WEEK 11: STRATEGIC CONTROL AND - Identify trends and events that signal the

CORPORATE GOVERNANCE need to revise strategies, goals and

objectives.
Strategic Control - involves monitoring
performance toward strategic goals and taking
corrective action when needed via effective
systems:
a. Informational Control System
Traditional approach to Strategic Control is
- Deals with both the internal and external
most appropriate when:
environment
- Environment is stable and relatively simple
- Do the Organization's goals and
- Goals and objectives can be measured
Strategies still “fit” within the context of
with certainty
the current Strategic Environment
- Little need for complex measures of
Two (2) key Issues: performance
a. Scan and monitor the external Four Steps of Contemporary Approach to
environment Strategic Control
b. Continuously monitor the internal 1. Identify constantly changing
environment environmental information that may have
b. Behavioral Control System strategic importance.
2. Review important information frequently
- Focus on implementation “doing things at all levels of the organization.
right” 3. Discuss Strategic implications of new
- Influences the actions of employees via: information in regular face-to-face
meetings.
a. Culture
4. Engage in debate and discussion to
b. Rewards determine which information has
c. Boundaries significance to the organization and how
to adapt strategies accordingly.
INFORMATIONAL CONTROL SYSTEM
BEHAVIORAL CONTROL SYSTEM
Traditional Approach
Organizational Culture
- Strategies are formulated and top
management sets goals (sequential) - is a system of shared values (what is
- Strategies are implemented important) and beliefs (how things work)
- Performance is measured against goals - shapes a firm’s people, organizational
- Infrequent, periodic formal review structures, and control systems.
process. - produces behavioral norms (the way we
do things around here)
Contemporary Approach
- the way an organization conducts
- Relationships between strategy business
Formulation, Implementation, and - the ethical framework for work and
Control are highly interactive and decision-making.
utilizing.
Reward and Incentives
- powerful means of influencing an
Organization’s culture
- focuses efforts on high-priority tasks
- motivates individual and collective task
performance
- can be an effective control mechanism
Boundaries and Constraints
- focusing individual efforts on strategic
priorities
- providing short term objectives and
action plans to channel efforts
- behavioral motivation through properly
conceived and implemented
compensation, rewards, and incentive
systems
- rules and conduct policies provide
explicit definition of behavioral
standards.
WEEK 12: ROLES IN CORPORATE
GOVERNANCE
Corporate Governance - structure of rules,
practices and processes that is used to manage
as well as dictate the corporate behavior of a
company
- Is a system that aims to instill policies and rules
that helps maintain the cohesiveness of an
organization
- Exists to help hold a company accountable, while
helping them steer clear of financial, legal, and
ethical pitfalls
- Encompasses the internal and external factors
that affect the interests of a company's
stakeholders.
- Influences how the objectives of a business are
set and achieved, how risks are monitored and
assessed, and how internal performance is
optimized.
Its CENTRAL PURPOSE is to make managers
accountable to shareholders. Without a corporate
governance structure, managers would be free to
make decisions that are in their own interest
Governance is oversight, the essential component
to ensure that activities are performed to the
expectations of the organization.
Administration covers activities that have a
known path and can be viewed as ancillary to
normal business operations.
Management is the broad discipline that covers
all activities that make an organization, including
both the governance and administrative tasks
SHAREHOLDERS
- Also known as STOCKHOLDERS. It is a
party that legally owns a share of a
company's stock.
- The term "shareholder" is used to denote
any person, institution or company that
has ownership of at least one share of a
company's stocks
- A shareholder owns shares or stocks
- If the value of the shares will determine
their total ownership in the company
which will decide the decision-making
power, the profit-entitlement and the
extent of personal liability.
CLASSIFICATION OF SHAREHOLDERS
Majority Shareholder - owns and controls more
than 50% of the company's outstanding shares
Minority Shareholder - owns and controls are
less than the 50% of the company's outstanding
shares
TYPES OF SHAREHOLDERS
a. Common Shareholders - majority of
shareholders fall under this type mainly
because it is more well-known among
investors. Common shares are way
cheaper compared to Preferred shares
and it is more plentiful
o has voting rights
o its potential to allow unlimited
capital gains if there is profit
o limited liability if the company
incur major losses
b. Preferred Shareholder - are paid before
common stockholders receive dividends.
 Preferred shares have a higher dividend
yield than common stockholders or
bondholders usually receive (very
compelling with low interest rates). They
have a greater claim on being repaid than
shares of common stock if a company
goes bankrupt. In other words, they're
really "preferred" by investors looking for
a more secure dividend and lower risk of
losses.
o have no voting rights
o first one to receive a fixed dividend
before the common shareholders
