Business
Corporate Control
Corporate control refers to the power and influence exerted by individuals or groups within a corporation to make decisions and shape the direction of the company. This control can be exercised through ownership of shares, board positions, or executive roles. It is a crucial aspect of corporate governance and can significantly impact the strategic and operational decisions of the business.
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3 Key excerpts on "Corporate Control"
- Trefor Jones(Author)
- 2004(Publication Date)
- Wiley(Publisher)
PART I CORPORATE GOVERNANCE AND BUSINESS OBJECTIVES 1 Ownership control and corporate governance 3 2 Business objectives: goals and theories of the ¢rm 23 3 Risk and uncertainty 45 1 OWNERSHIP CONTROL AND CORPORATE GOVERNANCE CHAPTER OUTLINE Chapter objectives Introduction Ownership structures Patterns of shareholding Classifying ¢rms as owner or management-controlled Case Study 1.1 Manchester United ^ owner or managerially controlled? Systems of Corporate Control Constraints on managerial discretion Improving corporate governance in the UK Case Study 1.2 Ownership and governance structures in UK’retailing Case Study 1.3 Corporate governance in English football Chapter summary Review questions References and further reading CHAPTER OBJECTIVES This chapter aims to discuss the governance structures of large ¢rms and the constraints on management by owners and corporate governance reforms. At the end of the chapter you should be able to: t Distinguish between ownership and control. t Outline and explain criteria for classifying ¢rms as either owner or man- agerially controlled enterprises. t Classify corporate governance systems as either insider or outsider systems. t Identify and analyse the main internal and external constraints on man- agerial discretion. t Outline the codes of practice that in£uence corporate governance struc- tures and practices. INTRODUCTION Firms are major economic institutions in market economies. They come in all shapes and sizes, but have the following common characteristics: g Owners. g Managers. g Objectives. g A pool of resources (labour, physical capital, ¢nancial capital and learned skills and competences) to be allocated roles by managers. g Administrative or organizational structures through which production is organized. g Performance assessment by owners, managers and other stakeholders. Whatever its size, a ¢rm is owned by someone or some group of individuals or organiza- tions.
- Lee H. Radebaugh, Sidney J. Gray, Ervin L. Black(Authors)
- 2015(Publication Date)
- Wiley(Publisher)
Figure 12.9 also shows the different factors within each player’s domain that influence how that player relates to the firm and thus affects the corporate gover- nance structure. Each of those factors will take on a different dimension in differ- ent countries based on the culture, legal system, and maturity of the market. 322 Chapter Twelve Corporate Governance and Control of Global Operations Capital Capital refers to the shareholders or owners of the company. Three factors deter- mine how shareholders exercise control to the firm: the property rights granted by the legal system, the characteristics of the financial system, and the existence of interfirm networks. Aguilera and Jackson suggest that shareholders exercise con- trol in two different ways: commitment or liquidity. Commitment refers to holding shares in the company for a long period of time, expecting long-term profits and growth. Liquidity refers to the active buying and selling of shares, searching for short-term profits as share prices fluctuate. Property Rights In countries with property rights predominantly favoring large shareholders (such as banks or large corporate investors), owners tend to pursue strategic interests toward the firm and exercise control via commitment. For exam- ple, Japan’s property rights favor banks and other large shareholders and virtually leave small shareholders unprotected. In such countries, shareholders exercise control of firms by holding stocks for longer periods of time (commitment) and for purposes other than making a short-term profit. Japanese networks, called Keiretsu, extensively use long-term, stable cross-shareholding among firms in the network. Examples of Keiretsu are Mitsubishi, Mitsui, and Sumitomo. On the other hand, U.S. laws tend to favor small, minority shareholders. These types of capital providers exercise power through liquidity by quickly buying and selling shares to make a profit as opposed to holding stocks for the long term.
eBook - PDFCorporate Governance
A Survey
- Thomas Clarke(Author)
- 2021(Publication Date)
- Cambridge University Press(Publisher)
Strategic effectiveness involves achieving an alignment between control strategies and the strategic context of the firm. Business strategies involving substantial risk require internal controls that are rich in information and involve open and subjective corporate relations. In contrast, lower-risk strategies can be managed using more formal and objective controls. For example, Hoskisson and Hitt (1988) found reliance on formal financial controls and incentives is negatively associated with the extent of research and development intensity. While outsider-dominated boards may be appropriate in larger, diversified corporations, it is possible more insider-based boards are appropriate for small R & D-intensive firms. Stiles and Taylor (2002) examine further the board’ s role in strategic deci- sion-making. The board’ s role is not to formulate strategy, but to set the context for strategic thinking, and to review management’ s strategic proposals, chan- ging these if necessary. This central role attributed to the board in the strategic process is contrary to the managerialist view of the passivity of the board: Firstly, the board is the ultimate arbiter of what constitutes the focus of the company (‘what business are we in?’, ‘what areas should we go into?’). Secondly, through selective screening and confidence building, the capacity for innovation and entrepreneurship can be regulated. Thirdly, through con- stant examination of the business definition and corporate strategy, the commitment to certain strategies or business sectors may be questioned and so boards may be instrumental in breaking organizational habits and forcing change (Stiles & Taylor 2002: 52). The roles of boards of directors in strategic direction have changed over time, and in different contexts. For example, historically boards have needed to take 25 Elements in Corporate Governance firm control of company strategy at times of crisis, even if they did not do so before.
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