BU.231.720.XX– Corporate Governance – Instructor – Page 1 of 10

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Corporate Governance

2 Credits
BU.231.720.XX
[NOTE: Each section must have a separate syllabus.]
[Day &Time / ex: Monday, 6pm-9pm]
[Start & End Dates / ex: 3/24/17–5/12/17]
[Semester / ex: Spring 2017]
[Location / ex: Washington, DC]

Instructor

[Full Name]

Contact Information

[Email Address]

[Phone Number, ###- ###-#### (Optional)]

Office Hours

[Please specify the day and time of the 2 hours that will be dedicated to office hours each week. For evening classes, faculty may wish to hold their office hours by phone or email. While faculty are permitted to state “and by appointment,” office hours should not be held exclusively by appointment.]

Required TextsLearning Materials

1)Monks, R.A.G., & Minow, N. (2011).Corporate governance (5th ed.).Wiley-Blackwell. ISBN 978-0-470-97259-5.

2)Lecture notes by Demir Yener: Corporate Governance: A Primer (DY).

3)Other cases and readings to be distributed through Blackboard as required.

Please note: The latest edition of the textbook will be adopted if there is one available. Please check out our online bookstore for most updated textbook information.

Please see other required and recommended readings in the class schedule.

Course Description

The value of a firm depends on good corporate governance practices protecting investors. Greater protection of shareholders lowers the cost of capital due to better risk mitigation. Thus, the set of governance practices, rules, and regulations that promote private sector investment and jobs creation also promote firm value. Topics include the role and responsibilities of shareholders (principals), the boards of directors (the principals' representatives), and the executive management (agent). They also include executive compensation policies, boardroom structure and practices, corporate disclosure and transparency, and the value of the shareholder vote. The course looks into corporate pyramidal structures, hostile takeovers, and the failure of the market for corporate control. It examines the role of financial institutions and credit rating agencies in promoting corporate governance, and how transparency, accountability, responsibility, and fair and equitable treatment of all shareholders help improve corporate governance and reduce agency conflicts between principals, management, and the board of directors.

Students cannot earn credit towards a degree or certificate for both 231.720 and 800.610 – these are equivalent course numbers.

Prerequisite(s)

None. While there is no prerequisite for this course, some background in Economics, Accounting, Corporate Finance and Investments is recommended.

Course Overview

Corporate governance is the set of mechanisms used to manage the relationship among stakeholders and to determine and control the strategic direction and performance of organizations.

Much of the productive capacity of the global economy is owned by business enterprises in the form of corporations. One of the key aspects of the corporation is the separation between ownership and control, which is the foundation of the Agency Theory, also known as the Principal–Agent Theory. Corporate governance seeks to prevent conflicts of interest among shareholders (principals) as the main owners or investors and management (agents) in the firm. The board of directors represent the shareholders at the firm.

While separation between owners and management allows corporations to exist independent of the life of owners and to attract professional expertise, it creates an agency problem in which agents may act in their own interests at the cost of owners. Due to the imperfect contracts and information asymmetry, various corporate governance mechanisms exist and keep evolving.

For this reason, we focus on strengthening the four values of corporate governance: Transparency, accountability, responsibility, and fair and equitable treatment of all shareholders as the mantra for this course.

The corporate governance issues have attracted public attention because of a series of corporate events and scandals (e.g. Wells Fargo, Volkswagen, Swissair, Enron, WorldCom, UBS, etc.). As a result of the exorbitant risks taken by management of large financial institutions leading to the recent financial crises and corporate scandals, a number of global institutions worked together to issue standards and principles that will provide guidance for a number of business and trade related activities, including corporate governance.

OECD introduced the principles of corporate governance in 1999, which was revised in 2004 and 2015. This has become standard corporate governance guidance to many international applications and legal and regulatory frameworks.In the United States, the Sarbanes–Oxley Act of 2002, and the Dodd–Frank Act of 2010 provide theregulatory framework for the U.S.-based corporations, with global reverberations.

