B.Com (Hons)

Academic Year: 2019-20

Corporate Governance in Financial Institutions

Semester: Spring 2020

Name of the Instructor: Dr. Soumyadip Roy

Email id: soumyadiproy@jgu.edu.in

INTRODUCTION

The term corporate governance and its use in the financial press is relatively new phenomenon.

However, the underlying principles and theories that govern it have been around for a long time. These

principles and theories are drawn from a multitude of disciplines including finance, economics, accounting,

law and management. This course will introduce these concepts from a theoretical perspective first by

discussing the principal-agent problem which lies at the heart of effective corporate governance. The course

will look at how various functional parts of the modern corporation such as board structure, executive

compensation and stakeholder structures affect corporate governance.

After an introduction to the idea of corporate governance, the course will focus on what effective

corporate finance means for financial institutions. Since the beginning of the financial crisis in 2008

countless policies have been proposed, discussed and enacted on aspects of banking and finance. The

financial crisis showed us that a healthy economy cannot exist without a well-functioning financial system

and this course will focus on how the crisis was, in part, caused because of failures of effective corporate

governance. We will also study a number of high-profile corporate scandals and scams which led to massive

public and private losses. These topics will be covered with the help of case studies.

COURSE OBJECTIVES

This course is designed to introduce various types of governance and ethical administration of financial

institutions. It will provide both a theoretical as well an applied perspective on best practices when it comes

to corporate governance. B.Com students will benefit from learning how governance structures guide the

financial health of firms and what happens when these rules are not followed.

LEARNING OUTCOMES

By the end of the course, students should be able to:

1. Explain the concepts of corporate governance in academic or business forums

2. Explain various theories related to corporate governance

3. Distinguish between the positive effects of following best practices

4. Explain the structure of a board in a corporation and how it impacts corporate governance of that

institution

5. Understand the impact of executive compensation and incentive structures on effective corporate

governance

6. Learn from various case studies on the ill-effects of flouting corporate governance rules and norms

7. Differentiate between corporate governance practices around the globe

8. Teamwork: Group presentations and projectwork will inculcate a sense of teamwork among

students

9. Effective Presentation Skill: Three presentations during the course of the semester will enable

students to polish their presentation skills

TEACHING METHOD

The course will consist of lectures, in-class discussions and case analysis. The backbone of this course will

be in-class discussions, which will aid in tying up the concepts taught in the class with examples from the

practical world. The onus of learning will be with the student and the instructor will act as a facilitator.

Furthermore, the team project will ensure that students work in teams and complement each other’s skills.

TEAMS AND TEAMWORK

You will be informed about your team members and you should prepare cases for class discussions and

presentations. You will have no more than 4 members in your team.

ATTENDANCE POLICY

Attendance to all the sessions is as per the university rules (minimum 75% excluding all leaves). The

following instances will also be treated as absence unless prior permission is taken

Attending only part of the session, either entering or leaving during the break

Arriving in class after the session is scheduled to begin

GRADING

Evaluation Item Weightage Nature Explanation Class Exercises 20% Individual Students will be given several class exercises

throughout the course, which will all be related to the topic discussed in class on that day.

Project 10% +20% Group + Individual Presentation (group) and project paper (individual) on a case study assigned by the instructor. 10% weightage on presentation and 20% on paper. Desired structure of project paper to be provided by instructor.

End Term 50% Individual Final examination, which will be closed notes / closed book in nature

DELIVERABLES

a. Project paper:

Each team will turn in a report (2.0 spaced, 12 point font, Arial or Times New Roman) of 10 to 12

pages , not including the references and the exhibits) and submit over email to

soumyadiproy@jgu.edu.in on or before the mutually decided date. Submissions should be in pdf

format. There will be a plagiarism check.

All pdf documents should be in standard journal paper formats with required headings to make for

easy reading. Appendices and tables do not count towards the page limit. Please use the tables and

appendices in the report that add to the context and additional insights to the report.

b. Presentations:

Slides to be emailed to soumyadiproy@jgu.edu.in no later than midnight before the assigned date of

presentation. Team members absent during assigned presentation day will get an automatic 0

DELIVERY DEADLINES FOR PROJECTS/ASSIGNMENTS

Deliverables Due (Week #)

Project Presentation # 13,14

Project paper On or before last class

REQUIRED READINGS:

1. Corporate Governance by Christine A. Malinn, 3rd edition

2. Corporate Governance Matters by David Larcker and Brian Tayan

RECOMMENDED READINGS:

1. Corporate governance and the global financial crisis by William Sun, Jim Stewart and David

Pollard

2. Cadbury report: https://ecgi.global/sites/default/files//codes/documents/cadbury.pdf

3. Corporate Governance by Jean Tirole, Econometrica 2001,

https://www.jstor.org/stable/2692184

4. Notable Governance Failures: Enron, Siemens and Beyond by Michael Primbs and Clara Wang,

Penn Law: Legal Scholarship Repository

5. Handbook on International Corporate Governance: Country analyses, Edited by Christine A.

Malinn

6. Corporate Governance, ethics and CSR by Justine Simpson and John Taylor

7. Corporate Financial Distress, Restructuring and Bankruptcy by Altman, Hotchkiss and Wang

COURSE PLAN

Week Agenda Description

1 Topic 1: Introduction

a. What is corporate governance? b. Why is it important for corporates and society? c. Evolution of corporate governance in the 20th century

1 & 2 Topic 2: Theoretical Aspects of Corp Gov*

a. Separation of ownership and control - Agency Theory b. Stakeholder Theory

3 Topic 3A: Owners and Stakeholders*

a. Shareholders and stakeholders, family-owned firms and role of institutional investors in Corporate Governance b. Corporate social responsibility (and Socially responsible investment)

3 Topic 3B: Directors and Board Structure

a. Unitary Board versus Dual board b. Board of directors – role of the board c. Board sub-committees d. Non-executive directors and their role e. Executive compensation and incentives

4 Topic 4: Best Practices*

a. Risk Management b. Financial reporting and external audit c. Transparency

5 Topic 5: Corporate governance in financial institutions:

How are financial institutions governed?

6,7 Topic 6: Corporate governance and the global financial crisis*

Deregulation, risk management, conflict of interest and role of ratings agencies

8 Midterm

9,10 Topic 8A: Case Study - Failures of Corporate Governance (Enron, Siemens, Satyam)

Study historic cases of governance failures such as Enron, Siemens, Satyam

11,12 Topic 8: Case Study - Failures of Corporate Governance (Students' choice)

Study additional cases of governance failures. Students can suggest interesting cases.

13 & 14 Project Presentation *This topic will have a class exercise

GRADING

ACADEMIC HONESTY

The University rules regarding plagiarism will apply. Students are expected to be familiar with

and adhere to University policies in relation to plagiarism.

Final examination will be held according to the examination schedule provided by the

university