GRA 6542 Corporate Governance
GRA 6542 Corporate Governance
This course provides a broad overview of recent issues in corporate governance. It addresses the situation where the firm's stakeholders (such as its owners, creditors, management, employees, and society at large) disagree on how to use the firm's resources. The potential conflicts of interest between stakeholders create a corporate governance problem and can produce welfare losses for the firm and for society as a whole. We will primarily study the corporate governance problem in terms of principal-agent relationships between the owners, the creditors, the board, the management team and other stakeholders.
We revise theoretical models about corporate governance and examine the ways in which they can be tested using available data. We also discuss key empirical findings in corporate governance, as well as more detailed individual cases .
The course also addresses the most recent developments in regulations concerning corporate governance (e.g. corporate governance codes from various countries). It places particular emphasis on the stakeholder view of corporate governance, sustainability, corporate social responsibility, environmental, social and governance standards, and socially responsible investment.
The course will go beyond the usual analysis of listed firms with dispersed ownership and use examples of private firms, including family firms.
The major objective of the course is to train the student in understanding what a corporate governance problem is, how it can be discovered, how serious it is, and how it can be handled. Students should become familiar with the main theoretical insights and the empirical evidence concerning corporate governance issues. They should be particularly aware of recent developments in corporate governance, such as the focus on sustainability and corporate social responsibility.
In particular, students should be aware of:
- the concept of stakeholder;
- the importance of asymmetric information issues in corporate governance;
- the sources of potential conflicts between shareholders and managers and the key mechanisms addressing those conflicts;
- the sources of potential conflicts between majority and minorit shareholders and the key mechanisms addressing those conflicts;
- the sources and consequences of conflicts between shareholders and debt holders;
- the stakeholder view of corporate governance and the recent developments concerning corporate social responsibility and socially responsible investment;
- the role of regulation in corporate governance;
- special governance issues affecting private firms and in particular family firms.
A key learning outcome is to successfully use the theoretical and empirical insights gained during the course to reduce the value drain caused by weak governance.
By the end of the course, students should be able to:
- identify and discuss specific governance issues in various real-life firms;
- understand and discuss the roles and interests of various stakeholders in the firm;
- understand and discuss the drivers of corporate governance regulations;
- be able to understand and analyze important theoretical models in corporate governance;
- interpret and discuss empirical findings in corporate governance;
- understand and analyze the implications of corporate governance issues for the valuation of firms and returns to investors in those firms.
An important goal is to help students reflect on the financial and ethical implications of decisions made by firm insiders and outsiders. Those decisions can affect both individual wealth and social welfare.
By the end of the course, students should be able to predict and analyze potential issues that can affect the firm, its owners and other economic agents. They should also be able to discuss optimal governance solutions for various firms.
The examples and empirical results used in the course will cover a broad range of geographical areas, and we will also discuss regulations from many countries. Students should be able to understand and analyze governance practices in an international context.
- The corporate governance problem: What is it, where does it come from and how serious is it? How do firms convey information to outsiders - and why do we still have asymmetric information issues in spite of that? What is the link between corporate governance and corporate finance?
- Endogeneity issues in the study of corporate governance issues. How do we measure the effect of corporate governance - and how do we make sure the relationship is causal?
- Ownership structure: Does it matter if owners are small or large, whether they are individuals or institutions, and whether they are long-term or short-term? Why are large owners both a problem and a blessing for small owners and vice versa? Can firms survive without owners? How does the ownership structure interact with the firm's Corporate Social Responsibility (CSR)?
- The market for corporate control: : Do takeover threats reduce the corporate governance problem? Do mergers reduce agency costs, or are they just driven by them?
- Fund activism: Do private equity funds, mutual funds, hedge funds, and pension funds influence the governance of the firms they invest in, or are they too small and incompetent to matter?
- Board composition: Should boards be large or small, dominated by owners or managers, homogeneous or heterogeneous?
- Compensation: How does fixed pay vs. performance pay influence the corporate governance problem? Are CEOs paid excessively?
- Majority vs minority shareholders: What are the issues faced by minority shareholders when investing in firms controlled by large blockholders?
- Owners and creditors: How can owners hurt the creditors best interests? What will creditors do to prevent this from happening? Who pays for this agency problem?
