Professional Documents
Culture Documents
Overview
Dr M Manjunath Shettigar
Professor of Economics
Learning objectives
Asset approach
Market approach
Income approach
Risk Premiums
risk,
Maturity risk,
Liquidity risk,
Contractual provisions, and
Tax risk.
CF1
CF2
CFn
V0
...
1
2
(1 k ) (1 k )
(1 k ) n
CAPM
Where:
Changes in Risk
Enron
Corporation
Worldcom
Parmalat
GlobalCrossing
Aledphia
Board of Directors
Chair of the Board
Corporate Secretary
Shareholders General Meeting of
Shareholders
What is a Corporation?
The business corporation is an instrument
through which capital is assembled for the
activities of producing and distributing goods
and services and making investments.
Accordingly, a basic premise of corporation
law is that a business corporation should
have as its objective the conduct of such
activities with a view to enhancing the
corporations profit and the gains of the
corporations owners, that is, the
shareholders. Melvin Aaron Eisenberg
What is a Corporation?
When they [the individuals composing a corporation]
are consolidated and united into a corporation, they
and their successors are then considered as one
person in law . . . For all the individual members that
have existed from the foundation to the present time,
or that shall ever hereafter exist, are but one person
in law a person that never dies: in like manner as
the river Thames is still the same river, though the
parts which composite are changing every instant.
Blackstone
An ingenious device for obtaining individual profit
without individual responsibility. Ambrose Bierce,
The Devils Dictionary
Corporate Form
1. limited liability for investors;
2. free transferability of investor
interests;
3. legal personality (entityattributable powers, life span, and
purpose); and
4. centralized management.
Purpose of a Corporation
Human satisfaction
Social structure
Efficiency and efficacy
Ubiquity and flexibility
Identity
Personality morality ?
Measuring Performance
Definitions
Other Definitions
Corporate Governance
Moral Hazard
Incomplete contracts
Adverse selection bias
Agency Problem
Fiduciary Duty
accessibility, efficiency,
timeliness, completeness, and accuracy
of information critical
Listing requirements
Inclusion of Corporate Governance in
investment decision process
Anglo-Saxon Model
External mechanisms
board of directors
employee compensation
Japanese Model
Concentrated Ownership
The observation that there is little
separation between ownership and
control
Holding structures and
reorganizations used to deny free
exercise of ownership rights
Inexperienced Directors
Government Intervention
Friendly Takeover
Theory
Agency Problem
Agency Problem
Control Mechanisms
More Theory
Types of Directors
a) Executive Directors
Executive directors can be defined as
those that also hold an executive
position in the company, namely
that of:
The General Director;
An Executive Board member; or
A manager of the company who is not an
Executive Board member.
Types of Directors
b) Non-Executive Directors
Non-executive directors are Supervisory Board
members that do not hold an executive position
in the company.
c) Independent Directors
Russian law does not define the concept of
independent directors. The Company Law does,
however, refer to independent directors under
specific circumstances to determine the position
of individuals engaged in related party
transactions and to prevent possible conflicts of
interests.
Independent Director
What is Independence?
Independent Director
Independent Director
Observance of the independence requirement is
the most important aspect of the activity of an
Independent Director.
(1) An Independent Director shall refrain from any
actions that could lead to a loss of his/her
independence. Where circumstances arise which
make an Independent Director lose his/her
independence, the Independent Director must
immediately notify the shareholders, the
management and the Association accordingly.
(2) An Independent Director shall be prepared to
provide arguments in support of his/her position if
he/she disagrees with the majority of members of
the Board of Directors, its chairman, the president
of the company, or its managing director.
Independent Director
Independent Director
Independent Director
Governance
Management
Outward
looking
Providing
Accountability
Strategy Formulation
Monitoring and
Supervising
Future Focused
O
O
O
O
O
O - executive directors
Management
N
O
O - executive directors
N non executive
directors
O
O
Management
N
O
O - executive directors
N non executive
directors
O
O
Management
Governance
N
N
N
N
N
O
O
O
O - executive directors
N non executive
directors
Management
O
O
O - executive directors
N non executive
directors
Management
The Board
Effectiveness
Talents