Strategic Management

Session 2

Chapter 2 : Corporate Governance

 Strategic Management is……..

• The act or art of managing an integrated

and coordinated set of commitments and
actions that exploit core competencies to
achieve the mission and objectives of a
business and deliver competitive
advantage
 Strategic Management is ………………..

• Strategic management is a set of

managerial decisions and actions that
help determine the long-term
performance of an organization.
 SONALIKA

• By studying the Sonalika case study,

analyse :
– How successful was Sonalika in Strategic
Management?
– What aspects of Strategic Management
• Worked well for Sonalika
• Did not work well for Sonalika
 CORPORATE GOVERNANCE

• Corporate Governance
– is the set of mechanisms used to manage the
relationship among stakeholders and to
determine and control the strategic direction
and performance of organizations
– Ireland/Hoskisson/Hitt
– refers to the relationship among Board of
Directors, Top Management and Shareholders
in determining the direction and performance
of the corporation
-Wheelen/Hunger/Hoffman/Bamford
 Key Stakeholders

Shareholder

Corporation
– Legal
entity

Board of
Management
Directors
 5 Board of Director Responsibilities

✓ Effective board leadership including the processes,

makeup, and output of the board

✓ Strategy of the organization

✓ Risk vs. initiative and the overall risk profile of the

organization

✓ Succession planning for the board and top

management team

✓ Sustainability
 Role of Board in Strategic Management

• Monitor: By acting through its committees, a board can keep

abreast of developments inside and outside the corporation,
bringing to management’s attention developments it might have
overlooked. A board should, at the minimum, carry out this task.

• Evaluate and influence: A board can examine management’s

proposals, decisions, and actions; agree or disagree with them;
give advice and offer suggestions; and outline alternatives. More
active boards perform this task in addition to monitoring.

• Initiate and determine: A board can delineate a corporation’s

mission and specify strategic options to its management. Only
the most active boards take on this task in addition to the two
previous ones.
Board of Director’s Continuum
 Top Management Responsibility
• The CEO articulates a strategic vision
for the corporation
• The CEO presents a role for others to
identify with and to follow
• The CEO communicates high-
performance standards and also shows
confidence in the followers’ abilities to
meet these standards
 BOD composition
• Inside Directors
• Outside Directors
• Affiliated Directors
• Retired Executive Directors
• Family Directors
Theories of BOD performance
• Agency Theory
• Stewardship Theory
 Influence of Board
Boards that successfully managed the executive succession
process had three things in common:

• The board set the criteria for candidate selection based on

the strategic needs of the company.

• The board set realistic performance expectations rather

than demanding a quick fix to please the investment
community.

• The board developed a deep understanding of the business

and provided strong strategic oversight of top
management, including thoughtful annual reviews of CEO
performance.