Corporate Governance, Business Ethics, and Strategic Leadership
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Corporate Governance, Business Ethics, and Strategic Leadership. Instructor: Dr.Gehan Shanmuganathan. LO 12-1 Describe and evaluate the relationship between strategic management and the role of business in society. LO 12-2 Conduct a stakeholder impact analysis.

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Corporate Governance, Business Ethics, and Strategic Leadership


Dr.Gehan Shanmuganathan

LO 12-1 LeadershipDescribe and evaluate the relationship between strategic management and the role of business in society.

LO 12-2 Conduct a stakeholder impact analysis.

LO 12-3 Critically evaluate the relationship between corporate social performance (CSR) and competitive advantage.

LO 12-4 Describe the role of corporate governance and evaluate different governance mechanisms.

LO 12-5 Describe and evaluate the relationship between business strategy and ethics.

LO 12-6 Describe the different roles that strategic leaders play and how to become a strategic leader.


HP’s CEO Mark Hurd Resigns amid Ethics Scandal Leadership


  • Mark Hurd

    • CEO of HP after Carly Fiorina

    • Low profile, no-nonsense, strategy execution forte

  • Highly successful

    • Increasing market shares for computers and printers

    • Stock rose 110% (well above that of NASDAQ)

  • 2010 sexual harassment scandal

    • Forced to resign

      • With $45 million severance package


Strategic management and the role of business in society
Strategic Management and the Role of Business in Society Leadership

Public stock company is the backbone of our economy

Four characteristics of public firms

Limited liability for investors

Transferability of investor interest

Legal personality

Separation of ownership and control


EXHIBIT 12.2 Leadership

Honesty and Ethics Ranking of Different Professions

Only 15% of “high” executives

“How would you rate the honesty and ethical standards

of people in different fields?”


Stakeholder strategy
Stakeholder Strategy Leadership

  • Stakeholder theory

    • How a wide variety of stakeholders interact to jointly create and trade value

      • Effective management of these relationships builds competitive advantage

  • Why have stakeholder management?

    • More cooperative and better information

    • Increased trust lowers costs

    • Greater flexibility and adaptability

    • Reduced risk

    • Stronger reputation


Stakeholder Impact Analysis Leadership



Corporate social responsibility
Corporate Social Responsibility Leadership

  • Milton Friedman circa 1962:

    • “the only social responsibility of business is … to increase profits so long as it stays within the rules of the game”

  • Today’s businesses tend to do more than just make profits

    • But does CSR help build competitive advantage?

    • The answer might depend on where you do business…

      • UAE, Japan, and India are less interested in CSR

      • China, Brazil, and Germany are more interested in CSR


Corporate governance
Corporate Governance Leadership

Corporate governance

Mechanisms to direct and control a firm

Ensure the pursuit of strategic goal

Address the principal–agent problem

When corporate governance failed

Accounting scandal

Global financial crisis

Bernard Madoff  Ponzi scheme

Information asymmetry

Insider information  ImClone and Galleon Group



GE’s Board of Directors

  • Diversity of GE’s board of directors (17 members)

    • Business, academia, politicians

      • 4 women, 2 ethnic minorities

    • 15 board members are independent outside directors

      • Less likely to fall victim to groupthink

    • Organized into committees to function

  • The separation of CEO/Board Chair duality

    • Due to recent global financial crisis



Corporate governance around the world
Corporate Governance LeadershipAround the World

Difference in national institutions and culture

“Free” market economies?

State-directed capitalism (less freedom). Ex: China

Free market capitalism (more freedom). Ex: U.S.


Stakeholder capitalism



Stakeholder capitalism


State-owned enterprises


Strategy and business ethics
Strategy and Business Ethics Leadership

  • Business ethics

    • Agreed-upon code of conduct in business

  • Legal conduct vs. Ethical conduct

    • Legal, but may not be ethical

      • Mortgage brokers selling “option ARMs”

    • Ethical, but may not be legal

      • Pharmaceutical firms discussing pricing to increase affordability

  • When facing an ethical dilemma

    • Whether the actions fall in acceptable norms of professional behavior?

    • Do you feel comfortable explaining and defending the decision in public?


Strategic leadership

Strategic leadership Leadership

Behaviors and styles of executives that influence others

Managerial discretion

Steve Jobs at Apple

Michael Dell at Dell

Mark Zuckerberg at Facebook

Bill Gates at Microsoft

Strategic Leadership


Strategic Leaders: The Level 5 Pyramid Leadership



Chaptercase 12 consider this
CHAPTERCASE 12/ LeadershipConsider This…

  • Larry Ellison (CEO at Oracle) hired Mark Hurd

    • Oracle stock price rose by $10 billion!

    • Remember HP stock went down $10 billion…

  • HP hired Leo Apotheker as CEOin Nov. 2010

    • Came from German firm SAP (enterprise software)

    • Announced exit from (consumer) hardware market (PCs, tablets), which is about 40% of HP's total revenues of roughly $100bn

    • Stock price dropped ~40%

  • HP fired Mr. Apotheker 11 months later! (with more than $20 million+ golden parachute)

  • In September 2011, Meg Whitman was appointed HP CEO