Corporate Governance-Module Handbook

Corporate Governance
Module Handbook

Muhammad Irfan
Faculty of Business Administration Department of Management Sciences

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Corporate Governance-Module Handbook

Table of Contents 1. Introduction...3 2. Objectives..3 3. How to Contact Module Instructor....4 4. Rationale Including Aims...4 5. Participants understanding after studying this course4 6. Teaching Methodology.....4 7. Course Requirements and Expectations.5 8. Academic Dishonesty.6 9. Final Project...6 10. Module Contents....8

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Corporate Governance-Module Handbook

1. Introduction
Corporate governance involves a set of relationships between a companys management, its board, its shareholders and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performances are determined. This course explains the relationship of owners (shareholders) and control (management), the issues involved and providing track how to resolve it. Furthermore, the reader will understand the status and remuneration related to executives and how they are compensated in terms of incentives and grants. Further study will enhance the understanding of analysing the role of accountants as well as auditors and their responsibilities in terms of creating favourable environment between the share holders and management. Similarly, this course will flourish your understanding about the Board of Directors (BOD), its strategic position in terms of creating opportunities for businesses, various hiring of executives including CEO and creating Good Board which will ensure that the shareholders money is safe and, simultaneous, providing perks to its employees. Further study will give the understanding of corporate takeovers as a governing mechanism while discussing its pros and cons as well as considering corporations social responsibilities toward the economic and social welfare of society.

2. Objective
The main objective of this module is to build up a clear understanding of two basic entities i.e. owner (shareholders) and control (management), their relationships as well as conflicts. In other words, 'good corporate governance' is simply 'good business'. It ensures:

Adequate disclosures and effective decision making to achieve corporate objectives; Transparency in business transactions; Statutory and legal compliance; Protection of shareholder interests; Commitment to values and ethical conduct of business; Analysing and investment forecast about any company.

This is a 3 credit hour course, comprising 3 hours of teaching per week.

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3. How to Contact Module Instructor

You can contact the module instructor in the following prioritised ways: 1. Email: Muhammad_irfan@comsats.edu.pk 2. SMS: 0312-2263361 (Name, Module Name, Class, Registration No., Matter) 3. Call: 0312-2263361 (Better to get permission through sms to call to avoid any inconvenience) 4. Office Meeting: By appointment only (Please do confirm your appointment either through email or sms)

4. Rationale Including Aims

After studying this course, the attendants will be able to understand the corporate culture, ethics and main issue related to shareholders and management. This course will also, somehow, explore the understanding of SEC functions, how it works and some knowledge about how to make investments.

5. Participants understanding after studying this course

To understand the relationship of shareholders and management. To understand the issues raised with the separation of owner (shareholders) and control (management) To understand the key position of CEO in the Board of Directors (BODs). To understand the analytical position of Auditors and Accountants. And above all, to understand the aspect of corporate social responsibility.

6. Teaching Methodology
Teaching methodology would be like two-way process i.e. participating with the course instructor during the class. Spoon feeding would be highly discouraged. Being graduate students you are asked to prepare your lecture before entering into the class which will facilitate the mutual discussion environment rather than having one sided delivery. During the semester you will be asked to have different quizzes and assignments which will, definitely, be considered while having your assessment and evaluation. 6.1.Assessment Scheme
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Mid-term examination I after 04 week Mid-term examination II after 10 week Quiz/Assignments/Projects/Presentations Terminal Examination after 16 week 6.2.Reading Materials Core Texts: 1. Corporate Governance by Kenneth A. Kim (2nd ed)

10% 15% 25% 50%

2. Corporate Governance, Principles, Policies and Practices by A. C. Fernando.

7. Course Requirements and Expectation

Grades: Grades will be assigned on the CIITs grading scale Being Prepared for Class: You should be ready to discuss the undergoing concepts by different perspectives Attendance: Students are required to attend all the classes; minimum attendance requirement by rule is 80% in CIIT. Quizzes: Quizzes will be announced and there will be no make-up for missed quizzes. Assignments: In fairness to students who complete assignments on time, late assignments will not be accepted. You must turn in the assignments at the end of the lecture on the day they are due. Minimising disruptions: All cell phones should be turned off during class. Do not involve in side conversations. Report: Students are required to write a project report on the assigned topic and they have to defend their work. Class Participation: Positive, healthy and constructive class participation will be monitored for each class. Particular emphasis will be given during the presentation sessions. The manner in which the question is asked or answered will also be noted. Your behaviour as business executives in the class will contribute to the class participation marks.

