Centre for Financial & Management Studies (CeFiMS) - University of London

Individual Professional Courses – IPC    

Corporate Governance [FFL110]

Introduction

This course is specially designed for the postgraduate study of such areas as management, finance, financial law, corporate law, economics and related subjects, and has been designed to increase the depth of your understanding of corporate government issues. The course places a strong emphasis on the relationship between theoretical concepts and real world issues, making a real contribution to your in-depth understanding of the relevant corporate governance issues and future career development.

Aims & Objectives

When you have completed your study of this course you will be able to:

• Outline and discuss the key legal, political and economic features of the major corporate governance systems found around the world

• Analyse how corporate governance systems influence performance, including both the performance of individual firms and the allocation of capital within a country

• Discuss the evolution of diverse ownership and governance structures across different economies

• Evaluate theories of the firm, and explain how they are relevant to the diverse range of ownership structures that exist in reality

• Address such practical questions, as how should the board of directors and executive teams be composed; how should executives and board of directors be remunerated given the legal, political and economic framework in the country; how do CEOs decide about the mix of debt and equity finance and how does the mix affect their discretion and control over cash flow?

• Explain why the quality of corporate governance is relevant to capital formation

• Describe why systematic failure of corporate governance can lead to failure of confidence that could spread from individual firms to entire markets or economies

• Discuss the role of corporate governance codes and evaluate their usefulness in achieving better corporate governance practices.

Resources

Students receive a looseleaf binder containing eight 'course units'; these texts are carefully structured to provide the main teaching and are equivalent to traditional course lectures, defining and exploring the main concepts and issues, locating these within current debate and introducing and linking the further assigned readings. Two assignments (to be marked by your CeFiMS tutors), and a specimen examination paper are also included within the student pack, along with the following:

Textbooks:

Monks, Robert A.G. and Nell Minow: Corporate Governance Third Edition, New York: Blackwell, 2004, ISBN1405116986 / 1405116994

Hansmann, Henry: The Ownership of Enterprises, Cambridge MA: The Belknap Press of Harvard University, 2000, ISBN 0674001710

Readings:

A compilation of further readings: recently published articles or seminal writings which augment and illustrate the main text.

Course Timetable:

This shows the linkage between the various components of the course and indicates the schedule for reading the texts, submitting assignments, etc.

Course Content

Unit 1: Introduction to Corporate Governance

This unit introduces the basic concepts of corporate governance and examines why interest in corporate governance has exploded around the globe. In studying the unit, you will chart the evolution of corporate structure and learn to describe corporate governance in terms of such issues as capital formation, corporate finance and economic growth.

Unit 2: Theory of the Firm

The complementary theoretical perspectives on ownership and governance of the firm are outlined in this unit. You will examine the firm as a 'nexus of contracts', learn to discuss the costs of market contracting in relation to ownership costs and to describe some recent unconventional developments that challenge traditional theories of the firm. Finally, you will examine some complementary approaches to the theory of the firm, and study the institutional change perspective as an alternative approach to explaining the adaptive efficiency and evolution of firm ownership and governance structures.

Unit 3: Corporate Governance and the Role of Law

In this unit the basic debate on dispersed and concentrated ownership is outlined and the major competitive explanations for ownership structure is examined. You will explore the recent rise of equity culture in the European Union, despite the absence of sweeping legal change. The unit also aims to provide a historical perspective on the emergence of corporate structure and outline some implications for transition and developing economies.

Unit 4: Corporate Governance around the World

The purpose of this unit is to develop a 'framework of comparison'. In studying it, you will learn the key features of the market-based and bank-led systems of corporate governance, and examine the functioning of the family-based system of governance common to Asian countries. You will learn, finally, how a family-controlled business group structure can be applied to either benefit or exploit minority shareholders.

Unit 5: Board Composition and Control

This unit outlines the basic trade-offs that occur between shareholders and management by presenting the key functions of the typical Anglo-American board, both past and present. In studying it, you will examine the legal frameworks governing board duties – in particular, how they have evolved in recent years. You will also examine the election and function of the board of directors, including independent non-executive directors, and learn to critically assess how the board functions in reality. Finally, you will consider the case of American Express as a practical example of how boardroom politics influence the removal of a Chief Executive Officer (CEO).

Unit 6: CEO Compensation

In this unit you are presented with the key challenges faced by Chief Executive Officers (CEOs). You will examine why CEOs fail and discuss the functions of an ideal CEO. In studying Unit 6, you will consider the increasingly controversial issue of CEO compensation and employment contracts. You will also study the purpose of stock options and learn how to evaluate their effectiveness, and consider the difficulties involved in aligning the interests of the CEO and the corporation and its shareholders. Finally, the University will provide you with a practicle example in the case of General Electric and its CEO, Jack Welch.

Unit 7: International Governance

This unit explains why corporate governance has gone global, and why companies, particularly those from developing economies, may choose to list abroad. You will be able to examine the reasons why crisis has driven reform in many developing economies, and study the key reforms that have taken place in developed countries. Finally, the unit will investigate the potential perils of the globalisation of corporate governance.

Unit 8: Overview of Corporate Governance Codes

This final unit provides an overview of the main corporate governance codes and outlines the OECD and ICGN Principles of Corporate Governance. In addition, the unit will discuss the practical application of codes of governance to developing and transitional economies, and outline how codes can facilitate corporate governance reform. Finally, you will have an opportunity to examine some limitations to corporate governance codes.

Tuition & Assessment

One two-hour examination and one assessed piece of written coursework in each module. Each course module will count for 10% of the total mark. Of this 10%, the examination will count for 70% and the coursework for 30%.