1. distinguish between vision statement and mission statement? 2.discuss the cha
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Question
1. distinguish between vision statement and mission statement?
2.discuss the characteristics of a valuable resource?
3.distinguish between concentric diversification strategy and conglomerate diversification strategy?
4.fully explain the following;
a)CEO duality
b) Corporate intelligence
c) Board diversity
d) Conflict of interest
e) Financial quality dimension of corporate governance.
5. The presence of the board of directors eliminates the agency conflict between owners and managers of the firm. critically evaluate this statement?.
Explanation / Answer
1. Distinguish between vision statement and mission statement:-
A mission statement explains the company’s (or department’s) reason for existence. It describes the company (or department), what it does and its overall intention. The mission statement supports the vision and serves to communicate purpose and direction to employees, customers, vendors and other stakeholders. The mission can change to reflect a company’s (or department’s) priorities and methods to accomplish its vision.
A vision statement describes the organization as it would appear in a future successful state. When developing a vision statement, try to answer this question: If the organization were to achieve all of its strategic goals, what would it look like 10 years from now? An effective vision statement is inspirational and aspirational. It creates a mental image of the future state that the organization wishes to achieve. A vision statement should challenge and inspire employees.
2. Discuss the characteristics of a valuable resource:-
3. Distinguish between concentric diversification strategy and conglomerate diversification strategy:-
4.fully explain the following;
a) CEO duality:-
CEO duality refers to the situation when the CEO also holds the position of the chairman of the board.
The board of directors is set up to monitor managers such as the CEO on the behalf of the shareholders. They design compensation contracts and hire and fire CEOs. A dual CEO benefits the firm if he or she works closely with the board to create value.
Establishing a unity of command at the head of the firm allows the firm to send a reassuring message to shareholders. However, it is also easier for the CEO to assert control of the board and consequently make it more difficult for shareholders to monitor and discipline the management.
Example
Research in Motion, the maker of Blackberry, has a dual CEO/chairman. In fact, it has two co-chairmen (Mike Lazaridis and Jim Balsillie), who are also co-CEOs, and one of whom is now CMO.
b) Corporate intelligence:-
As forensic accounting has become an essential tool to investigate fraud, corruption, and other forms of financial misconduct, the related, but distinct instrument of corporate intelligence has evolved to play a similar role. As opposed to relying on targeted review and analysis of the numbers in a company's financial statements, books, and records to identify high-risk or otherwise unusual transactions, the practice of corporate intelligence centers on research and analysis of qualitative information regarding a subject of interest, being either an entity, a person, or an issue.
Corporate intelligence and forensic accounting teams often work in tandem to identify and mitigate potential or current risks facing an organization, and help resolve questions arising from quantitative abnormalities.
Corporate intelligence is broadly defined as the focused collection and analysis of information regarding an unfamiliar subject that is used to deliver key insights to decision makers in support of a major business concern, corporate action such as an investment or acquisition, internal inquiry, or consideration of risk factors. This information is largely obtained through public records, open sources, and proprietary databases. It can also be developed through interviews and conversations with knowledgeable individuals.
c) Board diversity:-
Board diversity is defined as the percentage of women, African Americans, Asians, Hispanics, and other minorities on the board of directors. Our most important finding is as follows. After controlling for size, industry, and other corporate governance measures, we find statistically significant positive relationships between the presence of women or minorities on the board and firm value, as measured by Tobin’s Q. We also find that the fraction of women and minorities directors increases with firm size but decreases as the number of insiders increases. Our results suggest that firms making a commitment to increasing the number of women on boards also have more minorities on their boards and vice versa. Overall, our results provide important evidence of a positive relation between firm value and diversity on the board of directors.
d) Conflict of interest:-
A conflict of interest is a situation in which a corporation or person with a vested interest in a company becomes unreliable because of the clash between personal interests and professional interests. An example of a conflict of interest would be a board member voting on the induction of lower premiums for companies with fleet vehicles when he is the owner of a truck company outside of the corporation. In relation to law, representation by a lawyer or party with a vested interest in the outcome of the trial would be considered a conflict of interest, and the representation would not be allowed.
A conflict of interest in business normally refers to a situation in which an individual's personal interests conflict with the professional interests owed to his employer or the company in which he is invested. A conflict of interest arises when a person chooses personal gain over the duties to an organization in which he is a stakeholder. For example, all board members have fiduciary duties and a duty of loyalty to the corporations they oversee. If one of the board members chooses to take an action that benefits him at the detriment of the firm, he is harming the company with a conflict of interest.
A conflict of interest may lead to legal ramifications as well as job loss. However, if there is a perceived conflict of interest and the person has not yet acted maliciously, it's possible to remove that person from the situation or decision in which a possible conflict of interest can arise. Using the prior example of a board member owning an unrelated truck company, he would simply remove himself from all decisions that could positively or negatively affect his personal business.
e) Financial quality dimension of corporate governance:-
Corporate governance represents a current topic for academic community and practitioners, in the context of globalization and crisis, especially in case of developing countries. The main purpose of this paper is to analyze which dimensions of corporate governance are able to exercise a significant impact on the companies’ financial structure, using a dataset with 77 developing countries from Africa, Asia, Latin America and Central and Eastern Europe. The data are provided from World Bank Enterprise Survey website and the variables are grouped in two directions: corporate governance and financial structure variables. In this regard, using principal components analysis approach, we grouped firstly the variables related to financial structure and then variables related to the main four dimensions of corporate governance, such as ownership structure and management quality, transparency, environment and corruption. The impact of corporate governance dimensions on companies’ financial structure was analyzed in a generalized linear model framework and the main result of this paper consists in the fact that, for analyzed countries, companies’ financial structure is significantly influenced by several dimensions of the governance like transparency, environment or corruption.
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It is that type of diversification in which a firm acquire related firm. It is that type of diversification in which a firm acquire totally unrelated firm. In concentric diversification, acquired firm is related with acquiring firm in terms of market, product or technology. In conglomerate diversification, acquired firm is not related with acquiring firm in terms of market, product or technology. Less risky More risky E.g. It will be concentric diversification if a telecom company acquire Net Provider Company. E.g. It will be conglomerate diversification if a telecom company acquire Petrol Pump.Related Questions
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