Corporate governance has become an increasingly important topic among shareholders, the management and the boards of directors, as well as other corporate stakeholders and government regulatory agencies on how firms are being governed and the effectiveness of corporate governance. The course addresses this broad issue with cases.

Finally, the course places a good deal of emphasis into building the business case for good corporate governance practice rather than looking at it as simply as an issue for compliance legal and regulatory frameworks.

Learning Objectives

By the end of this course, students will be able toexplain, evaluate and analyze:

  1. The global best practice knowledge in corporate governance environment, the corporate forms, proper corporate, legal, and regulatory frameworks necessary to perform the duties of the board in protecting the rights of the shareholders.
  2. The causes and consequences of agency problemsdue to inherent conflicts of interest between shareholders, the board of directors, and the executive management and other stakeholders in governance.
  3. Theglobal best practice principles of corporate governance as defined by OECD and other international and US conventions.
  4. Howtransparency, responsibility, accountability, and fair and equitable treatment of all shareholders form the basis of good corporate governance practices.
  5. The relationship between corporate governance,corporate finance,investments and shareholder wealth maximization.
  6. The tools for assessment and scoring of corporate governance practices for investors.

To view the complete list of Carey Business School’s general learning goals and objectives, visit the Carey website.

Assignments

Assignment / Learning Objectives / Weight
Attendance and participation in class discussions / 1–6 / 10%
2 Quizzes (Due dates: Week 3 and Week 5) / 1–6 / 30%
CG Assessment and Rating Paper and Presentation/Submission (Week 7) / 1–6 / 20%
Final Exam (Comprehensive) (Week 8) / 1–6 / 40%
Total / 100%

1)Attendance and Class Participation (10%)

Attendance and participation are an important part of your course grade. Students are expected to attend all scheduled class sessions. Each class will include opportunities for teams to work together. Failure to attend class will result in an inability to achieve the objectives of the course. Full attendance and active participation are required for you to succeed in this course. Please inform the instructor if you must miss a class.

If you anticipate that you will miss two or more lectures due to business reasons or other, I strongly recommend you consider dropping this class and find another time to take it.

Students will benefit most on the topics covered in this course through actively participating in classroom interaction. Attendance and classroom participation will account for 10% of the course grade. Active participation and contribution to insightful discussions will receive higher grade in classroom participation.

2)Two Quizzes (15 % each= 30%)

There will be two quizzes through the period, each accounting for 15% of the final grade. Each quiz will cover the contents delivered in previous lectures and will take 20 minutes. The quiz format mayconsist of True/False problems, multiple choice, and/or short essay problems. Students who have to miss the scheduled quiz should contact the instructor. Quiz make-ups are not possible. Students should try not miss a quiz as it will affect the final grade.

3)Corporate Governance Assessment Project and Presentation (20%)

The instructor will distribute a corporate governance rating survey instrument (CG Rating Survey) to all students at the beginning of the session. The survey instrument was prepared by the instructor for the purpose of corporate governance rating of listed companies and it is currently in use in a number of locations. Please check the Blackboard Assignments section for further detailed instructions.

Each student will be assigned (by the instructor) one publicly traded company (preferably an S&P 500 firm)at the beginning of the session. This is the company the student will analyze and assess the corporate governance compliance and identify any weaknesses.

You will conduct research on recent corporate governance related articles about the S&P 500 companyyou have been assigned.

These sources may include the corporate website, the U.S. Securities and Exchange Commission EDGAR website, the NYSE, or the Wall Street Journal or other business periodicals (FT, Fortune, Forbes, Bloomberg, CNBC, etc.).

Please try to contact the reference librarian who will provide you with guidance regarding other sources JHU library has.

a-About the Corporate Governance Survey and Scoring project:

  • This is an individual project.
  • You may work as a group or individually as this will facilitate your understanding of the topic. The paper is individually graded.
  • Individuals or teams may request meetings with the instructor as required to clarify any issues.
  • The final project will be submitted via Blackboard by each individual student on due date.

