corporate mgnt104 chapter 4

1. Chapter 4

2. Corporate governance in an MNC is
generally composed of two tiers:
Parent-Level Corporate Governance
Subsidiary-Level Corporate
Governance

3. How the parent
company’s right power
and responsibilities are
divided and monitored.

4. Foreign subsidiaries that
have their own board of
directors deals with their
shareholders and other
local stakeholder while
simultaneously answering
to and integrating with the
parent firm.

5. 1st case: when a subsidiaries is listed on a host
country’s stock exchange, then corporate
governance structure in this subsidiary is not much
different from governance structure in host country
corporations traded in local stock exchanges.
2nd case: when a subsidiaries is not listed on a local
exchange but has its own board to meet a host
country’s legal requirement .

6. 3rd case: when a subsidiary board is established
to meet a parent firm’s strategic
considerations. Subsidiaries boards play an
important part in an MNCs global
coordination, accountability and governance.

7. Parent board Subsidiary board
1st tier Second-tier
corporate corporate
governance governance
(parent level) ( subsidiary level)
Parent Subsidiary
management management

8. The above section explain the corporate
governance link between parent firm and
foreign subsidiaries.

9. Subsidiary strategies are a critical mechanism
for dealing with the parent-subsidiary
relationship. As a strategic-oriented approach
is emerging in lieu of traditional control-
centered approach. It plays an increasingly
important part in corporate governance
design for global operations and
management.

10. An MNC’s corporate strategy for the purpose of
global coordination and integration entails
three options:
Multidomestic Strategy: strategic and
operating decision are decentralized to
strategic business until in each country in
order to tailor products to the local market.

11. Global Strategy: assumes more standardization
of products across country markets. As s
result. The competitive strategy is centrally
by the home office.
Transnational Strategy: corporate strategy that
seeks to achieve both global efficiency and
local responsiveness.

12. Managerial Governance and Corporate together
comprise total governance or organizational
governance. Corporate governance involves
governance and control of corporate affairs.
Managerial governance includes the system that
bring about internal adherence within the
corporation to set of strategic goal designed by
top management through using corporate
power or authority.

13.  1st, the diversity of countries in which the firm
operates.
 2nd, maintaining the proper global
integration-local responsiveness, balance is
an ongoing process which requires occasional
reassessment.

14. Breadth of coordination refers to the number of
other units with which a subsidiary
coordinates.
Diversity of coordination (the number of
functions coordinated) are both important
aspect of the degree to which a subsidiary is
integrated into the MNC network.

15.  the formal group contains 4 mechanisms
comprising
centralization, Formalization, Planning and
Behavioral control
 Formalization: extent to which policies, rules
and job description.
 Planning: refers to systems and processes like
strategic planning budgeting, scheduling, and
goal setting.

16.  the formal group contains 4 mechanisms
comprising
centralization, Formalization, Planning and
Behavioral control
 Centralization: extent to which the locus of
decision making lies in the higher levels of the
chain of command.
 Behavioral control: based on direct, personal
surveillance of individual behavior.

17. The subtle group includes 3 kinds of managerial
mechanisms namely lateral relations.
Informal communication and organizational
culture. Lateral relations cut across the
vertical structure and includes direct contact
between managers of different departments
that share a problem, task
force, team, integrating role.

18. Informal communication differs from lateral
relations in that is not structured around
specific tasks.
Finally, organizational culture can be developed
through a process of socialization of
individuals by communicating ways of doing
things.