coordination the process whereby the specialized (see SPECIALIZATION) activities of different participants in an economy are synchronized. Coordination of TRANSACTIONS may take place through MARKETS or within ORGANIZATIONS. Within organizations, coordination is necessary to try to ensure that decisions within subunits of the organization are consistent with each other and with the objectives of the organization as a whole. See INTERNAL MARKETS.
copyright the ownership of the rights to a publication of a book, manual, newspaper, etc., giving legal entitlement and powers of redress against theft and unauthorized publication or copying. See INTELLECTUAL PROPERTY RIGHT.
Copyright, Designs and Patents Act 1988 a UK Act that provides for the establishment and protection of the legal ownership rights of persons and businesses in respect of various classes of ‘intellectual property’, in particular COPYRIGHTS, DESIGN RIGHTS and PATENTS.
The Act is administered in part by the PATENTS OFFICE, with cases of unauthorized copying, patent infringements, etc., being handled by the courts.
core business the particular products supplied by a firm that constitute the heart of its business. These are generally products in which the firm has a competitive advantage. Over time the firm may begin to supply other products that may be associated with its core business but are more peripheral to the firm and its operations. See DIVERSIFICATION.
core competence a key resource, process or system possessed by a firm that allows it to gain a COMPETITIVE ADVANTAGE over rivals.
core product a basic product such as a motor car. See TOTAL PRODUCT.
corner vb. to buy or attempt to buy up all the supplies of a particular product on the MARKET, thereby creating a temporary MONOPOLY situation with the aim of exploiting the market.
corporate bond see BOND.
corporate control the ability to exercise control over a public JOINT-STOCK COMPANY. In countries where shares in a large company are freely traded, if the incumbent directors and senior managers fail to achieve good profit and dividend performance, the price of the company’s shares will fall, making it possible for managers of another company to buy a majority of shares in the underperforming company and to gain control of it. This market for corporate control can exercise a restraining effect upon incumbent managers of a firm who are aware that they can lose their jobs if their company underperforms to the extent of provoking a takeover bid by other managers who feel that they can run the company more profitably. See CORPORATE GOVERNANCE, TAKEOVER, PRINCIPAL-AGENT THEORY, DIVORCE OF OWNERSHIP FROM CONTROL.
corporate governance
The duties and responsibilities of a company’s BOARD OF DIRECTORS in managing the company and their relationship with the SHAREHOLDERS of the company. With the DIVORCE OF OWNERSHIP FROM CONTROL, salaried professional managers have acquired substantial powers in respect of the affairs of the company they are paid to run on behalf of their shareholders. However, directors have not always had the best interests of shareholders in mind when performing their managerial functions (see PRINCIPAL-AGENT THEORY), and this has led to attempts to make directors more accountable for their policies and actions.
A number of reports were published in the UK in the 1990s, prompted by the public’s concern at cases of gross mismanagement (for example, the collapse of the BCCI bank and Polly Peck and the misappropriation of employee’s pension monies at the Mirror Group) and ‘fat cat’ pay increases secured by executive directors. The Cadbury Committee Report (1992) recommended a ‘Code of Best Practice’ relating to the appointment and responsibilities of executive directors, the independence of nonexecutive directors and tighter internal financial controls and reporting procedures. The Greenbury Committee Report (1995) specifically addressed the issue of directors’ pay, recommending that executive directors’ pay packages should be determined by companies’ remuneration committees, consisting solely of nonexecutive directors, and that share awards under EXECUTIVE SHARE OPTION SCHEMES and LONG-TERM INCENTIVE PLANS (LTIPS) should be linked to companies’ financial performance. The Hempel Committee Report (1998) covered many of the same issues raised by these two earlier reports, recommending (‘Principles of Good Governance’) checks on the power of any one individual executive director (by, for example, separating the roles of chairman and chief executive), a more independent and stronger voice for nonexecutives (including the appointment of a ‘senior’ nonexecutive to offer guidance to, and check ‘empire building’ tendencies on the part of, executive directors and in liaising with shareholder interests) and more accountability to shareholders at the AGM (including the approval of options and LTIP schemes).
In 1998 the ‘Code of Best Practice’ and ‘Principles of Good Governance’ were combined and formally incorporated into the listing rules of the London STOCK EXCHANGE.
In 1999 the Turnbull Committee Report on ‘Internal Control’ proposed guidelines for regular internal controls not only on financial procedures but also on business and operational matters with a greater emphasis on ‘risk’ management and evaluation to ensure that these are compatible with the company’s business objectives.
More recently, the Higgs Committee Report (2003) envisaged a more prominent role for nonexecutives, including the following recommendations: the chairman should be a nonexecutive; the senior independent nonexecutive director should be given additional responsibilities, particularly in regard to liaising between the board and the companies’ shareholders; nomination committees should consist entirely of nonexecutives; at least half the board’s directors should be nonexecutive; no full-time executive director should take on more than one additional non-executive position in another company.
For UK and other MULTINATIONAL COMPANIES operating in the USA the Sarbanes-Oxley Act (2002) requires them to follow strict financial accounting procedures, audits and reporting to increase financial transparency and to prevent fraud. The Act was introduced following a number of financial scandals, notably those at Enron and World Com., and the failure of nonexecutives and major accountancy firms such as Arthur Anderson (now broken up) to detect malpractices. In the UK itself, financial reporting has been tightenend up following the recommendations of the Smith Committee Report (2003) on internal auditing practices.
While traditionally the issue of corporate governance has tended to focus on director-shareholder relationships, the stakeholder approach emphasizes that directors have wider responsibilities to other groups with an interest or ‘stake’ in the business: their employees, consumers, suppliers and the community at large. See FIRM OBJECTIVES, MANAGERIAL THEORIES OF THE FIRM, SOCIAL RESPONSIBILITY.
corporate reengineering the process whereby the ORGANIZATION structure of a corporation is changed. This may involve a movement away from a functional organization to a multidivisional organization or the elimination or restructuring of certain product divisions within a multidivisional organization. Such reengineering often involves dramatic changes for managers and employees and can be linked with DOWNSIZING.
corporate sector that part of the ECONOMY concerned with the transactions of BUSINESSES. Businesses receive income from supplying goods and services and influence the workings of the economy through their use of, and payment for, factor inputs and INVESTMENT decisions. The corporate sector, together with the PERSONAL SECTOR and FINANCIAL SECTOR, constitute the PRIVATE SECTOR. The private sector, PUBLIC (GOVERNMENT) SECTOR and FOREIGN SECTOR make up the national economy. See CIRCULAR FLOW OF NATIONAL INCOME MODEL.
corporation 1 a private enterprise FIRM incorporated in the form of a JOINT-STOCK COMPANY.
2 a publicly owned business such as a nationalized industry.
corporation