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Individuals or groups with interests, claims, or stakes in the company, in what it does, and in how well it performs
Stakeholders
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Stockholders and employees, including executive officers, other managers, and board members
Internal stakeholders
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All other individuals and groups that have some claim on the company
External stakeholders
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Agents almost always have more information about the resources they are managing than the principal does
Information asymmetry
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By virtue of their position within the company, certain managers, can use their authority and control over corporate funds to satisfy these desires at the cost of returns to stockholders
On-the-job consumption
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Senior employees of the company, such as the CEO
Inside directors
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Not full-time employees at the company, who hold positions on the boards of several companies
Outside directors
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Centerpiece of the corporate governance system directly elected by stockholders and represent their interest in the company
Board of Directors
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The right to buy the company's shares at the predetermined (strike) price at some point in the future
Stock options
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The risk of being acquired by another company
Takeover constraint
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Earning money by having stock bought out by a defending company for a hefty premium
Greenmail
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The primary governance mechanisms established within a company to reduce the scope of the agency problem between levels of management
Strategic control systems
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Accepted principles of right or wrong that govern the conduct of a person, the members of a profession, or the actions of an organization
Ethics
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Accepted principles of right or wrong governing the conduct of business people
Business ethics
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Situations in which there is no agreement over exactly what the accepted principles of right and wrong are or where none of the available alternatives seems ethically acceptable
Ethical dilemmas
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Honorable and benevolent behavior that is considered the responsibility of people of high (noble) birth
Noblesse oblige
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Occurs when managers find a way to feather their own nests with corporate monies
Self-dealing
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Occurs when managers use their control over corporate data to distort or hide information to enhance their own financial situation or the competitive position of the firms
Information manipulation
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Actions aimed at harming actual potential competitors, most often by using monopoly power, and thereby enhancing the long-run prospects of the firm
Anticompetitive behavior
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Occurs when the managers of a firm seek to unilaterally rewrite the terms of a contract with suppliers, buyers, or complement providers in a way that is more favorable to the firm, often using their power to force the revision through
Opportunistic exploitation
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When managers underinvest in working conditions, or pay employees below-market rates, to reduce their costs of production
Substandard working conditions
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Occurs when a firm takes actions that directly or indirectly result in pollution or other forms of environmental harm
Environmental degradation
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When managers pay bribes to gain access to lucrative business contracts
Corruption
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Generally accepted principles of right and wrong governing the conduct of individuals
Personal ethics
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Formal statement of the ethical priorities a business adheres to
Code of ethics
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