Lecture 1 * FB 303 – Wednesday 9:30-12:30 * Email: trevor.hunter@uwo.ca
Course Purposes: * Hierarchy in organizations – board is responsible for managing the managers * Low chance we will actually be paid to sit on a publically traded board there is a high likelihood will be affected by it in some way – and possibly could be on a non-profit board (a much larger amount) * Governance focuses on top managers – BOD hire, fire, manage and appraise the CEO, if you have the right CEO it kind of stands to reason that the CEO who is then responsible for hiring the other senior managers and will hire competent, ethical, senior managers and continuing on.. * There really are no definitive answers to the questions on the course purposes page * Does not mean that there are not good answers just not one- reason being it is an organization specific activity, what works in one may not work as well in the other – no one size fits all model * Huge amounts of resources that are controlled by these BOD’s
History
* Relatively new invention – came in the heels of the publically owned firm (only 150-200 years old) * Eventually were unable to finance and own the firm together – so as a shareholder you would hire a bunch of professional people to run the business for them * Led to the principle agent issue – principal would hire agent to act on their behalf and by law the agent is supposed to act in the best interest of the principal * Someone needs to supervise – monitoring body to ensure the goals/interests of shareholders are pursued by the managers * In 6 years’ time the recognition that this is not an appropriate way to govern firms made it change by 2009 (when he did his research*)
Why study? * Small better – more time allocated * Independent directors are better –you want people who are independent of CEO (ie: CEO of