Strategic Purpose PDF

a64b0469ff35958ef4ab887a898bd50bdfbbe91a-7658801 LESSON 2. STRATEGIC PURPOSE. 1. MISSION, VISION, VALUES AND OBJECTIVES....

a64b0469ff35958ef4ab887a898bd50bdfbbe91a-7658801 LESSON 2. STRATEGIC PURPOSE. 1. MISSION, VISION, VALUES AND OBJECTIVES. MISSION Def.: the identity and personality of the company, in the present and future, from a very general perspective. It should collect the organization’s reason for being and therefore justify its existence, forming something like a declaration of principles by which the company presents to society. ○ It provides the company and its members as a valid reference to its own identity, so it is important to be known by all members of the organization, as it serves as an element of identification with the company philosophy and cohesion among all participants. It tends to be stable over time. ○ In any case, it should be understood as a dynamic concept that evolves as the other components of the organization. ○ It can be restated as a result of environmental changes, or changes in the top management of the company. Usually based on the following variables: 1. The definition of the activity scope of the company. In practice, this definition has to do with the products or services offered, markets served or geographical area covered. 2. The identification of the essential capabilities that the company developed or may develop in the future, which show how to compete in the markets. Based on them, the company achieves sustainable competitive advantages. 3. Elements of company culture, values, beliefs, philosophy. Mission and culture are interdependent in the sense that it can promote certain orientation of the company, but in turn, the mission determines and influences the system of values and behaviours required. VISION The answer to the question of, how we should be or, what we want to be in the future. It reflects the mental image of the trajectory of the company. ○ It refers to the current perception of what should be the company’s future and establishes the criteria that the organization has to use to set the way forward. Its definition must be the one of the central roles of the leader. ○ It should be a reference for all actions of individuals so, when various alternatives arise to them on how to perform tasks, all members should choose those that best suit the company’s vision. VALUES Principles that guide the actions of an organization. ○ Values and beliefs conform to organisational culture, and provide a clear reference to stakeholders (internal and external) about questions like, how are we? or how to behave? 9 Reservados todos los derechos. No se permite la explotación económica ni la transformación de esta obra. Queda permitida la impresión en su totalidad. a64b0469ff35958ef4ab887a898bd50bdfbbe91a-7658801 ○ They can be an expression of how the organisation behaves and/or refer to values that are intended to achieve. OBJECTIVES Two broad types of objectives: ○ General objectives: Reservados todos los derechos. No se permite la explotación económica ni la transformación de esta obra. Queda permitida la impresión en su totalidad. Corporate goals: usually defined in financial terms for each type of stakeholder. SBU’s goals. ○ Operational objectives: Specification of general goals and the ways to achieve them. Usually measurable (use of indicators) in order to facilitate implementation. 2. CORPORATE GOVERNANCE. Corporate governance: a set of mechanisms that allow owners (shareholders) to exercise control over managers in order to ensure the confluence of interests between both. Mechanisms of control: ○ External: business market, capital market, managerial labor market and goods and services markets. ○ Internal: Incentive system. Direct supervision: Board of Directors, control of the majority shareholders, hiring of external auditors or consultants, and supervision among managers. 10 Abre tu Cuenta NoCuenta con el código WUOLAH10 y llévate 10 € al hacer tu primer pago a64b0469ff35958ef4ab887a898bd50bdfbbe91a-7658801 Corporate governance is created due to the separation between owners and managers and the emergence of conflicts of interest between both. The management of a company can be entrusted to a single administrator or multiple administrators. Reservados todos los derechos. No se permite la explotación económica ni la transformación de esta obra. Queda permitida la impresión en su totalidad. Special features: ○ In SL (Limited company): if there are + than 2 administrators, the administration is the responsibility of the Board of Directors. ○ In the quoted/listed SL (Public Limited company), the management is mandatory of the Board of Directors. BOARD OF DIRECTORS Board of Directors: body responsible for the administration of a company. The interaction between management and owners takes place at the board of directors. Board member or director: the natural or legal person that belongs to the Board of Directors. Types of board members (Ley de sociedades de Capital. Art 529 duodecies - Spanish Law): ○ Insider directors: top managers of the company, executive directors ○ Outsider directs/Non-executive directors or supervisory directors: Proprietary directors: those who hold a shareholding equal to or greater than that which is lawfully considered significant. Independent directors: those that may perform their responsibilities without being conditioned by relations with the company, the shareholders or the managers, because of their personal and professional knowledge or background. Other external board members: those who are not executives’ directors but neither proprietary or independent directors. The Board of directors fulfill the dual function of: 1. Advise, support, provide information, networks… that improve the strategic decisions of the company. 