1. Chapter Ten Corporate Governance
Intro to scadals (STOP at 2:00!!!)

2. Boards of Directors Corporate governance:
The processes, policies, and laws that govern an organization to establish accountability and reduce conflicts of interest associated with principle-agent problems
Board of directors:
Monitoring
Advice
Resource Provision
Three Roles: Advice, Resource Provision, Monitor (Summarizes Figure 10.1, but at a higher level)
What does a board do? (STOP at 4:00)

3. Boards of Directors
Agency problem: Exists when the interest of the individuals that act as agents to manage the company, that may not align with the interest of the firm’s stockholders
Board insiders (outsiders): Members of the board of directors that are generally employed inside (outside) of the organization
CEO duality: Occurs when the chief executive officer is also the chairman of the board of directors
Related and unrelated outsiders.
WHAT DO YOU THINK MIGHT BE SOME KEY PROBLEMS WITHS BOARDS AS A MECHANISM OF CORPORATE GOVERNANCE?
Board Diversity:
(stop at 2:00)

4. Investors
Institutional investors put large sums of money into a broad portfolio of holdings
Banks
Retirement funds
Mutual funds
Pension funds
But monitoring can be too strict:
10-4

5. Executive Compensation
One of the most visible roles of boards of directors is the setting of CEO pay
In most publicly traded firms, CEO compensation generally includes:
Guaranteed salary
Cash bonus
Stock options
10-5

6. Are CEOs Paid Too Much? Are CEOs paid too much?:
CEO-to-worker pay is about in 2016.

7. Market for Corporate Governance
10-7

8. Rational Decision-Making
The process of rational decision-making:
Problem identification
Establishment and weighing of decision criteria
Generation and evaluation of alternatives
Selection of the best alternative
Decision implementation
Decision evaluation
While this model provides valuable insights by providing an ideal approach by which to make decisions, there are several problems with this model when applied to many complex decisions
Many strategic decisions are not presented in obvious ways
Rational decision-making assumes that options are clear and that a single best solution exists
Rational decision-making assumes no time or cost constraints
Rational decision-making assumes accurate information is available
10-8

9. Decision Biases
10-9

10. Decision Biases
10-10