Bay State College Boston Strategic Management and Business Policy Essay

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Bay State College Boston

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Meet the 500 word count, Makes connections to the course content and/or other experiences. The course is: Strategic Management and Business Policy Toward Global

Sustainability, 15th edition, Authors: Thomas L. Wheelen and J. David Hunger.

The chapter is chapters 2 and 3;

Please refer to key terms and concepts from the text as you answer the following questions:

  1. Should all CEOs be transformational leaders?
  2. Would you like to work for a transformational leader?

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Strategic Management and Business Policy 15e Chapter 2 Corporate Governance 15e Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. Learning Objectives 2-1 Describe the role and responsibilities of the board of directors in corporate governance 2-2 Explain how the composition of a board can affect its operation 2-3 Describe the impact of the Sarbanes–Oxley Act on corporate governance in the United States 2-4 Discuss trends in corporate governance 2-5 Explain how executive leadership is an important part of strategic management Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-2 Role of the Board of Directors (1 of 2) • Corporation – a mechanism established to allow different parties to contribute capital, expertise and labor for their mutual benefit • The corporation is fundamentally governed by the board of directors overseeing top management, with the concurrence of the shareholders. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-3 Role of the Board of Directors (2 of 2) • Corporate governance – refers to the relationship among the board of directors, top management, and shareholders in determining the direction and performance of the corporation Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-4 Responsibilities of the Board (1 of 2) 1. Effective board leadership including the processes, makeup, and output of the board 2. Strategy of the organization 3. Risk vs. initiative and the overall risk profile of the organization 4. Succession planning for the board and top management team 5. Sustainability Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-5 Responsibilities of the Board (2 of 2) • Due care – the board is required to direct the affairs of the corporation but not to manage them • If a director or the board as a whole fails to act with due care and, as a result, the corporation is in some way harmed, the careless director or directors can be held personally liable for the harm done. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-6 Role of the Board in Strategic Management • Monitor developments inside and outside the corporation • Evaluate and Influence management proposals, decisions and actions • Initiate and Determine the corporation’s mission and specify strategic options Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-7 Figure 2-1: Board of Directors’ Continuum Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-8 Board of Directors Composition (1 of 4) • Inside Directors – typically officers or executives employed by the corporation • Outside Directors – may be executives of other firms but are not employees of the board’s corporation Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-9 Board of Directors Composition (2 of 4) • Agency theory – states that problems arise in corporations because the agents (top management) are not willing to bear responsibility for their decisions unless they own a substantial amount of stock in the corporation Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-10 Board of Directors Composition (3 of 4) • Stewardship theory – proposes that, because of their long tenure with the corporation, insiders (senior executives) tend to identify with the corporation and its success Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-11 Board of Directors Composition (4 of 4) • Affiliated directors – not employed by the corporation, handle legal, or insurance work • Retired executive directors – used to work for the corporation, partly responsible for past decisions affecting current strategy • Family directors – descendants of the founder and own significant blocks of stock Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-12 Codetermination: Should Employees Serve on Boards? (1 of 3) • Codetermination – the inclusion of a corporation’s workers on its board – began only recently in the United States • Although the movement to place employees on the boards of directors of U.S. companies shows little likelihood of increasing, the European experience reveals an increasing acceptance of worker participation on corporate boards. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-13 Codetermination: Should Employees Serve on Boards? (2 of 3) • Direct interlocking directorate – when two firms share a director or when an executive of one firm sits on the board of a second • Indirect interlocking directorate – when two corporations have directors who serve on the board of a third firm Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-14 Codetermination: Should Employees Serve on Boards? (3 of 3) • Interlocking directorates – useful for gaining both inside information about an uncertain environment and objective expertise about potential strategies and tactics Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-15 Nomination and Election of Board Members (1 of 2) • 97% of large U.S. corporations use nominating committees to identify potential board members • Staggered boards – only a portion of board members stand for reelection when directors serve more than oneyear terms Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-16 Nomination and Election of Board Members (2 of 2) Main reasons individuals serve on a board: • Interested in the business—79% • Make a difference—65% • Stay active in business community—50% • Recruited by friend on the board—25% • Compensation—14% • Networking opportunities—11% • Notoriety/prestige—9% • Recruited by friend, not on the board—4% Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-17 Organization of the Board (1 of 4) • The size of a board in the United States is determined by the corporation’s charter and its bylaws, in compliance with state laws. • Although some states require a minimum number of board members, most corporations have quite a bit of discretion in determining board size. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-18 Organization of the Board (2 of 4) • The average large, publicly held U.S. firm has ten directors on its board. • The average small, privately-held company has four to five members. