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CORPORATE PERFORMANCE, GOVERNANCE, & BUS ETHICS

CORPORATE PERFORMANCE, GOVERNANCE, & BUS ETHICS. CHAPT. 11, BUS 189, VERSION “B” SPRING 2007 DR. MARK FRUIN. A CRISIS IN CORP. GOVERNANCE?. ENRON, WORLD COM, ARTHUR ANDERSON, AND SO ON & ON… PRESSURES FOR PERFORMANCE VERSUS NORMS OF BEHAVIOR, DISCLOSURE & SOCIAL RESPONSIBILITY

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CORPORATE PERFORMANCE, GOVERNANCE, & BUS ETHICS

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  1. CORPORATE PERFORMANCE, GOVERNANCE, & BUS ETHICS CHAPT. 11, BUS 189, VERSION “B” SPRING 2007 DR. MARK FRUIN

  2. A CRISIS IN CORP. GOVERNANCE? • ENRON, WORLD COM, ARTHUR ANDERSON, AND SO ON & ON… • PRESSURES FOR PERFORMANCE VERSUS NORMS OF BEHAVIOR, DISCLOSURE & SOCIAL RESPONSIBILITY • RAISING THE QUESTION • WHY DO FIRMS EXIST • TO WHOM & WHAT SORT OF RESPONSIBILITIES DO THEY HAVE??

  3. CAUSES OF POOR PERFORMANCE • POOR MANAGEMENT • HIGH COST STRUCTURE • LACK OF ADEQUATE DIFFERENTIATION • OVEREXPANSION • STRUCTURAL SHIFTS IN DEMAND & NEW COMPETITION • ORGANIZATIONAL INERTIAL • !!COMPETITION IS BURIED IN CAUSE #5!!

  4. NOT MENTIONED IN BOOK • CHANGING CONCEPTIONS OF WORK AND ORGANIZATION • FROM AGRICULTURE & MANUFACTURING TO SERVICE (FOR USA) • FROM VERTICALLY INTEGRATED TO LESS V.I. FIRMS (BUT NOT YET TO VIRTUAL FIRMS) • LOSS OF TRADITIONAL MEANING- GIVING RELATIONSHIPS • CLOSE CONNECTION BETWEEN FIRMS AND COMMUNITIES • CLOSE CONNECTIONS BETWEEN FIRMS AND FOUNDING INVESTORS & GOVERNMENT

  5. IN A GLOBAL WORLD • EVERYTHING IS FOR SALE • FIRMS GO EVERYWHERE IN SEARCH OF COMPETITIVE ADVANTAGE • TRADITIONAL TIES BROKEN • TRADITIONAL IDEAS OF RECIPROCITY AND RESPONSIBILITY UNDERMINED BY RELENTLESS COMPETITION & DISTANT OPPORTUNITIES

  6. IMPROVING PERFORMANCE (BACK TO BOOK, 6TH ED.) • CHANGE LEADERSHIP • CHANGE STRATEGY • CHANGE ENVIRONMENT (NOT IN BK) • CHANGE ORGANIZATION • UNFREEZE ORGANIZATION • CHANGE & AND IN A TIMELY WAY • “REFREEZE” ORGANIZATION

  7. AGENCY THEORY (& PROBLEM) • AGENCY THEORY LOOKS AT SITUATIONS WHERE DECISION MAKING IS DELEGATED FROM PRINCIPAL TO AGENT • CEO AS PRINCIPAL VS CEO AS AGENT • BERLE AND MEANS FIND THAT SEPARATION OF OWNERSHIP & CONTROL (MGMT) THE “NORM” AS EARLY AS 1920s • AGENCY PROBLEM ARISES WHEN PRINCIPALS & AGENTS HAVE DIFFERENT GOALS, INFORMATION & VALUES • CEO COMPENSATION • CEO AS EMPIRE BUILDERS • CEO VERSUS OTHER CORPORATE EXECUTIVES • SUBSIDIARY CEO VS HOLDING CO/CORPORATE CEO

  8. WHEN THE GOVERNMENT • IS THE RESIDUAL STAKEHOLDER • A LOT OF FOLKS SAY • “THEY WON’T MISS IT” • I DESERVE THIS FOR ALL THE YEARS I’VE BEEN PAYING TAXES (AND NOT GETTING ANYTHING FOR IT) • IF WE CAN GET AWAY WITH IT, WE DESERVE IT/IT’S OURS

  9. GOVERNANCE & TAKEOVERS • ACCURACY OF FINANCIAL INFORMATION AFFECTS TAKEOVERS • CAN THOSE TAKING OVER DO A BETTER JOB THAN THOSE CURRENTLY RUNNING THE COMPANY? • HOW DIFFERENT PARTS OF THE COMPANY ARE VALUED AFFECTS GOVERNANCE

  10. ETHICAL MODELS • UTILITARIAN • GREATEST GOOD FOR THE GREATEST # • MORAL RIGHTS • PROTECT & PROMOTE BASIC RIGHTS • JUSTICE • WHO SHOULD BENEFIT AND WHY • IN A GLOBAL WORLD, HAVES AND HAVE-NOTS

  11. MAJOR CHALLENGES TO CORP PERFORMANCE & GOVERNANCE • MAINTAIN CONSISTENT LROIC? • UNDERSTAND GLOBALIZATION AND POSITION COMPANY ACCORDINGLY? • GLOBAL WARMING/CLIMATE CHANGE? • IRREVERSIBLE ENVIRONMENTAL EFFECTS • SEA TEMPERATURE RISING • GLACIERS MELTING • ASSOCIATED WEATHER CHANGES, LIKE HURRICANES • OTHER • SCHWARTZENEGGER - A NEW TYPE OF POLITICIAN?

  12. THUS, MAJOR CHALLENGES TO STRATEGY • FUNCTIONAL LEVEL STRATEGY WILL LIKELY BECOME MORE IMPORTANT • ENERGY EFFICIENCY AND CARBON EMISSIONS ADDED TO FUNCTIONAL STRATEGIES • LIKE LABOR/FACTORY CONDITIONS OF THE PAST 10-20 YEARS • BUSINESS LEVEL STRATEGY WILL BE IMPACTED IN TERMS OF PUBLIC OPINION, REPUTATION FOR PRODUCT DESIGN • CORPORATE LEVEL STRATEGY WILL BE AFFECTED - HOW

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