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4. Corporate governance: Methods for influencing management's decisions Corporate governance refers to policies and rules, regulations and laws, and activities that (1) influence both management's
4. Corporate governance: Methods for influencing management's decisions Corporate governance refers to policies and rules, regulations and laws, and activities that (1) influence both management's decisions and its company's operations, and (2) affect the relationships between a business's stakeholders. These stakeholders include the company's executives and managers, shareholders, creditors, current and former employees, competitors, and local and global communities. In simple terms, corporate governance provisions can take two forms: carrots and sticks , with the former generally taking the form of compensation designed to reward management for benefitting the firm's stakeholders, and the latter resulting in their removal or termination for making damaging decisions or undertaking unacceptable activities. These governing forces are both internal and external to the organization, and they can either align management's interests with those of their shareholders (a positive outcome) or further entrench the firm's management (a not-so-positive outcome). An entrenched management is one that is likely to be removed, all other things remaining equal. Internal and external corporate governance provisions and activities can take many forms, including a hostile takeover. Which of the following best describes this situation? This activity involves acquiring a target company after reaching a pre-purchase agreement with the target firm's management. In this situation, there is animosity between the firm's board of directors and its senior management, resulting in the board wanting to take over the daily operations of the firm. This situation involves acquiring a target company without reaching a pre-purchase agreement with the target firm's management. If you were making recommendations to repair a dysfunctional board of directors, which of the following practices would you suggest be implemented
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