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MANAGING PROJECTS

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Projects represent nonroutine business activities that often have long-term strategic ramifications for a firm. In this chapter, we examined how projects differ from routine business activities and discussed the major phases of projects. We noted how environmental changes have resulted in increased attention being paid to projects and project management over the past decade. In the second half of the chapter, we introduced some basic tools that businesses can use when planning for and controlling projects. Both Gantt charts and network diagrams give managers a visual picture of how a project is going. Network diagrams have the added advantage of showing the precedence between activities, as well as the critical path(s). We wrapped up the chapter by showing how these concepts are embedded in inexpensive yet powerful software packages such as Microsoft Project. If you want to learn more about project management, we encourage you to take a look at the Web site for the Proj...
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Corporate Governance and Business Ethics

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In this final chapter, we looked at stakeholder strategy, corporate governance, business ethics, and strategic leadership.
The shared value creation framework and its relationship to competitive advantage.
By focusing on financial performance, many companies have defined value creation too narrowly.
Companies should instead focus on creating shared value, a concept that includes value creation for both shareholders and society.
The shared value creation framework seeks to identify connections between economic and social needs, and then leverage them into competitive advantage.
The role of corporate governance.
Corporate governance involves mechanisms used to direct and control an enterprise in order to ensure that it pursues its strategic goals successfully and legally.
Corporate governance attempts to address the principal–agent problem, which describes any situation in which an agent performs activities on behalf of a principal.
Applying agency theory to explain why and how companies use governance mechanisms to align interests of principals and agents.
Agency theory views the firm as a nexus of legal contracts.
The principal–agent problem concerns the relationship between owners (shareholders) and managers and also cascades down the organizational hierarchy.
The risk of opportunism on behalf of agents is exacerbated by information asymmetry: Agents are generally better informed than the principals.
Governance mechanisms are used to align incentives between principals and agents.
Governance mechanisms need to be designed in such a fashion as to overcome two specific agency problems: adverse selection and moral hazard.
The board of directors as the central governance mechanism for public stock companies.
The shareholders are the legal owners of a publicly traded company and appoint a board of directors to represent their interests.
The day-to-day business operations of a publicly traded stock company are conducted by its managers and employees, under the direction of the chief executive officer (CEO) and the oversight of the board of directors. The board of directors is composed of inside and outside directors, who are elected by the shareholders.
Inside directors are generally part of the company’s senior management team, such as the chief finansial officer (CFO) and the chief operating officer (COO).
Outside directors are not employees of the firm. They frequently are senior executives from other firms or full-time professionals who are appointed to a board and who serve on several boards simultaneously.
Other governance mechanisms.
Other important corporate mechanisms are executive compensation, the market for corporate control, and financial statement auditors, government regulators, and industry analysts.
Executive compensation has attracted significant attention in recent years. Two issues are at the forefront: (1) the absolute size of the CEO pay package compared with the pay of the average employee and (2) the relationship between firm performance and CEO pay.
The board of directors and executive compensation are internal corporate-governance mechanisms. The market for corporate control is an important external corporate-governance mechanism. It consists of activist investors who seek to gain control of an underperforming corporation by buying shares of its stock in the open market.
All public companies listed on the U.S. stock exchanges must file a number of financial statements with the Securities and Exchange Commission (SEC), a federal regulatory agency whose task it is to oversee stock trading and enforce federal securities laws. Auditors and industry analysts study these public financial statements carefully for clues of a firm’s future valuations, financial irregularities, and strategy.
The relationship between strategy and business ethics.
The ethical pursuit of competitive advantage lays the foundation for long-term superior performance.
Law and ethics are not synonymous; obeying the law is the minimum that society expects of a corporation and its managers.
A manager’s actions can be completely legal, but ethically questionable.
Some argue that management needs an accepted code of conduct that holds members to a high professional standard and imposes consequences for misconduct.

 

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