- Shareholders vs. stakeholders: Should the company focus narrowly on "shareholder value" or should other stakeholders also be explicitly considered? How important are corporate social responsibility and socially responsible investing? What are the implications of increasing sustainability concerns, and of environmental, social and governance (ESG) ratings?
- Private firms: How does the nature of the corporate governance problem differ between public (listed) and private (nonlisted) firms? Why do firms choose to stay private rather than go public?
- Family firms: What are the major governance problems for firms controlled by a family? How can they potentially affect firm performance?
- Regulation: Should politicians interfere with corporate governance? For instance, does it make sense to have the Norwegian system of mandating at least 40% of each gender in the boardroom, and to ensure that 1/3 of the directors are employees? Why have more than 50 stock exchanges around the world issued recommendations for how to execute corporate governance?
The instruction consists primarily of discussions of the readings assigned to the topics listed above. Each topic is assigned chapters from the textbook, theoretical and empirical articles, as well as real-life cases and examples. Exercises based on articles are associated with several topics. Students are expected to have read the material before each class meeting.
Class discussions are to focal point of the course. Students are strongly encouraged to get involved, and build an understanding of often complex corporate governance debates.
Group assignments will also be used to encourage team work and independent thinking on corporate governance topics. Students will be given real-life examples to analyze and discuss.
Please note that while attendance is not compulsory in all courses, it is the student’s own responsibility to obtain any information provided in class.
This is a course with continuous assessment (several exam components) and one final exam code. Each exam component is graded by using points on a scale from 0-100. The components will be weighted together according to the information in the course description in order to calculate the final letter grade for the examination code (course). Students who fail to participate in one/some/all exam elements will get a lower grade or may fail the course. You will find detailed information about the point system and the cut off points with reference to the letter grades when the course starts.
At resit, all exam components must, as a main rule, be retaken during next scheduled course.
Honour Code
Academic honesty and trust are important to all of us as individuals, and represent values that are encouraged and promoted by the honour code system. This is a most significant university tradition. Students are responsible for familiarizing themselves with the ideals of the honour code system, to which the faculty are also deeply committed.
Any violation of the honour code will be dealt with in accordance with BI’s procedures for cheating. These issues are a serious matter to everyone associated with the programs at BI and are at the heart of the honour code and academic integrity. If you have any questions about your responsibilities under the honour code, please ask.
All courses in the Masters programme will assume that students have fulfilled the admission requirements for the programme. In addition, courses in second, third and/or fourth semester can have specific prerequisites and will assume that students have followed normal study progression. For double degree and exchange students, please note that equivalent courses are accepted.
Covid-19
Due to the Covid-19 pandemic, there may be deviations in teaching and learning activities as well as exams, compared with what is described in this course description.
| Assessments |
|---|
Exam category: Submission Form of assessment: Written submission Weight: 15 Grouping: Group/Individual (2 - 4) Duration: 1 Semester(s) Comment: Group write-ups based on given topics. Exam code: GRA65421 Grading scale: Point scale leading to ECTS letter grade Resit: All components must, as a main rule, be retaken during next scheduled course |
Exam category: Submission Form of assessment: Written submission Invigilation Weight: 20 Grouping: Individual Support materials:
Duration: 2 Hour(s) Comment: Mid-term written examination under supervision. Exam code: GRA65421 Grading scale: Point scale leading to ECTS letter grade Resit: All components must, as a main rule, be retaken during next scheduled course |
Exam category: Submission Form of assessment: Written submission Invigilation Weight: 60 Grouping: Individual Support materials:
Duration: 3 Hour(s) Comment: Final written examination under supervision. Exam code: GRA65421 Grading scale: Point scale leading to ECTS letter grade Resit: All components must, as a main rule, be retaken during next scheduled course |
Exam category: Activity Form of assessment: Presentation and discussion Weight: 5 Grouping: Group (2 - 4) Duration: 1 Semester(s) Comment: Presentations on given topics (based on the same material as the group write-ups). Exam code: GRA65421 Grading scale: Point scale leading to ECTS letter grade Resit: All components must, as a main rule, be retaken during next scheduled course |
A course of 1 ECTS credit corresponds to a workload of 26-30 hours. Therefore a course of 6 ECTS credits corresponds to a workload of at least 160 hours.