Bài giảng Strategic Management - Chapter 9: Strategic Control and Corporate Governance

Strategic Control and Corporate Governancechapter 9Strategic ControlStrategic control involves monitoring performance toward strategic goals and taking corrective action when needed via effective systems:Informational control systemsBehavioral control systemsCorporate governance9-*Strategic Control: Traditional ApproachThe traditional approach to strategic control is sequentialStrategies are formulated, goals are setStrategies are implementedPerformance is measured against goals9-*Exhibit 9.1 Traditional Approach to Strategic ControlStrategic Control: Contemporary ApproachRelationships between strategy formulation, implementation, & control are highly interactive, utilizingInformational controlBehavioral control9-*Exhibit 9.2 Contemporary Approach to Strategic ControlInformational Control Informational control deals with both the internal & external environmentDo the organization’s goals and strategies still “fit” within the context of the current strategic environment?Two key issues:Scan & monitor the external environmentContinuously monitor the internal environment9-*Behavioral Control Behavioral control = focused on implementation – “doing things right”Influences the actions of employees via:CultureRewardsBoundaries 9-*Exhibit 9.3 Essential Elements of Behavioral ControlBehavioral Control: Culture Organizational culture is a system ofShared values (what is important)Beliefs (how things work)Organizational culture shapes a firm’sPeopleOrganizational structuresControl systemsOrganizational culture producesBehavioral norms (the way we do things around here)9-*Behavioral Control: Rewards Reward systems & incentive programs:Powerful means of influencing an organization’s cultureFocus efforts on high-priority tasksMotivate individual & collective task performanceCan be an effective motivator & control mechanism9-*Behavioral Control: Boundaries Boundaries and constraints can be usefulFocusing individual efforts on strategic prioritiesProviding short-term objectives and action plans to channel effortsSpecific, measurable, including a specific time horizon for attainmentAchievable, yet challenging enough to motivateIndividual managers held accountable for implementation9-*Corporate GovernanceCorporate governance controls focus on relationships betweenThe shareholdersThe management (led by the Chief Executive Officer - CEO)The Board of DirectorsHow can corporations succeed (or fail) in aligning managerial motives withThe interests of the shareholdersThe interests of the board of directors9-*Corporate GovernanceThe separation of owners (shareholders) & management in a modern corporationShareholders (investors) have limited liability & can participate in the profits without taking direct responsibility for operationsManagement can run the company without personally providing any fundsThe Board of Directors are elected by shareholders & have a fiduciary obligation to protect shareholder interests9-*Corporate Governance: Agency TheoryAgency theory deals with the relationship between principals & agentsWhat to do when the goals of the principals and agents conflict?What to do when it is difficult or expensive for the principal to verify what the agent is actually doing?What happens when the principal and the agent have different attitudes and preferences toward risk?9-*Corporate Governance MechanismsCorporate governance mechanisms: aligning the interests of owners and managers throughA committed and involved Board of DirectorsShareholder activismManagerial rewards and incentivesContract-based outcomesCEO duality – should the CEO also be chairman of the board of directors?9-*Corporate Governance MechanismsExternal governance control mechanismsThe market for corporate controlThe takeover constraintAuditorsEnron, WorldCom?Banks and analystsLehman Brothers, Countrywide?Regulatory bodiesSecurities and Exchange Commission (SEC)The Sarbanes-Oxley ActMedia and public activistsBloomberg Businessweek, Ralph Nader9-*International Corporate GovernancePrincipal – principal conflicts (vs principal – agent conflicts) involveConcentrated ownership, or family ownershipMotivation to engage in expropriation of minority shareholders for personal gainBusiness groups who can take coordinated actionJapanese keiretsus, Korean chaebolsFew external regulatory constraints9-*International Corporate Governance9-*Exhibit 9.9 Principal-Agent Conflicts and Principal-Principal Conflicts: A DiagramSource: Young, M.N., Peng, M.W., Ahlstrom, D., Bruton, G.D., & Jiang, 2008. Principal-Principal Conflicts in Corporate Governance. Journal of Management Studies 45(1):196-220; and Peng, M.V. 2006. Global Strategy. Cincinnati: Thomson South-Western. We are very appreciative of the helpful comments of Mike Young of Hong Kong Baptist University and Mike Peng of the University of Texas at Dallas.