Corporate governance is the set of mechanisms used to manage the relationshipsamong stakeholders and to determine and control the strategic direction and performance of organizations.

P304 Table 11.1:Corporate Governance Mechanisms:

Ownership Concentration:

1: relative amounts of stock owned by individual shareholders and institutional investors

Board of Directors:

1: Individuals responsible for representing the firm’s owners by monitoring top-level manager’s strategic decisions.

Executive Compensation

1: Use of salary, bonuses, and long-term incentives to align manager’s decisions with shareholder’s interests.

An agency relationship exists when one or more people(the principal

or principals)hire another person or people (the agent or agents) Managerial opportunism is the seeking of self-interest with guile (I.E, cunning or deceit) p307

Ownership concentration is defined by both the number of

large-block shareholders typically own at least 5 percent of a corporation’s issued shares.p310

Large-block shareholders typically own at least 5 percent of a corporation’s issued shares.p310

Institutional owners are financial institutions such as stock mutual funds and pension funds that control large-block shareholder positions.p310

The board of directors is group of shareholder-elected individuals