Term
| M-form, or multidivisional, structure |
|
Definition
| each business that a firm engages in is managed through a division, the divisions are true profit and loss centers (see p. 222) |
|
|
Term
|
Definition
| calculated at the level of the division in firms |
|
|
Term
|
Definition
| one of the major components of an M-form organization. all of a firm's senior managers report to the board. |
|
|
Term
|
Definition
| usually on the board, often but not always the chairman of the board |
|
|
Term
|
Definition
| when one party to an exchange delegates decision-making authority to a second party |
|
|
Term
|
Definition
| the party to whom authority is delegated |
|
|
Term
|
Definition
| the party delegating decision-making authority to a second party |
|
|
Term
|
Definition
| do not add economic value to the firm but do directly benefit those managers (examples: lavish offices, corporate jets, and corporate vacation homes) |
|
|
Term
|
Definition
| agency problem because investors would prefer managers to invest in risky investments that have higher returns |
|
|
Term
|
Definition
| investment in managerial perquisites and managerial risk aversion |
|
|
Term
|
Definition
| responsible for ensuring the accuracy of accounting and financial statements |
|
|
Term
|
Definition
| maintains the relationship between the firm and external capital markets |
|
|
Term
|
Definition
| nominates new board members |
|
|
Term
| personnel and compensation committee |
|
Definition
| evaluates and compensates the performance of a firm's senior executives |
|
|
Term
|
Definition
| usually pension funds, mutual funds, insurance companies, or other groups of individual investors that have joined together to manage their investments |
|
|
Term
| roles that make up the office of the president |
|
Definition
| the chairman of the board, the chief executive officer, and the chief operating officer |
|
|
Term
|
Definition
| provides information about the firm's external and internal environments to the firm's senior executive |
|
|
Term
|
Definition
| assigned a budget and manage their operations to that budget. do not have profit-and-loss responsibility. |
|
|
Term
|
Definition
=adjusted accounting earnings (WACC x total capital employed by a division)
this is a measure of divisional performance |
|
|
Term
|
Definition
| corporate executives create a list of all capital allocation requests from divisions in a firm, rank them from "most important" to "least important" and then fund all of the projects a firm can afford, given the amount of capital it has available |
|
|
Term
| intermediate products or services |
|
Definition
| products or services produced in one division are used as inputs for products or services produced by a second division |
|
|
Term
|
Definition
| one division "sells" its products or services to a second division for a transfer price. this price is set by a firm's corporate management to accomplish corporate objectives. |
|
|
