Corporate Governance Mallin Chapter 1: Prof. Dr. Laxmi Remer

CAMPUS KÖLN
CAMPUS MAINZ
CAMPUS POTSDAM
Corporate Governance
Module 1
Mallin Chapter 1
Prof. Dr. Laxmi Remer
Cologne Business School
This course and its slides are based on the books –

– Bob Tricker, Corporate Governance (Oxford UP,
2009)
– Christine Mallin, Corporate Governance (Oxford
UP, 2010)
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Introduction
1. Overview on the Course and Requirements

2. What is Corporate Governance and Why Do We Need it?
3. A Case Study: Enron – “The Birth of the Modern
Corporate Governance Discussion”
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• The purpose of the course is to introduce students thoroughly to

the subject of Corporate Governance.
• We will look at theoretical aspects of CG, its implementation in
businesses, its necessity as well as its strength and weaknesses, and
its form in different international settings.
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• Introduction to the Course and the Subject

• Theoretical Aspects of CG
• Historical Development of CG Codes
• Directors and Board Structure
• Directors’ Performance and Remuneration
• Shareholders and Stakeholders
• Family Business Governance
• Institutional Investors in CG
• The Role of CG in Mergers & Acquisitions
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• Socially Responsible Investment

• CG in Continental Europe
• CG in Central and Eastern Europe
• CG in the Asia-Pacific Region/CG in Emerging Markets
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• The final grade will consist of an exam (100%)
• Exam:
– 60 minutes
– 20% multiple choice, 80% open questions
– content:
• the slides used in the lecture
• everything being said in the lecture
• additional texts provided by the instructor
• recommended chapters from the below mentioned books
– We will do an exam preparation session!
• You do not need to buy a textbook! Helpful ones are:
– Bob Tricker, Corporate Governance (Oxford UP, 2009)
– Christine Mallin, Corporate Governance (Oxford UP, 2010)
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2. What is Corporate Governance and Why Do We
Need it?
• Corporate governance is the set of laws, policies, processes, customs, and institutions
affecting the way a corporation (or company) is directed and controlled (Cadbury Report,
1992).
– external dimension:
• laws and regulations
• values and norms
– internal dimension:
• written down, manifested in documents
• customs and traditions, “unwritten” rules
– external actors: governmental institutions and other stakeholders
– internal actors: board of directors (management), board of
supervisors, shareholders, employees
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Need it?
• Definitions:
– “Corporate Governance Deals with the ways in which suppliers of finance to corporations
assure themselves of getting a return on investment” (Shleifer and Vishny, 1997).
– “A set of relationships between a company’s board, its shareholders and other
stakeholders. It also provides the structure through which the objectives of the company
are set, and the means of attaining those objectives, and monitoring performance, are
determined” (OECD, 1999).
– “The framework of rules and practices by which a board of directors ensures
accountability, fairness, and transparency in a company's relationship with all its
stakeholders (financiers, customers, management, employees, government, and the
community)” (Business Dictionary, 2011).
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Need it?
• Corporate Governance at SAP
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Need it?
• Corporate Governance at AGC
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Need it?
• Important reasons why we need CG:
– ensures that an appropriate system of control works within a company and helps to protect
assets
– prevents single individuals from having too much influence
– concerned with the relationship between the board of directors, the management, the
shareholders, and other stakeholders
– ensures that the company is managed in the best interests of the shareholders and the other
stakeholders
– attempts to foster transparency and accountability, which investors are looking for in
corporate management as well as in corporate performance.
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3. Case Study - Enron
“I think that the failures of Enron and WorldCom and other companies are
partially failures of investors to recognize companies that are selling for a
thousand times nothing, but chances are they may be worth only that.”
(Arthur Levitt)
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CAMPUS KÖLN
CAMPUS MAINZ
CAMPUS POTSDAM
HERZLICHEN DANK FÜR

IHRE AUFMERKSAMKEIT
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CAMPUS KÖLN

This course and its slides are based on the books –

1. Overview on the Course and Requirements

• The purpose of the course is to introduce students thoroughly to

• Introduction to the Course and the Subject

• Socially Responsible Investment

HERZLICHEN DANK FÜR

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