COMMERCE 4PA3 Chapter Notes - Chapter 7-11: Strategic Choice, Corporate Social Responsibility, Organizational Learning

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Chapter 7 management preference analysis: the strategy-management preference. Interests may conflict management challenge is to reconcile. Ex. lower price to customers means lower wage for employees and lower profit for shareholders. Firm will not survive without any one of three key stakeholders. Must consider degree to which stakeholder holds significant position of power. Must also ensure that management does not act solely in their own interests. Board of directors is in charge of corporate governance. Things keeping managers in check: board of directors, regulatory constraints, market pressure. Sarbanes-oxley act of 2002 was most radical reform of corporate governance since great. Primary criticisms of board of directors is that it is dominated by internal management or friends of management. Mechanisms for resolving these issue: separating roles of ceo and chairman of the board, appointing more outside directors, manage executive compensation to align interests of management with those of stockholders through stock option plans. Performance crises are because of failures of judgment.

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