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8. Academic Dishonesty
Academic dishonesty is an offence that will not be tolerated in any form. Any student who is involved in any such activity will be penalised according to the university regulations.

Plagiarism and Cheating: A student caught in plagiarism and cheating of documents would be penalised according to the CIIT regulations.

9. Final Project
Following are the points need to be focused clearly while attempting your project. Part 1. 1. Introduction/brief history of the Corporation 2. Objectives 3. Vision and Mission Statement 4. Products manufactured or services offered by the organization 5. Board of Directors a. Committees of the Board and its significances 6. Landmark Achievements of the corporation Part 2. 1. CEOs of the Corporation since Corporations inceptions 2. The most important CEO a. Contribution made by CEO i. Shaping the company ii. Promoting the Corporation Part 3. 1. 2. 3. 4. 5. 6. Part 4. 1. 2. 3. 4. 5. Corporations present scenario Prospect for the future Analyse current business challenges and future outlook Increase in profit due to new product/services introduction Achievements in regards to its competitors Strategies for future growth (in the light of directors of the BODs & other stakeholders) Pattern of shareholding Major shareholders Increase/decrease in the value of shares during the last five years Earnings per share and payment of dividend to the shareholders CEO/senior executive compensation pattern

Part 5. 1. Analysing corporation CSR (corporate social responsibility)

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2. Corporate governance practices i.e. a. Financial scam b. Fraud c. Corruption

3. Punishments (received by its executives) and its impact on; a. Corporations profit b. Corporations reputation Part6. 1. 2. 3. 4.

Analysis Recommendations Conclusion References/Bibliography

Companys List S# Company 1 Apple 2 3 4 5 6 7 8 9 10 Google S# Company 11 Wells Fargo S# Company 21 Costco Wholesale 22 BMW 23 Target

12 Southwest Airlines Berkshire 13 Marriott Hathaway International Volkswagen 14 Best Buy Amazon.com 15 IBM Procter & 16 General Gamble Electric 17 DuPont 3M Goldman Sachs Group General Mills Lowe's

24 Nike 25 AT&T 26 L'Oral

27 Singapore Airlines 18 J.P. Morgan 28 Exxon Chase Mobil 19 29 Walt Disney Deere 20 Cisco Systems 30 Nordstrom

Some more information 1. Maximum number of members in each group is five (5) and the minimum number is three (3). 2. Two groups cant go for one (1) company. 3. So if you arent feeling comfort with any of your group member, just divide your work that must be mentioned in the project. You will be marked individually for your work. 4. But if the group members didnt tell me in advance about the project division, the whole group will get the same marks.
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5. The criterion for a company selection is on the basis of first come first serve. So book your company to avoid in inconvenience. 6. Two similar companys project will be marked ZERO. 7. Your project must look like Project, having proper page numbers, table of contents and references. 8. Make it colourful with ideas, thoughts and understanding, not just colourful diagrams. 9. Last date for submission of project will be announced in the class. 10. Good luck.

10.

Module Content

Week1: Corporations and Corporate Governance Defining different Economic Systems in the world What is Capitalism? Why Capitalism is considered for Corporations growth? How Companies can increase businesses? What is Corporate Governance? Main focus of Corporate Governance. Separation of ownership and control. Forms of Business Ownership Comparing corporations with sole proprietorship and partnership forms of businesses. Main disadvantages of Corporations. Running Corporations can be expensive. Can Investors Influence Managers? o Merger between Hewlett Packard (HP) and Compaq. Forms of Proposals. How to Monitor the corporations? An Integrated System of Governance. International Monitoring. Summary.

Week 2: Executive Incentives Separation of Owners and Controllers is the main cause of emerging problems. How Incentives can be a good solution. Potential Managerial temptations. Examples of self-serving managerial actions.

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Types of Executives Compensation: o Base salary and Bonus; o Stock Options; o Stock Grants. Restricted Stocks Performance Sharing

Does Incentives-Based Compensations work in general? Potential Incentive Problems with Incentive based Compensation Expensive Executive Options: An Easy Solution Real World Examples Managements Behaviour at Xerox Other Compensations o CEOs Club Membership o Retirement (or resignation) Compensation o Millions of loans at low interest rates. Crime and Punishments International perspective- CEO Compensation around the world Summary.