2. Monitor and supervise that executive’s actions create value for the company. Responsibilities/obligations of the Board of Directors: ○ Strategic: approve and determine the strategy and policies of the company. ○ Monitoring: management control formulate annual accounts, appoint and dismiss of top management… ○ Communication: they serve as a liaison with shareholders (1) presents the accounts to the General Meeting, 2) convenes the General Meeting of shareholders, 3) the agenda proposes agreements to be reached) CODES OF BEST PRACTICE They appear in different countries due to the need of improving corporate governance. Problems: 1. Increase in business size, leading to greater separation between ownership and management. Multiple shareholder groups with different interests to be considered. 2. Unequal power distribution (power asymmetries). 11 Abre tu Cuenta NoCuenta con el código WUOLAH10 y llévate 10 € al hacer tu primer pago a64b0469ff35958ef4ab887a898bd50bdfbbe91a-7658801 3. Self-interest maximising behavior. 4. Well-known cases of fraud or bad governance. 2008 Leham Brothers, 2012 CSSM & BANCAJA Codes of Best Practice. Spanish reports. ○ Olivencia Report (February, 1998) ○ Aldana Report (January, 2003) ○ Conthe Report (2006) ○ Rodríguez Report: Código Unificado de Buen Gobierno de las Sociedades Cotizadas (published on February 2015 and revised on June 2020) Codes of Best Practice. Other countries. ○ Recommendations of EU ○ Cadbury Report (1992), UK ○ Vienot Report (1995), France Unified Code of Good Governance or Code of Best Practices of Listed Companies (2020): Some of the recommendations of previous codes have been incorporated into mandatory legal regulations, mainly to the “Ley de Sociedades de Capital”. The definition of the type of directors, the duration of the directors’ mandates. ○ Characteristics: No mandatory or Voluntarista, using the “comply or explain” approach (whereby companies are required to explain their practices by reference to a set of designated best practice recommendations). Assessment of compliance by the capital market. Application to the quoted/listed companies. ○ It contains: 25 general principles, 17 of them referring to the Board of Directors. 64 recommendations. Recommendations CUBG (2015): ○ Recommendation 13. The Board of directors size must help the efficiency and participation of board members, being advisable to be between 5 and 15 members. ○ Recommendation 14. The policy for selection of board members: a) need to be clear and reliable, b) needs to ensure that profiles of candidates fit with the board needs c) favor diversity of knowledge, experience and gender. Measures that encourage the company to have a significant number of women senior managers are considered to favor gender diversity. ○ Recommendation 15. A clear majority of board directors must be outsider directors. The number of exclusive directors must be as low as possible. And that the number of female directors represents, at least, 40% of the members of the board of directors before the end of 2022 and onwards, not previously being less than 30%. ○ Recommendation 17. Independent directors must be at least half of the total board. 12 Reservados todos los derechos. No se permite la explotación económica ni la transformación de esta obra. Queda permitida la impresión en su totalidad. a64b0469ff35958ef4ab887a898bd50bdfbbe91a-7658801 ○ Recommendation 18. Web page must give information about directors: professional profile and background, other boards of directors, date of first appointment, shares of the company… ○ Recommendation 26. The frequency of meetings must allow board efficiency and at least there must be 8 meetings. Reservados todos los derechos. No se permite la explotación económica ni la transformación de esta obra. Queda permitida la impresión en su totalidad. 3. STAKEHOLDERS AND POWER/INTEREST MATRIX. Mission, vision and goals need to take into account shareholders' interests but also the interest of other groups that can be affected by the behavior of the firm. Stakeholders: ○ DEF: Groups of people who depend on an organization to achieve their own goals and on whom, in its turn, an organisation depends. They can be affected by the goals, actions or behaviours of them. ○ Types: Internal: shareholders, directors, employees, managers… External: clients, suppliers, government, competitors, NGOs, local associations, customers… ○ ○ STAKEHOLDER MAPPING: THE POWER/INTEREST MATRIX (A. MENDELOW - 1986) Tool for identifying stakeholders. It identifies stakeholder expectations and power and helps in understanding political priorities. Goals: 1. Describe and analyse the stakeholders that can affect a firm's strategy. 2. Analyse the game of power. 3. Manage the power and behavior of stakeholders. Stages: 1. Describe stakeholders. 2. Assess the power of each stakeholder and potential coalitions. 