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-19 Organization of the Board (3 of 4) • Lead director – consulted by the Chair/CEO regarding board affairs and coordinates the annual evaluation of the CEO • 96% of U.S. companies that combine the Chairman and CEO positions had a lead director. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-20 Organization of the Board (4 of 4) • The most effective boards accomplish much of their work through committees. • Although they do not usually have legal duties, most committees are granted full power to act with the authority of the board between board meetings. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-21 Impact of the Sarbanes-Oxley Act on U.S. Corporate Governance • Sarbanes Oxley Act – designed to protect shareholders from excesses and failed oversight of boards of directors – whistleblower procedures – improved corporate financial statements Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-22 Evaluating Governance S&P Corporate Governance Scoring System researches four major issues: 1. Ownership structure and influence 2. Financial stakeholder rights and relations 3. Financial transparency and information disclosure 4. Board structure and processes Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-23 Avoiding Governance Improvements • Multiple classes of stock • Public to private ownership • Controlled companies Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-24 Trends in Corporate Governance (1 of 2) • Boards shaping company strategy • Institutional investors active on boards • Shareholder demands that directors and top management own significant stock • More involvement of non-affiliated outside directors • Increased representation of women and minorities Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-25 Trends in Corporate Governance (2 of 2) • Boards evaluating individual directors • Smaller boards • Splitting the Chairman and CEO positions • Shareholders may begin to nominate board members • Society expects boards to balance profitability with social needs of society Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-26 The Role of Top Management • Top management responsibilities – getting things accomplished through and with others in order to meet the corporate objectives – multidimensional and oriented toward the welfare of the total organization Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-27 Executive Leadership and Strategic Vision (1 of 3) • Executive leadership – directs activities toward the accomplishment of corporate objectives – sets the tone for the entire corporation • Strategic vision – description of what the company is capable of becoming Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-28 Executive Leadership and Strategic Vision (2 of 3) • Transformational leaders – leaders who provide change and movement in an organization by providing a vision for that change Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-29 Executive Leadership and Strategic Vision (3 of 3) Three key characteristics of effective CEOs: 1. Articulate a strategic vision for the corporation. 2. Present a role for others to identify with and follow. 3. Communicate high-performance standards and also show confidence in the followers’ abilities to meet these standards. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-30 Managing the Strategic Planning Process (1 of 2) • Strategic planning staff – charged with supporting both top management and the business units in the strategic planning process Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-31 Managing the Strategic Planning Process (2 of 2) Strategic planning staff responsibilities include: 1. Identify and analyze company-wide strategic issues, and suggest corporate strategic alternatives to top management 2. Work as facilitators with business units to guide them through the strategic planning process Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 2-32 Strategic Management and Business Policy 15e Chapter 3 Social Responsibility and Ethics in Strategic Management Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. Learning Objectives 3-1 Discuss the relationship between social responsibility and corporate performance 3-2 Explain the concept of sustainability 3-3 Conduct a stakeholder analysis 3-4 Explain why people may act unethically 3-5 Describe different views of ethics according to the utilitarian, individual rights, and justice approaches Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 3-2 Social Responsibilities of Strategic Decision Makers • Social responsibility – proposes that a private corporation has responsibilities to society that extend beyond making a profit Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 3-3 Friedman’s Traditional View of Business Responsibility • Argues against the concept of social responsibility. • Primary goal of business is profit maximization not spending shareholder money for the general social interests. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 3-4 Carroll’s Four Responsibilities of Business (1 of 2) 1. Economic responsibilities – produce goods and services of value to society so that the firm may repay its creditors and increase the wealth of its shareholders 2. Legal responsibilities – defined by governments in laws that management is expected to obey Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 3-5 Carroll’s Four Responsibilities of Business (2 of 2) 3. Ethical responsibilities – follow the generally held beliefs about behavior in a society 4. Discretionary responsibilities – purely voluntary obligations a corporation assumes Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 3-6 Figure 3-1: Responsibilities of Business Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 3-7 Responsibilities of a Business Firm • Social capital – the goodwill of key stakeholders, that can be used for competitive advantage – opens doors in local communities – enhances reputation with consumers Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 3-8 Benefits of Being Socially Responsible • May enable firm to charge premium prices and gain brand loyalty • May help generate enduring relationships with suppliers and distributors • Can attract outstanding employees • More likely to be welcomed into a foreign country • Can utilize the goodwill of public officials for support in difficult times Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 3-9 Characteristics of Sustainability • Environmental • Economic • Social Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 3-10 Corporate Stakeholders • Stakeholders – have an interest in the business and affect or are affected by the achievement of the firm’s objectives • Enterprise strategy – an overarching strategy explicitly articulating the firm’s ethical relationship with its stakeholders Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 3-11 Stakeholder Analysis (1 of 4) • Stakeholder analysis – the identification and evaluation of corporate stakeholders – usually done in a three-step process Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 3-12 Stakeholder Analysis (2 of 4) • The first step in stakeholder analysis is to identify primary stakeholders. • Primary stakeholders – those who have a direct connection with the corporation and who have sufficient bargaining power to directly affect corporate activities – include customers, employees, suppliers, shareholders, and creditors Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 3-13 Stakeholder Analysis (3 of 4) • The second step in stakeholder analysis is to identify the secondary stakeholders. • Secondary stakeholders – have an indirect stake in the corporation but are also affected by corporate activities – includes NGOs, activists, local communities, trade associations, competitors, and governments Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 3-14 Stakeholder Analysis (4 of 4) • The third step in stakeholder analysis is to estimate the effect on each stakeholder group from any particular strategic decision. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 3-15 Stakeholder Input • Once stakeholder impacts have been identified, managers should decide whether stakeholder input should be invited into the discussion of the strategic alternatives. • A group is more likely to accept or even help implement a decision if it has some input into which alternative is chosen and how it is to be implemented. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 3-16 Reasons for Unethical Behavior • Unaware that behavior is questionable • Lack of standards of conduct • Different cultural norms and values • Behavior-based or relationship-based governance systems • Different values between business people and stakeholders Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 3-17 Moral Relativism (1 of 3) • Moral relativism – claims that morality is about some personal, social, or cultural standard and that there is no method for deciding whether one decision is better than another Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 3-18 Moral Relativism (2 of 3) • Naïve relativism – based on the belief that all moral decisions are deeply personal and that individuals have the right to run their lives • Role relativism – based on the belief that social roles carry with them certain obligations to that role Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 3-19 Moral Relativism (3 of 3) • Social group relativism – based on a belief that morality is simply a matter of following the norms of an individual’s peer group • Cultural relativism – based on the belief that morality is relative to a particular culture, society, or community Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 3-20 Kohlberg’s Levels of Moral Development 1. Preconventional level – concern for one’s self 2. Conventional level – considerations for society’s laws and norms 3. Principled level – guided by an internal moral code Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 3-21 Encouraging Ethical Behavior (1 of 3) • Code of Ethics – specifies how an organization expects its employees to behave while on the job Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 3-22 Encouraging Ethical Behavior (2 of 3) A code of ethics: 1. Clarifies company expectations of employee conduct in various situations 2. Makes clear the company expects its people to recognize the ethical dimensions in decisions and action Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 3-23 Encouraging Ethical Behavior (3 of 3) • Whistleblowers – employees who report illegal or unethical behavior on the part of others Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 3-24 Views on Ethical Behavior (1 of 5) • Ethics – the consensually accepted standards of behavior for an occupation, trade, or profession • Morality – one’s rules of personal behavior based on religious or philosophical grounds • Law – the formal codes that permit or forbid certain behaviors and may or may not enforce ethics or morality Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 3-25 Views on Ethical Behavior (2 of 5) • Utilitarian approach – proposes actions and plans should be judged by their consequences • Individual rights approach – proposes human beings have certain fundamental rights that should be respected in all decisions Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 3-26 Views on Ethical Behavior (3 of 5) • Justice approach – decisions must be equitable, fair, and impartial in the distribution of costs and benefits to individuals or groups Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 3-27 Views on Ethical Behavior (4 of 5) Cavanagh’s questions to solve ethical problems: 1. Utility: Does it optimize the satisfactions of the stakeholders? 2. Rights: Does it respect the rights of the individuals involved? 3. Justice: Is it consistent with the canons of justice? Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 3-28 Views on Ethical Behavior (5 of 5) Kant’s categorical imperatives 1. Actions are ethical only if the person is willing for the same action to be taken by everyone who is in a similar situation. 2. Never treat another person simply as a means but always as an end. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 3-29
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Running Head: (TRANSFORMATIONAL LEADERSHIP)

(Transformational Leadership)

(Institutional Affiliation)
(Your Name)
(Instructor Name)
(Course Number)
(Due Date)

(Transformational Leadership)

(Last Name) 1

Running Head: (TRANSFORMATIONAL LEADERSHIP)

(Last Name) 2

Leadership is a trait that people are either born with or learn to acquire as they get older.
In the business spirit, one must portray themselves with leadership qualities and a belief in the
product’s quality or service. The traditional and concrete definition of transformational leaders
is “leaders who provide change and movement in an organization by providing a vision for that
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I was having a hard time with this subject, and this was a great help.

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