1. Learning Objectives zTo learn the three components of a mission statement and to identify those components when examining actual mission statements zTo learn the problems that agency theory identifies when examining corporate governance relationships

2. What is a Company Mission? z An enduring statement of a firm’s intent z Who z What z How

3. Eli Lilly zWe provide customers “Answers That Matter” through innovative medicines, information, and exceptional customer service that enable people to live longer, healthier, and more active lives.

4. Kraft zThe mission of Kraft is meeting consumers’ needs and making food an easier, healthier, more enjoyable part of life by fulfilling a promise to deliver the best, ensuring high standards in everything we make, caring for people, communicating to the environment and listening to the ideas of others through an open dialogue.

5. Three Components of the Mission zIdentification of the basic product or service zIdentification of the primary market zIdentification of the principal technology for production or delivery

6. Overseeing the Strategy Makers - The Board of Directors z 8-12 qualified individuals zEstablish and update the mission zElect and determine compensation of the firm’s top officers zDetermine dividends zSet important policies on a broad basis zSet company objectives and allow management to implement long-term strategies zManaging legal and ethical matters for the company as a whole

7. Agency Theory zAgency problems – moral hazards and shirking zCompany growth, rather than profitability zDiversification of risk zAvoidance of risk zExecutives optimize their personal payoffs zExecutives act to protect their status (entrenchment)

8. Solutions to the Agency Problem zIncentives to align executive interests with shareholders zMonitoring by directors