13 Abre tu Cuenta NoCuenta con el código WUOLAH10 y llévate 10 € al hacer tu primer pago a64b0469ff35958ef4ab887a898bd50bdfbbe91a-7658801 3. Describe the interest of each stakeholder in each strategy. 4. Make specific proposals in order to manage stakeholders interests. Reservados todos los derechos. No se permite la explotación económica ni la transformación de esta obra. Queda permitida la impresión en su totalidad. SOURCES OF POWER: Power: ability of individuals or groups to persuade, induce or coerce others into following certain courses of action. 4. CORPORATE SOCIAL RESPONSIBILITY: INITIATIVES AND TOOLS. Ethics: Cortina, A. (2014) ¿Qué es la ética? Ethics comes from the Greek term ethos, which means character (a set of qualities that morally differentiate a group of people or a person’s peculiar way of being). They are acquired by persistent behaviour, by habit, and generate tendencies to respond in a certain way and expectations of response in others. Business ethics focuses on the study and moral judgement of the decisions and actions that a company carries out within the scope of its freedom. They help a company develop a good character, which predisposes it to act in an excellent way and which distinguishes it from other companies. 14 Abre tu Cuenta NoCuenta con el código WUOLAH10 y llévate 10 € al hacer tu primer pago a64b0469ff35958ef4ab887a898bd50bdfbbe91a-7658801 Corporate Social Responsibility (CSR) includes the set of obligations of a company derived from imperatives of an ethical nature, which the company imposes itself and which go beyond what is required by current legislation. ○ Why is CSR important? In the interest of enterprises: CSR provides important benefits to companies in risk management, cost savings, access to capital, customer relationships, HHRR management, and their ability to innovate. In the interest of the EU economy: CSR makes companies more sustainable and innovative, which contributes to a more sustainable economy. In the interest of society: CSR offers a set of values on which we can build a more cohesive society and base the transition to a sustainable economic system. ○ Dimensions of CSR: Economic: related to the own activity of the firm (production of goods and services needed by society and creation of value for stakeholders). Social: related to the concern about the community where the firm operates, respecting its traditions & culture and involving in beneficial actions to it. Environmental: concern of the firm about its relationship to its environment (environmental management, sustainability…). ○ CSR: regulatory questions. Scope of application of Ley 11/2018: Companies with the following characteristics must include in the management report a statement of non-financial information: Companies considered Public Interest Entities listed companies, financial entities Companies in which the average number of workers employed during the year is greater than 500 and also during two consecutive years meet, at the closing date of each of them, at least two of the following circumstances: 1. That the total of the asset items exceeds 20,000,000 euros. 2. That the net amount of its annual turnover exceeds 40,000,000 euros. 3. That the average number of workers employed during the year is greater than 250. What’s new: Until now, the information related to CSR campaigns in Spain was outside the legal standards. With this measure, investors and other stakeholders will have full access to company information, both fiscal and non-fiscal. Objectives: 1. To help measure, monitor and manage the performance of companies and their impact on society. 15 Reservados todos los derechos. No se permite la explotación económica ni la transformación de esta obra. Queda permitida la impresión en su totalidad. a64b0469ff35958ef4ab887a898bd50bdfbbe91a-7658801 2. Contribute to the management of the transition towards a sustainable economy that can combine long-term profitability with the protection of the environment. 3. Increase non-financial information by companies as a crucial factor in ensuring a more long-term approach. What information should be included? Reservados todos los derechos. No se permite la explotación económica ni la transformación de esta obra. Queda permitida la impresión en su totalidad. In accordance with Ley 11/2018, the Non-Financial Information Statement (Estado de Información No Financiera - EINF) will include significant information on the following issues: 1. Business model, 2. Environmental management and performance, 3. Social and personnel-related issues wage gap, average wages, organisation of work and working time, 4. Respect for human rights, 5. Fight against corruption and bribery, 6. Information about the company relationships with suppliers, purchasing policy. 5. CULTURAL CONTEXT. Culture: set of values, beliefs and assumptions that are shared by the members of a group and are taught to new members as the correct forms of behaviour in the social group. The corporate culture is demonstrated in symbols, rites, legends, architecture… and is generated through values that sometimes become underlying beliefs or assumptions (paradigm). Ethics deals with normative issues. Must be. Culture deals with positive issues. What is. 16 Abre tu Cuenta NoCuenta con el código WUOLAH10 y llévate 10 € al hacer tu primer pago