GRA 6568 Corporate Value Creation, Sustainability and Social Welfare
GRA 6568 Corporate Value Creation, Sustainability and Social Welfare
The issues of Corporate Social Responsibility (CSR), Socially Responsible Investment (SRI), and Sustainability are at the forefront of the challenges corporations, investors and government are facing. To a large extent, the need for CSR arises from the existence of externalities to the firm productive activities. We first examine the problem of externalities and review the market, non-market and ethics based solutions proposed in the literature. We use this framework to provide a solid economic foundation to the conditions under which the objective of the firm should be shareholder value maximization, and the conditions under which it should be replaced by either shareholder welfare maximization or stakeholder welfare maximization. We then develop the practical steps firms need to undertake to incorporate sustainability in their investment decisions and operations management. We investigate in detail the alternative institutional mechanisms open to shareholders and institutional investors to effect CSR and sustainability focused management practices. We examine alternative ways through which finance innovations can help achieve individual returns and benefits, economic development and social impact. We review the empirical evidence on the different solutions to the externalities problem on value creation and firm performance. Of particular interest is the link (or lack thereof) between CSR and firm economic performance as well as CSR and firm value. We analyze the role of fiduciary duty in helping align board and manager behavior to shareholders priorities.
The student will become familiar with the economic tools for analyzing the impact of externalities on economic activities, the alternative approaches (market based, non-market based and ethics based) to address externalities, the conditions under which each approach can be used, and the mechanisms through which they affect firm value and performance. She will develop an understanding of the different institutional arrangement that can be used to achieve jointly firm value creation and social welfare enhancements. She will acquire a broad familiarity with the empirical evidence on the impact of the different approaches on firm value creation, profitability and sustainability. She will also develop an understanding of the different institutional arrangement that can be used to achieve jointly firm value creation and social welfare enhancements.
The students will learn an economic framework to identify and analyze both the private costs and benefits and the public costs and benefits of the firm’s activities, and learn to recognize the conditions under which market solutions, non-market or ethics based solutions are feasible and/or preferable to improve social welfare. In particular she will learn to "identify where the company creates or destroys value", with a definition of value including environmental or social value, identify the sustainability framework appropriate to measure impact, and be able to perform a “materiality analysis” to identify that really matters in different corporate environments. She will learn to apply this framework in various situations and develop an understanding of the investment instruments and institutional mechanisms appropriate for each set of circumstances.
The course provides a broad framework to analyze the social welfare and private benefits implications of economic activities and the extent and limits of the role of finance in addressing and balancing these competing objectives. The course should also enhance the students ability to formulate and communicate clearly their analysis as well as to identify and disclose fully its advantages and limitations.
Topics:
- Economic analysis of externalities: market vs non market solutions and the role of ethics: Meade, Coase and Arrow
- Shareholder value maximization vs shareholders welfare maximization – From Friedman and Jensen to Hart and Zingales.
- Corporate Social Responsibility, Governance and Firm Economic Performance and Value.
- ESG and firm operating performance & downside risk
- ESG and equity and bond value & returns
- Sustainability focused corporate investment and operating management
- Identification of the firms’ areas of operations that create or destroy value, in financial, environmental and social terms, using of the main sustainability frameworks to measure impact.
- Materiality analysis: which social and environmental dimension really matter for the firm’s operations
- Investment and operation action plan.
- Tools for engagement: institutional mechanisms for shareholder actions to enhance corporate sustainability focus
- UN Principles of Responsible Investing (UNPRI) and UN Sustainable goals.
- Institutional Investors and Socially Responsible Investing
- Ethics, Fiduciary duty and social responsibility
- Alternative finance mechanism to sustain for profit economic activity with benefits to the individuals and social impact.
- Finance, economic development and inequality
The learning activities will combine for 1/3 lectures, 1/2 case discussions, and 1/6 external guest speakers. Students are expected to prepare the lectures and guest speakers by reading assigned materials and participate actively in the discussions. The course will include the preparation and discussion of four to five in-depth case on sustainability management. There will be various assignments throughout the course, including preparing reports for each of the cases, and in class presentations of the case reports. Most learning will take place through student discussions of papers, cases, and other assignments.
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.
Disclaimer
Deviations in teaching and exams may occur if external conditions or unforeseen events call for this.
GRA 6566
| Assessments |
|---|
Exam category: Submission Form of assessment: Written submission Weight: 30 Grouping: Group (3 - 4) Duration: 1 Week(s) Comment: 4 cases reports due during the first 9 weeks of teaching. 1 week per case. Exam code: GRA 65681 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: 40 Grouping: Individual Support materials:
Duration: 3 Hour(s) Comment: Written examination under supervision Exam code: GRA 65681 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 Weight: 15 Grouping: Group (3 - 4) Duration: 1 Week(s) Comment: 2 case reports due in the last 3 week of the course. I week per case Same groups as for previous cases Exam code: GRA 65681 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: 15 Grouping: Individual Comment: Presentation of case reports and in class discussion of cases Exam code: GRA 65681 Grading scale: Point scale leading to ECTS letter grade Resit: All components must, as a main rule, be retaken during next scheduled course |
| Activity | Duration | Comment |
|---|---|---|
Case teaching | 12 Hour(s) | |
Teaching | 12 Hour(s) | |
Feedback activities and counselling | 12 Hour(s) | |
Group work / Assignments | 48 Hour(s) | |
Student's own work with learning resources | 48 Hour(s) | |
Prepare for teaching | 36 Hour(s) | |
Examination | 3 Hour(s) |
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.