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For rms to be successil, they must practice effective strategic control and corporate governance. Without such controls, the firm will not be able to achieve competitive advantages and outperform rivals in the marketplace. We began the chapter with the key role of informational control. We contrasted two types of' control systems: what we termed \"traditional\" and \"contemporary\" information control systems. Whereas traditional control systems may have their place in placid, simple competitive environments, there are fewer of those in today's economy. Instead, we advocated the contemporary approach wherein the internal and external environment are constantly monitored so that when surprises emerge, the rm can modify its strategies, goals, and objectives. Behavioral controls are also a vital part of effective control systems. We argued that firms must develop the proper balance between culture, rewards and incentives, and boundaries and constraints. Where there are strong and positive cultures and rewards, employees tend to internalize the organization's strategies and objectives. This permits a firm to spend fewer resources on monitoring behavior, and assures the firm that the efforts and initiatives of employees are more consistent with the overall objectives of the organization. Inthe final section of this chapter, we addressed corporate governance, which can be def med as the relationship between various participants in determining the direction and perfonnanoe of the corporation. The primary participants summary include shareholders, management (led by the chief executive officer), and the board of directors. We reviewed studies that indicated a consistent relationship between effective corporate governance and financial performance. There are also several internal and external control mechanisms that can serve to align managerial interests and shareholder interests. The internal mechanisms include a committed and involved board of directors, shareholder activism, and effective managerial incentives and rewards. The external mechanisms include the market for corporate control, banks and analysts, regulators, the media, and public activists. We also addressed corporate governance from both a United States and an international perspective. SUMMARY REVIEW QUESTIONS 1. Why are effective strategic control systems so important in today's economy? 2. What are the main advantages of contemporary control systems over traditional control systems? What are the main differences between these two systems? 3. Why is it important to have a balance between the three elements of behavioral controlculture, rewards and incentives, and boundaries? 4. Discuss the relationship between types of organizations and their primary means of behavioral control. 5. Boundaries become less important as a rm develops a strong culture and reward system Explain
