Chapter 2 – Strategic Management & Business Policy – 14th Edition

Affiliated Director
Directors who, though not really employed by the corporation, handle the legal or insurance work for the company or are important suppliers
Agency Theory
A theory stating that problems arise in corporations because the agents (top management) are not willing to bear responsibility for their decisions unless they own a substantial amount of stock in the corporation.
Board of Directors’ Continuum
A range of the possible degree of involvement by the board of directors (from low to high) in the strategic management process
Board of Director Responsibilities
Commonly agreed obligations of directors, which include: setting corporate strategy, overall direction, mission or vision; hiring and firing the CEO and top management; controlling, monitoring or supervising top management; reviewing and approving the use of resources; and caring for shareholder interest.
The inclusion of a corporation’s workers on its board of directors
Corporate Governance
Refers to the policies and procedures set in place to ensure a business operates within the law and for the optimal benefit of all stakeholders.

A system of law and sound approaches by which corporations are directed and controlled.

Due Care
The obligation of board members to closely monitor and evaluate top management
Executive Leadership
The directing of activities toward the accomplishment of corporate objectives
Inside Director
An officer or executive employed by a corporation who serves on that company’s board of directors; also called management director
Interlocking Directorate
A condition that occurs when two firms share a director or when an executive of one firm sits on the board of a second firm
Lead Director
An outside director who calls meetings of the outside board members and coordinates the annual evaluation of the CEO
Outside Director
Members of a board of directors who are not employees of the board’s corporation; also called non-management directors
Retired Director
Past leaders of a company kept on the board of directors after leaving the company
Sarbanes-Oxley Act
Legislation passed by Congress in 2002 to promote and formalize greater board independence and oversight
Stewardship Theory
A theory proposing that executives tend to be more motivated to act in the best interests of the corporation than in their own self-interests
Strategic Vision
A description of what the company is capable of becoming
Top Management Responsibilities
Leadership tasks that involve getting things accomplished through, and with, others in order to meet the corporate objectives
Transformational Leader
A leader who causes change and movement in an organization by providing a strategic vision

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