Question

Consider firm organization:

a. Very briefly explain why corporations with sufficiently diffused ownership are typically governed by a board of directors and why such a board typically includes members from outside of the corporation.

b. Identify the three sources of cost that vertical integration is intended to mitigate or eliminate. However, no firm is completely vertically integrated, implying there is a cost to vertical integration. Identify this cost and very briefly relate it to firm size and scope.

P.S

I know this question has already been answered on chegg and the answer is available. Please don't copy that one and paste it here. i need a different answer and not as long. as is says "very briefly explain" for question "a"

Answer 1

By the undersatanding of the question it coming with the case of a Firm Organization

-An organization is the larger form and generally comprises of a number of companies. Simply, a company is an organization, but an organization is not just a company.

Eventhough it seems if the organization have sufficient diffused ownership while the Firm governed by a board of directors and the board includes members from outside of the corporation.

From the theories and laws of Corporate governance it is imporatant to have outside memebers as memebers of a corporate board of directors because,

1.Outside members to the directors of corporate board are adavanatgeous for the organization because they have less conflit of interest than insiders.

2.Appointig an outside member as Borad of dirctors followed by the proffessional advice of experts agencies and consultants.So the outside members to the board of directors already proved their excellence in the field.

3.Outsider director can able to make quick changes in the organization.

4.He or she is new to the organization.New people bring new ideas.It is advantage to the Organization

5.There will not be bad influence by other people inside the company which affects the organization's future.