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Lecture 3

Week 3 - Societal Context & Corporate Governance.docx

2 Pages
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Department
Administrative Studies
Course Code
ADMS 1000
Professor
Eytan Lasry

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ADMS 1000 September 24 , 2013 WEEK 3: SOCIETAL CONTEXT & CORPORATE  GOVERNANACE  Why Do We Need Governance? • The separation of ownership and control in modern corporations • The Principal-Agent Problem o Causes  Managerial incentives and information asymmetry o Solutions  Aligning incentives • ..of principals and agents by providing stock options, shares, etc. to Top Management Teams o Problem: share price manipulation (insider trading, etc.)  Monitoring • ...by Boards of Directors and External Auditors o Problem: insider or related directors, conflict of interest, dual- class/non-voting shares • Components o Corporation (Charter) o Shareholders (Principals) o Board of Directors o Officers/Managers (Agent) o Employees The Societal Context • Corporate Social Responsibility o The obligation of corporate decision makers to take actions
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