Week 3: Accountants and Auditors Importance of Accountants and Auditors in corporations monitoring system. Accounting functions: o Accounting for Inside use o Accounting for Outside use Problems that may occur in accounting: o Unintentional Errors o Problems with receivables o Intentional Errors o So who is/are responsible? What is Auditing? Types of auditors o Story from a The Wall Street Journal o Independent Auditors Reports for General Motor
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Four Largest Accounting Firms. The Changing Role of Accounting-Managing Earnings o Generals Motors smooth earnings. From manipulation to fraud o Rite Aids Overstatement of Income. Auditors as Accountants o Tycos Tax saving strategy. International Perspective o Parmalats Accounting Scandal Summary.

Week 4: Board of Directors What is Board of Directors (BODs)? Who elects the BODs for a corporations? Composition of BODs. Functions of BODs. Overview of the Board. The Board Legal duties Board Committees. Historical Perspective- Is a Director simply a Figure-Head More attention on Directors. o Who are Directors (example) o Is being a director worth it? What is a Good board? Board structure in the US and around the World. Good for the Goose, Good for the Gander? Can Good Boards Lead to Better Firms Performance? Potential Problems with Todays Board. o Disneys Board during the 1990s. International Perspective Boards in Western Europe. o Is Enrons Board Partially to blame? Conclusion. Week 5: 1st Sessional Exams
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Week 6: Investment Banks and Securities Analysts What is Investment Bank? What is Security and who are Securities analysts? Investment banking activities. Methods of Issuing Stocks and bonds. Criticism of Investment Banks. o IPO problems PETS.COM initial Public Offering ENRONS Partnerships. o Structured deal Securities Analysts categories Quality of Analysts Recommendations. Potential Conflicts of Interest o Analysts and the Firms they analyse o Analysts working at Investment banks Merrill Lynch: Analysts vs. Investment Banking Some new regulations Summary.

Week 7: Creditors and Credit Rating Agencies Who are Creditors to corporations? Types of Lenders. What is the difference between stock and bond? Debt as a Disciplinary Mechanism. Credit rating agencies. o A brief History Perspective o The Ratings Criticism on Rating Agencies o ENRONs Credit Rating International Perspective. Creditors Right Around the World. Summary.

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Week 8: Shareholders and Shareholder Activism Shareholders are considered innocent and helpless. Why? Investors category. Institutional Investors vs. Individual Investors Benefits of Mutual Funds. Costs of Mutual Funds. What is Shareholders Activism? o Activism by Individual Shareholders Goodrichs call for Shareholder proposals. Individual Investors in action.

o Monitoring by Large Shareholders. Institutional Shareholders: An Overview Does Institutional Shareholders Activism Work? Potential Roadblocks to Effective Shareholders Activism. International perspective. Summary.

Week 9: Corporate Takeovers: A Governance Mechanism? What is Corporate Takeover? Vertical Takeover vs. Horizontal takeover Why merger and acquisitions (M & A) are important in corporate governance? What is Hostile Takeover? Brief overview of M & A. The Target Firm. o Shamrock holdings fails in hostile takeover attempt of Polaroid, But who is the real loser? The Notion of the Disciplinary Takeover. Takeover defences. Assessment of Takeover defences. International Perspective. o The Largest Hostile Takeover didnt occur in the US. Summary.

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Week 10: Corporate Citizenship What is Corporate Social Responsibility? Stakeholders View of the Firm. o Wal-Mart Battle with Stakeholders Legal Foundation Corporate Citizenship at American Express Governance and Stakeholders Theory Criticsms o Dow Jones Stoxx Sustainability Index International Perspective Corporate Social Responsibility as pre-emptive tool Summary. Week 11: 2nd Sessional exams

Week 12: New Governance Rules Sarbanes-Oxley Act of 2002 Will the Act be Beneficial? Other Regulatory Changes o The NYSE o NASDAQ Stock Market Causes of Securities Regulations: A history Lessons o Major Laws Created to Protect Investors International perspective Worldwide Focus on Corporate Governance Summary.

Week 13: Corporate Governance Principles Manual of Corporate Governance (Pakistan) Corporate Governance Principles (American Express Company) Corporate governance Guidelines (Berkshire Hathaway Inc) Week 14 & 15: Course Review and Students presentations .Best of luck
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