can receive theirs
o more stable than common despite
of being not cheaper
c. Additional: Debenture Holder - are not
the owners rather, they are the creditors
of the company. They do not have any
voting rights. Instead of receiving
dividends, they receive interest payments
from the company.
RIGHTS OF SHAREHOLDER
1. Appointment of directors
2. Legal action against directors
3. Right to appoint the company auditors.
4. Voting rights
5. Right to call for general meetings
6. Right to inspect registers and books
Can a Shareholder be a Director? – YES
7. Right to get copies of financial statements
8. Winding up of the company
9. Inspecting
10. Dividend Entitlement
11. Considerations
12. Ownership in a portion of the company
13. The right to transfer ownership
14. Entitlement to dividends
RESPONSIBILITIES OF SHAREHOLDER
1. Financing a company
For a shareholder to be a director of a
2. Monitor the conduct of the board of
corporation, he/she:
directors
3. Control over a company
4. Change the company's constitution
5. Pass resolutions at general meetings by
voting in their shareholder capacity.
a. Ordinary resolution - is passed by
the shareholders if a simple
majority of shareholders present
at the meeting vote (50%) in
favour of the proposal
b. Special resolution - required by the
Companies Act in certain cases; a
75% majority must vote in favour
6. Promote effective corporate governance
in the company that practices high
standards of accountability, transparency
and responsibility.
7. Approving the financial statements of the
company
8. Act in good faith in order to promote the
objects of the company for the benefit of
its members as a whole, and in the best
interests of the company, its employees,
the shareholders, and the community and
for the protection of the environment.
9. Exercise their duties with due and
reasonable care, skill and diligence and
exercise independent judgement.
10. Not get involved in a situation in which
they may have a direct or indirect interest
that conflicts, or possibly may conflict,
with the interests of the company.
- a shareholder can be a director
- the same person can be both a
shareholder and a director all at the same
time
- Some corporations have three types of
directors and one of it is inside directors
which are usually also shareholders,
officers, or some other type of upper-
management within the corporation.
- Not filing for or undischarged from
bankruptcy
- Not acting as an auditor for the
corporation
- Not a disqualified director of another
company
- Must be at least 16 years old
SHAREHOLDER VS. STAKEHOLDER
Shareholder
ROLE OF MANAGEMENT
- are owners of the company, but they are
not liable for the company’s debts.
- can be an individual, company, or
institution that owns at least one share of
a company
- has a financial interest in its profitability
- have the right to exercise a vote and to
affect the management of a company
- affected directly by a company's
performance
Stakeholders can be:
- Owners and shareholders
- Employees of the company
- Bondholders who own company-issued
debt
- Customers who may rely on the company
to provide a particular good or service
- Suppliers and vendors who may rely on
the company to provide a consistent
revenue stream
ROLES OF BOARD OF
MANAGEMENT
CORPORATE GOVERNANCE
- Coordination of the staff’s efforts and
administration of tasks like setting an
organization’s strategy to achieve a goal
and objectives through efficiently and
effectively use of available resources.
- Usually led by a CEO, it is responsible for
setting, managing, and executing the
strategies of a company including but not
limited to running company operations
overseen by the board and keeping them
informed about it.
DIFFERENCE OF MANAGEMENT TO BOARD
OF DIRECTORS
1. Management handles low-level managing
policy decisions while BOD makes high-
level policy decisions.
2. Management reports relevant
information to the board using well-
documented analyses and
recommendations while BOD receives
report and make informed decisions
about major issues.
 Develops and implements corporate
strategy and operates the company’s
business under the supervision of board
of directors and its audit committee.
 Produces financial statements fairly
presenting the company’s financial
condition and results of operations
 Makes timely disclosures that the
investors need to assess the financial and
business soundness and risks of the
company.
 Responsibilities: strategic planning, risk
management, and financial reporting.
 An Effective Management Team runs the
company while focusing on executing the
company’s strategy over a meaningful
time horizon and at the same time avoids
an undue emphasis on short-term
metrics.
DIRECTORS IN
 to ensure that the company’s corporate
governance policies integrate the
corporate strategy, risk management,
accountability, transparency, and ethical
business practices.
 to supervise the operation of the Board,
and assuring its effectiveness and
independence
 to oversight in maintaining company
resources to make sure that the company
is equipped with the tools it needs to be
managed well
 to make decisions in the best interest of
the company, and to act with due skill and
careand consider the interests of its
employees
 to establish goals and objectives inclined
to company's vision and mission, values
and policies to guide its operations for the
long-term development and its stability
  to assess financial reporting, reputation,
litigation, ethics, technology, health,
safety &environmental risks to pursue
internal and external controls promptly