The goal of this assignment is to conduct a corporate governance scoring survey, and provide the corporate governance assessment of a listed company based on the OECD principles of corporate governance.

The learning objective of this exercise is to understand how the CG Principles are operationalized.

Students will write a corporate governance assessment paper and provide recommendations. Papers will be individual.

This paper is worth 20 points towards the final grade.

b-Guidance onstructural details of the project:

Write your paper in MEMO format to the investment committee at your company.

The paper should not exceed the maximum of 6–8 pages, excluding appendices.

There is no limit on the number of appendices you may provide.

Try to be concise in your report. Avoid using language directly from any website; make sure you properly reference all statements from any sources.

Summarize the information in your own words, and provide references when necessary.

Please use the following structure for your Corporate Governance Scoring, Rating, and Assessment paper:

The Corporate Governance Survey Project is 20 points total towards your final grade.

Details are as follows:

i)Executive Summary/Introduction(2 points): (1–2 pages maximum) Using the data you have collected from the company website and other publicly available information, prepare the executive summary that should clearly state the objectives, background and the main findings of your corporate governance assessment paper on the selected company.

ii)Company Background(1 point):(1 page maximum)Prepare a brief, one page maximum review of the company background, important issues reported in its US SEC filings, and other information you have collected. You may provide the following information in an attached exhibit, with proper references provided.

(1)The company organization, its values, vision, mission, products (keep it very short);

(2)Corporate financial information, revenues, capitalization, stock price, ROE, ROI, PE ratio, Book/Market ratio, its management team and corporate governance practices. Using a table in the appendix, discuss some of the highlights. (prepare a short table of information and attach it to the end in an appendix);

(3)Do not simply copy and paste from company web site.Summarize the information in your own words.

(4)Make sure you provide references properly. Provide the list of references at the end of the report.

iii)The Written Report on CG Survey Results(10 points):(2–3 pages maximum) Using the 100-question CG survey instrument you are provided, determine your survey findings and calculate the CG score.Using the guidance in the provided survey instrument, rank this company (from 1–5) based on your survey score. A suggested structure is as follows:

(1)Process the 100 questions in the Excel spreadsheet survey, summarizeyour findings, provide charts and exhibits. Try to keep it short.

(2)If and when appropriate, explain why some of the survey questions may or may not be applicable.

(3)Discuss your CG Scoring findings.Copy and paste the summary table and the chart into your report (from the top of the spreadsheet that automatically populates the results). (DO NOT INCLUDE THE COMPLETED EXCEL SPREADSHEET SURVEY WITH YOUR REPORT)

(4)Discuss specifically the corporate governance Strengths, Weaknesses, Opportunities and Threats (SWOT), and how some of the observations you have made relate to pertinent topics covered in the course.

  • If you source any data from the company web site, provide reference.
  • For any such information, you may paraphrase and write it in your own words.

iv)Findings and conclusions(5points):(2 pages maximum) Provide a small summary table of findings and discuss the SWOT. Discuss any of the available corporate governance mechanisms that are relevant to the chosen firm and the advantages and disadvantages of those mechanisms. While discussing your findings, try to bring in academic literature and/or provide practical evidence to support your argument.

  • Discussthe main CG issues that you identified given the theoretical background.
  • The conclusions should summarize the main findings and discuss their implications for the particular firm, investors, regulators and the economy.
  • Your recommendations should have three to five specific points the company board could do to improve a situation you have determined in the company.

v)Attachments(2 points): Include references, charts figures and/or tables as evidence to support your report.

vi)Class Presentation/Discussion(2 points): This is part of class participation, in addition to the written report.

At the beginning of the 7th lecture period, we shall go around the class. Each student will discuss a very brief summary of their papers withina maximum of 3–5 minutes (OR LESS, DEPENDING ON CLASS SIZE)to present the findings and lessons learned. There will be some time for Q&A and comments session. The instructor will grade the quality of the presentation and delivery of the message.This is due Week 7.

Class discussion/Presentation of your findings is considered as part of the“Class Participation” and will be graded accordingly.

