Organization structure:

Definition of corporate governance:

Corporate governance is the system by which organizations are

directed and controlled. Cadbury defined corporate governance

as ‘the direction, management and control of an organization’

(1992) . It relates to the way in which companies are governed,

with a particular emphasis on the relationship between

shareholders and directors. Corporate governance looks at

how an organization is managed in order to achieve its

objectives.

A company should be managed in the best interests of its

stakeholders, with a particular emphasis on its shareholders.

Consideration should be given to all stakeholders in relation to the

activities a business undertakes, for example employees, the

general public, lenders, suppliers should all be considered and all

factors affecting them covered, not just financial issues. For

example, any social and environmental issues connected with

activities should realistically be thought through. In the United

Kingdom, company law protects shareholders but it does not

protect other stakeholders affected by a company’s decisions.

‘the purpose of corporate governance is to facilitate effective,

entrepreneurial and prudent management that can deliver the

long-term success of the company’. In order to achieve good

corporate governance a company must have regard to the

following:

• It must act in the best interest of its owners (shareholders).

• Consideration should be given to all stakeholders.

• It must comply with relevant codes.

• Consideration should be given to the balance of power within the

board of directors.

• Fair remuneration should be exhibited.

• Risk must be monitored and managed.

• Good ethics must be observed and Corporate Social

Responsibility must be considered.

• It should employ independent auditors.

The corporation is governed by the board of directors that oversees top management with the
concurrence of the shareholders.

the board is required to direct the affairs of the corporation but not to manage them.

If a director or the board as a whole fails to act with due care and, as a result, the corporation is
in some way harmed, the careless director or directors can be held personally liable for the harm
done.

Top management responsibilities

1.involve getting things accomplished through and with others in order to meet the corporate
objectives.

2.are multidimensional and are oriented toward the welfare of the total organization.

3.Monitor developments inside and outside the corporation

4. Evaluate and Influence management proposals, decisions and actions

5.Initiate and Determine the corporation’s mission and strategies

Agency theory

states that problems arise in corporations because the agents (top management) are not willing
to bear responsibility for their decisions unless they own a substantial amount of stock in the
corporation.

Lead director

consulted by the Chair/CEO regarding board affairs and coordinates the annual evaluation of the
CEO.

—key expectations of directors and the board

They must lead the business and set out its strategic aims and plans.

• They must ensure that the management of the business is carrying out its role correctly.

• The board must consist of a chief executive, chairman and a suitable mix of executive and
non-executive members who are appointed and selected appropriately following the company’s
procedure for appointment.

• They must make sure that the business has appropriate risk management techniques and
necessary internal controls to reduce the risk of inappropriate activities taking place.

• Shareholders’ and other stakeholders’ needs must be met by the company.

• They must meet regularly and keep minutes of all decisions.

• Directors must have a clear list of their responsibilities.

• Their pay should be decided by the remuneration committee with their pay linked in to their
abilities and performance.

• The role of the chairman and chief executive should be separated.

• There should be a strong presence of non-executive directors on the board.

• The chairman and non-executive directors need to meet regularly to review board performance
and the non-executive directors need to review the performance of the chairman.

• All board members have a duty to update their skills on a regular basis.

• They should receive information in a timely and efficient manner.

• The board should review the effectiveness of their performance on a regular basis.

• New directors should be brought in regularly and re-elected every three years, with long service
contracts discouraged (12 months being optimal).

Executive leadership

• the directing of activities toward the accomplishment of corporate objectives, sets the tone for
the entire corporation.

Strategic vision

• description of what the company is capable of becoming.

Characteristics of effective CEOs include:

1. The CEO articulates a strategic vision for the corporation.

2. The CEO presents a role for others to identify with and to follow.

3. The CEO communicates high performance standards and also show confidence in the
followers’ abilities to meet these standards.

Strategic planning staff

• charged with supporting both top management and the

business units in the strategic planning process

Strategic planning staff responsibilities include:

1. Identify and analyze company-wide strategic issues, and suggest corporate strategic
alternatives to top management

2. Work as facilitators with business units to guide them through the strategic planning process
stakeholders 定义？

a person or group who has an interest in or can be affected by an organization’s

activities.covering employees, shareholders, management, creditors, trade unions, customers,
suppliers, investors, the government, the local community, future generations and so on.

1.split stakeholders into those who are inside the organization and those who are outside –
namely internal and external stakeholders.

Internal stakeholders would cover groups such as employees, management and trade

unions. External stakeholders would cover groups such as customers, competitors

and suppliers.

2.Another way of classifying stakeholders would be to consider those who are most affected
and/or dependent on the organization and those who are less affected/dependent on the
organization.

Those who are likely to be more affected by the organization are shareholders, employees,
management, customers and suppliers. Those who are likely to be less affected are the
government and the wider community.

3.Placing stakeholders under the heading of ‘primary’ and ‘secondary’ stakeholders can

also help.

Primary stakeholders are those who have a direct impact on the organization and without whom
it would be difficult to operate. Stakeholders would be the government, shareholders and
customers. Secondary stakeholders such as the community and management have a less direct
impact on the organization and the company could survive without them to a certain extent.

4.Another useful way of categorizing stakeholders:active& passive

active, such as management, employees, regulators, suppliers and pressure groups,

and those who are passive such as shareholders, local communities, the government

and customers.
For the growing small company, adoption of the key principles of good corporate

governance involves:
• delegation of authority away from one individual who is controlling shareholder,

director and manager;

• institution of a system of checks and balances so no one person has unfettered

control;

• professional decision-making based on reliable information supplied to a properly

constituted and empowered board;

• accountability based on defined levels of responsibility;

• transparency regarding the firm’s activities, to encourage high standards of behavior.

The development of effective governance processes may:

• lift a significant burden from the founder;

• facilitate a swift succession; and

• allow access to a wider pool of expertise and know-how.

The result may be improved leadership, decision-making and strategic vision. Improved

governance may also make it easier to monitor and manage the various risks to which

the company is exposed, particularly as it grows in size and complexity.

Learning objectives （IIA-P5）

1. Understand what financial strategy is, and how it can add value.

2. Explain why shareholder value is created by investments with a positive

net present value.

3. Appreciate how the relationship between perceived risk and required

return governs companies and investors.

4. Differentiate the different models of measuring shareholder value.

5. Explain why share price is not necessarily a good proxy for company

value.

6. Outline how agency theory is relevant to corporate finance.

Marketing is the management process responsible for identifying, anticipating and

satisfying customer requirements profitably.

Strategy is deciding where to go and the means to get there.

Strategy is a declaration of intent.

strategic management: A continuous, iterative process aimed at keeping

an organization as a whole appropriately matched to its environment;

Keeping the business in tune with management and marketing forces both outside and inside the
firm;

What is SHRM?

Strategic human resource management has been defined as ‘the linking of human resources with
strategic goals and objectives in order to improve business performance and develop innovative
organizational culture that foster innovation and flexibility.

Which definition of OD do you prefer? Why? Group 1

Pick an organization of which you are a member. Would you rather work with an internal or an
external OD consultant? Why? Group 2

Why do you think that appreciative inquiry consultants might have a difficult time in selling the
concept to clients? What arguments might be used to make the concept acceptable? Group 3
If OD is so potentially relevant, why is it often ignored? Group 5