Corporate Governance, Syllabus MGT/P/B 410

Transcription

1 Corporate Governance, Syllabus MGT/P/B 410 Michael W. Maher Assisted by: Kathleen Donelan-Maher Telephone: Purpose of the course. Let's cut to the chase. If companies want to raise money, how can they? 1. They can use internal profits. 2. They can use bond sales. 3. They can use the sale of stock through IPOs or secondary offerings. The sale of stock has additional advantage. It leads to sharing the risk and increasing the scale of operations. Corporate governance is the watchdog process that enables companies to sell their stock. Let's look at some components of corporate governance: 1. The Board of Directors. The Board of Directors is directly accountable to shareholders. That is in theory. In this course we ll see how it works in practice. 2. The auditors. Lots of directors rely on the auditors. They say, If the auditors are okay, we are okay too. In my opinion, the Board of Directors relies too much on the auditors. 3. The Securities and Exchange Commission (SEC). The SEC provides oversight to the securities markets. But, because of limited funding, the SEC does not do much oversight. 1

2 Overview Corporate governance is an exciting and timely topic. This course covers recent and notso-recent business and accounting scandals, discusses how corporations can better operate in the interests of shareholders and the public, and learn from people who rely on corporate governance in making investment decisions. This course should be valuable to current and prospective shareholders and directors and to managers who wish to operate their organizations with effective governance. It is directly relevant to people who are or want to be involved in governance auditors, consultants in compensation and incentives, staff working on mergers and acquisitions, corporate regulators, and shareholder rights activists. We focus on the shareholders as the primary constituent of the organization, but our work is also relevant for a broader group of stakeholders. This course aims to help students understand the workings of corporate governance. We focus on the governance of corporations for which there is a separation of ownership from control of resources. In these cases, owners-shareholders have entrusted corporate managers with resources to conduct business and generate a return on investment for them. Owners-shareholders rarely monitor corporate managers closely, which allows managers considerable discretion in using resources. For example, researchers have long documented the inclination of managers to achieve growth at the expense of profitability and to manage accounting numbers to present a more stable picture of companies financial performance than actually occurs. The result is that corporate managers have tremendous resources at their disposal and wield influence that arguably is greater than that of governments. Corporate governance is a broad and important topic that matters to managers, directors, accountants and auditors, shareholders, regulators and society. Serious students of corporate governance must know the law, economics, finance, accounting and auditing, sociology, psychology and political science. You could take many courses on this topic and still have only scratched the surface. Note: I am grateful to Bill Kinney, University of Texas at Austin and to Tom Frecka, University of Notre Dame, for many helpful discussions and ideas that I used in developing this course. Required course materials. None. (I will provide handouts of required reading in class.) Grading. This course is a pass-fail course. 70 out of 100 points are required to pass. You may earn the points in the following ways: 1. Weekly quizzes, 50 points in total. The weekly quizzes will be based on the previous week's class. They will be given at the beginning of class. They will be closed book quizzes. You will be given an option to take a final exam instead of the weekly quizzes. If you miss a class, I recommend that you take the final exam. 2

3 2. Class participation, 30 points in total. To earn points for class participation you have to be here, participating in the class discussion; you have to be engaged in the discussion. In order to participate in the discussion, you have to have everything with an on-off switch switched to the off position. 3. Class presentation, 20 points in total. On the last, day you ll be expected to make a class presentation of either your favorite company or a book or two movies that you have seen or read. You will be expected to make short PowerPoint presentation about 10 minutes long. Class schedule. Classes in the Day Program. We have four classes for two hours and 20 minutes each, from 3:10 p.m. until 5:30 p.m. The dates are Mondays, September 30, October 7, October 14, and October 21. Classes in the Sacramento Program. We have three classes for three hours and 10 minutes each, from 1 p.m. until 4:10 p.m. The dates are Saturdays, September 28, October 5, and October 12. Classes in the San Ramon Program. We have three classes for three hours and 10 minutes each, from 1 p.m. until 4:10 p.m. The dates are Sundays, November 10, November 17, and November 24. Detailed course schedule and assignments. Sacramento and San Ramon programs. First session. 1. What this course is about. 2. Overview of corporate governance. 3. Class exercise. Go to the company website, search for the proxy statement. Answer the following questions from the proxy statement: 3.1 How many directors are on the Board? How many of them are independent? Are you sure that all of those are independent? How many have substantial expertise? 3

4 3.2 What are the issues being brought before the shareholders to be voted on? Are there any issues that management opposes? 3.3 Who are the auditors? Are the auditors being reappointed? What is the compensation of the auditors? Who appoints the auditors? 3.4 What is the compensation of the Board of Directors? What is the compensation of the five executives that are in charge of the company? 4. We will have a 30-minute movie entitled, Cooking the Books. 5. Assigned readings for the next class: the Sarbanes-Oxley Act. Second session. 2. Discuss readings on the Sarbanes-Oxley Act. 3. Begin the Enron case. Third session. 2. Continue the Enron case. 3. Your presentation to the class. Day program. First session. 1. What this course is about. 2. Overview of corporate governance. 3. Class exercise. Go to the company website, search for the proxy statement. Answer the following questions from the proxy statement: 3.1 How many directors are on the Board? How many of them are independent? Are you sure that all of those are independent? How many have substantial expertise? 4

5 3.2 What are the issues being brought before the shareholders to be voted on? Are there any issues that management opposes? 3.3 Who are the auditors? Are the auditors being reappointed? What is the compensation of the auditors? Who appoints the auditors? 3.4 What is the compensation of the Board of Directors? What is the compensation of the five executives that are in charge of the company? 4. Assigned readings for the next class: the Sarbanes-Oxley Act Second session. 2. Class assignment: Cooking the Books 3. Discuss readings on the Sarbanes-Oxley act. Third session. 2. Enron case. Fourth session. 2. Your presentation to the class. 5