  • Instructor will require students to turn in their CG score and some other data for their company in an Excel spreadsheet. The instructor will collect this data, and prepare a summary of the class findings of the ratings for discussion in class on Week 7.
  • Instructor may decide to make adjustments to the presentation schedule depending on class size and time limitations.

-For class discussion, summarize your paper in a maximum of 5 bullet points.

-The final written report is due two to three days following the class discussion on Week 7. Students will be given further instructions on first day of class.

  • The final company CG scoring and assessment report must be submitted via Blackboard.

4)Final Exam (40%)

The final will be a 3-hour, in-class, comprehensive, closed-book exam on the eighth session.

Grading

Effective Fall 2017: The grade of A is reserved for those who demonstrate extraordinarily excellent performance as determined by the instructor. The grade of A- is awarded only for excellent performance. The grades of B+, B, and B- are awarded for good performance. The grades of C+, C, and C- are awarded for adequate but substandard performance.The grades of D+, D, and D- are not awarded at the graduate level (undergraduate only). The grade of F indicates the student’s failure to satisfactorily complete the course work.

Please note that for Core and Foundation courses, a maximum of 25% of students may be awarded an A or A-; the grade point average of the class should not exceed 3.3. For Elective courses, a maximum of 35% of students may be awarded an A or A-; the grade point average of the class should not exceed 3.4. (For classes with 15 students or fewer, the class GPA cap is waived.)

Tentative Course Calendar

The instructors reserves the right to alter course content and/or adjust the pace to accommodate class progress. Students are responsible for keeping up with all adjustments to the course calendar.

Texts:

1-Monks and Minow (M&M).Corporate Governance (5th ed.). 2011.

2-Demir Yener (DY). Corporate Governance: A Primer. 2016.

Session / Content / Reading / Note
Week 1 /
Lecture 1:An Introduction to Corporate Governance: The Corporation, Strategy Formation and Value Creation.
/ M&M. Chapter 1:What is Corporation? Principal–Agent Theory.
DY Lecture 1:Introduction to Corporate Governance. Agency Theory
Reading:(1) Jensen and Meckling (1976). “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure.” (2) Fama and Jensen (1983) Separation of Ownership and Control.
Case: See class notes
Week 2 / Lecture 2:Ownership and Shareholders. / M&M. Chapter 2:The role of Shareholders and Ownership
DY Lecture 2:Shareholders and Shareholder Activism
Reading: M&M Ch 2 and DY Class Notes
Case: See class notes
Week 3 / Lecture 3:The Board Of Directors / M&M. Chapter 3: The role of Directors and Monitoring
DY Lecture 3:The Board of Directors
Reading: M&M Ch 3 and DY Class Notes
Case:See class notes / Quiz #1
Week 4 / Lecture 4:The Management and Compensation / M&M. Chapter 4: The role of Management:Principal–Agent Issues.
DY Lecture 4:Executive Management and CEO Compensation Issues. Succession Planning
Reading: M&M Ch 4 and DY lecture notes.
Case: See class notes
Week 5 / Lecture 5:Transparency, Disclosure, and Communication. /

M&M: N/A

DY Lecture 5:Transparency, Disclosure, and Firm Value Implications. M&A and the Role of Financial Institutions

Reading: DY Lecture notes.
Case: See class notes / Quiz #2
Week 6 / Lecture 6:Corporate Social Responsibility / DY Lecture 6:Corporate Social Responsibility. Stakeholders.
Reading: DY Lecture notes and other
Case: See class notes
Week 7 / Lecture 7:The International Environment for Corporate Governance / M&M. Chapter 7:International Corporate Governance. OECD and BIS Principles. Implementation. Pitfalls. Final Review.
DY Lecture 6:The International Environment for CG
Reading: M&M Ch 7 and DY Lecture notes
Case:See class notes / Project Discussion andProject Reports due
Week 8 / No lecture. / 3-hour comprehensive final exam. / Final Exam

Course Summary