The board of directors operates as the representatives of the firm’s stockholders. Elected by the stockholders, the board has these major responsibilities:
- To elect the company’s top officers, the foremost of whom is the CEO.
- To establish the compensation levels of the top officers, including their salaries and bonuses.
- To determine the amount and timing of the dividends paid to stockholders.
- To sets broad company policy on such matters as labor-management relations, product or service lines of business, and employee benefit package.
- To set company objectives and to authorize managers to implement the long-term strategies that the top officers and the board have found agreeable.
- To mandate company compliance with legal and ethical dictates.
More from this Section
- Profitability Ratios
Profitability is the net result of a large number of policies and decisions chosen by an organization’s management. Profitability ratios indicate how effectively the total firm is being managed.
- Fiedler’s research
Fiedler’s research uncovered three contingency dimensions that defined the key situational factors in leader effectiveness:
- Activity Ratios
Activity ratios indicate how effectively a firm is using its resources. By comparing revenues with the resources used to generate them, it is possible to establish an efficiency of operation. The asset turnover ratio indicates how efficiently management is employing total assets. Asset turnover is calculated by dividing sales by total assets.
- Unstructured problem
A problem that is new or unusual and for which information is ambiguous or incomplete, is called unstructured problem.
- Simple organizational structure
Structure in which there is an owner and a few employees and where the arrangement of tasks, responsibilities, and communication is highly informal and accomplished through direct super vision.
- Generic strategy
A core idea about how the firm can best compete in the marketplace.
- Path-goal theory
Path-goal theory, which states that the leader’s job is to assist followers in attaining their goals and to provide direction or support