highlight the rising importance of managers To clarify what shareholders want from managers To raise some of the shareholders’ concerns. Manager’s Influence.

aggie
Download Presentation

Management: Performance

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. MGT 427 - Corporate Governance Management: Performance • Faisal AlSager Week 9

  2. Objectives • To highlight the rising importance of managers • To clarify what shareholders want from managers • To raise some of the shareholders’ concerns

  3. Manager’s Influence • In the 1990’s, managers have become more noticeable • CNN’s Ted Turner, Intel’s Andy Grove, Amazon’s Jeff Bezos, and GE’s Jack Welch

  4. Issues with Managers • Shareholders and employees share concerns about managers • Mainly, the tens of millions of dollars they receive • Also, how long will the manager positively impact the share price? Usually, it’s on short-term only • And as we know, many CEOs have not set a good example of responsible share ownership

  5. What Do We Want from the CEO? • Change is the only certainty in business • Thus, we want a CEO who is able, by virtue of ability, expertise, resources, motivation, and authority, not just to keep the company ready for change but ready also to benefit from changes • The CEO must be powerful enough to do the job • BUT he/she must be accountable enough to make sure the job is done correctly • CEO decisions must be in the long-term interests of shareholders rather than in his/her own interests

  6. How Do We Achieve that Balance? • Answer: Executive Compensation • Shareholders prefer a compensation plan with maximum variability • Management prefer a compensation plan with maximum security

  7. Measuring CEO’s Performance? • Question: How Can we measure a CEO’s performance? • Answer: we usually use same measures we use for measuring the company’s performance

  8. Challenge • The biggest challenge a company faces is not failure, but success! • Giants of the 1960s became problems of the 1980s and 1990s (Xerox, Kodak, General Motors) • Giants of the 1990s became problems of the 2000s (Enron, Tyco, Global Crossing, WorldCom)

  9. What Caused Failures? • Company’s failure was the effect of bad governance • Same person held the following positions: • CEO • chairman of the board • CEO of the largest operating division • chairman of the nominating committee of the board • trustee of the 25 percent of the company’s stock

  10. Executive Compensation • One important issue of governance is excessive CEO compensation • This issue was the first corporate issue to be the focus of the press • This issue has the most direct impact on shareholder value • To the shareholder, compensation represent an investment opportunity: • how much will the return on investment be? • Is it going to sustain?

  11. References • Corporate Governance (4th Edition): Monks, R. and Minow, N. 2004. (Publisher: Wiley-Blackwell)

More Related