TYPES OF ORGANIZATIONS STRUCTURES

a. Simple Organizational Structure
 o the staff is an extension of the top
to develop a good working relationships and
sense of mutual confidence with
managers by communicating clearly and
in a timely manner
 acting as stewards of the company that
govern for the present times and provide
guidance for the company’s future. Also,
the one who create dividends and options
policy
WEEK 13: CREATING EFFECTIVE
ORGANIZATIONAL DESIGNS
Organizational structures - Refers to
formalized patterns of interactions linking;
a.) Tasks
b.) Technologies
c.) People
Structure - Provides a balance between:
- the need for division of tasks into
meaningful groupings
- the need to integrate these groupings for
maximum efficiency and effectiveness
- Is the oldest and most common
organizational form where:
o the organization is small, with a
single or very narrow product line
o the owner-manager makes most of
the decisions
executive’s personality.
b. Functional Organizational Structure
- Where the major functions of the firm are
group internally.
o the organization is small, with a
single or closely relative product
or service, and high production
volume.
o the owner-manager needs
specialists in various functional
areas.
o the executive has responsibility for
coordination and integration of the
functional areas.
c. Divisional Organizational Structure d. Strategic Business Unit (SBU) Structure
- Where products, projects, or product - where similar products or markets are
markets are group internally. grouped into units to achieve synergy.
o Divisions are relatively o Variation on the divisional
autonomous, consisting of structure
products or services that are o Synergies are achieved through
different from those of other related diversification – core
divisions. competencies, shared
o Each division includes its own infrastructures, market power.
functional specialists typically o Each SBUs operates as a profit
organized into departments. center.
o Division and executives help
determine product market and
financial objectives.

WEEK 14&15: Achieving Competitive

Advantage (Monitoring, Evaluating and
Improvement of Strategy)
- A process by which corporate activities
and performance results are monitored,
evaluate, and controlled so that actual
performance can be compared with
desired performance.
Monitoring is the systematic process of
collecting, analyzing and using information to
track a program's progress toward reaching its
objectives and to guide management decisions.
Evaluation is the systematic assessment of an
activity, project, program, strategy, policy, topic,
theme, sector, operational area or institution’s
performance.
Importance:
o To ensure that activities are being
performed within the defined parameters.
o To ensure that activities are consistent
with company DNA.
o To assess ability to achieve goals and
identify problems.
SMEAC STRATEGIC TOOLS
1. Benchmarking is a strategy tool used to
compare the performance of the business
processes and products with the best
performances of other companies inside
and outside the industry.
o Benchmarking is the search for
industry best practices that lead to
superior performance.
1. Plan. Assemble a team. Clearly define what
you want to compare and assign metrics to it.
2. Find. Identify benchmarking partners or
sources of information, where you'll be able to
collect the information from.
3. Collect. Choose the methods to collect the
information and gather the data for the metrics
you defined.
4. Analyze. Compare the metrics and identify the
gap in performance between your company and
the organization observed. Provide the results
and recommendations on how to improve the
performance.
5. Improve. Implement the changes to your
products, services, processes or strategy.
MONITORING AND EVALUATION STRATEGIC
TOOLS
2. Strategic Evaluation Framework
- a conceptual framework used in collecting
information about how well the strategic
plan and strategies are progressing.
Examining the underlying bases of Strategy
 Review of SWOT would reveal
how competitors have reacted to
the firm’s strategies, how
competitors have changed their
strategies in response of (our)
company’s strategies, enables the
managers to identify the real
reasons for unsatisfactory results.
Comparing expected results with actual results
 actual results are compared with
the planned results, deviations are
detected, if there is any.
Taking corrective actions to ensure performance
conforms to plans
 Actions need to be undertaken on
the basis of the nature of the
deviation and the causes of such
deviation. It may be necessary to
make directives in objectives, the
strategy itself, organization
structure, human resources
deployed on strategy
implementation, policies, resource
allocation, reword systems and
more.
3. Balance scorecard – It is a system that
measures the organization’s progress in
accomplishing its strategic objectives. The
purpose is to align the company’s vision
and strategies to the activities of the
organization
Robert Kaplan and David Norton developed
the Balance Scorecard which incorporates the
following:
1. Financial Perspective includes
operating income, ROI and economic
value. It measures the flow of funds in a
timely and consistent manner. Manager
analyze the costs and how the funds can
realize customer satisfaction.
2. Customer Perspective measures
customer satisfaction, customer loyalty.
 3. Business Process Perspective includes 2. Return on Equity
procurement of materials, production and 3. Profit Margin
order fulfillment. Managers see to it that
the products/services conform to 4. Market Share
customer requirements and standards. 5. Debt to Equity
4. Learning and Growth Perspective
6. Earnings Per share
measures of employee’s satisfaction and
retention. Includes training and 7. Sales Growth
improvement since employees are 8. Asset Growth
considered as the main source when it
comes to knowledge. Since technological
shift rapidly, employees must.
10 CHARACTERISTICS OF AN EFFECTIVE
EVALUATION SYSTEM
1. Strategy – evaluation activities must be
economical
2. Too much information or too little can be
bad
3. Too many controls can do more harm
than good
4. Should be meaningful
5. Should be specifically relate to a firm's
objectives
6. Should provide managers with useful
information about tasks over which they
have control and influence
7. Should provide timely information
8. Should be designed to provide a true
picture of what is happening
9. Strategy evaluation process should not
dominate decisions; it should foster
mutual understanding, trust and common
sense.
10. The system has the ability to convince
participants that failure to accomplish
certain objectives within a prescribed
time is necessarily a reflection of their
performance.
Key Financial Ratios that are Useful as
Criteria for Strategy Evaluation
1. Return on Investment