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Lecture 2

AFM203 Lecture Notes - Lecture 2: Decision-Making
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3 Pages
58 Views
Fall 2018

Department
Accounting & Financial Management
Course Code
AFM203
Professor
Bruce Wolff
Lecture
2

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Corporate Governance
What is corporate/governance structure?
o How a company organizes itself to set strategy and make/execute decisions?
How does governance differ between private and public companies?
o Key shareholders of the private company decide who to appoint to the board of directors
o Public companies are required to have a board of directors
Protect the shareholders' interests
How is decision-making different between a small start-up and a large corporation?
o Start up
Owners and CEO drive strategy, alongside Sr. Management Team
o Large corporation
Public companies have Board, many private
A company's board of directors have the highest authority; they approve strategic decision-making &
strategic plans, act as advisors and protect shareholders' interests.
Why is it critical to focus on a company's structure when it comes to making high quality
decisions?
o Accountability of key executives/management
o Structure will support strategic goals (important to understand what these are)
o Structure will assist management make high quality decisions in a timely manner (leader vs
follower)
o Increase company value: "a company's value is no more (and no less) than the sum of the
decisions it makes and executes"
A corporation's structure will produce better performance is if it improves the organization's
ability to make key decisions better and faster than competitors
Functional Structure (CEO and VPs)
Pros
Cons
Eliminates possible duplicates of efforts
Focus on specialized skills
Facilitates communication within
functional area
Accountability by function
Focus on short-term routine tasks/operations
Possibility of reduction of communication within
departments
Narrow business perspective
Ideal for small to medium enterprises with stable and predictable business operations
Product/Service Structure
Pros
Cons
Different processes within different product areas
Executives can own strategy/decisions for different
product lines
High cost due to duplication of
geography, customer
Competition between divisions

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Description
Corporate Governance What is corporate/governance structure? o How a company organizes itself to set strategy and make/execute decisions? How does governance differ between private and public companies? o Key shareholders of the private company decide who to appoint to the board of directors o Public companies are required to have a board of directors Protect the shareholders' interests How is decision-making different between a small start-up and a large corporation? o Start up Owners and CEO drive strategy, alongside Sr. Management Team o Large corporation Public companies have Board, many private A company's board of directors have the highest authority; they approve strategic decision-making & strategic plans, act as advisors and protect shareholders' interests. Why is it critical to focus on a company's structure when it comes to making high quality decisions? o Accountability of key executives/management o Structure will support strategic goals (important to understand what these are) o Structure will assist management make high quality decisions in a timely manner (leader vs follower) o Increase company value: "a company's value is no more (and no less) than the sum of the decisions it makes and executes" A corporation's structure will produce better performance is if it improves the organization's ability to make key decisions better and faster than competitors Functional Structure (CEO and VPs) Pros Cons Eliminates possible duplicates of efforts Focus on short-term routine tasks/operations Focus on specialized skills Possibility of reduction of communication within Facilitates communication within departments functional area Narrow business perspective Accountability by function Ideal for small to medium enterprises with stable and predictable business operations Product/Service Structure Pros Cons Different processes within different product areas High cost due to duplication of Executives can own strategy/decisions for different geography, customer product lines Competition between divisions
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