Part A

1. Corporate governance is the structure or rules, processes, and practices responsible for the
management of a company (Claessens, 3). A board of directors is the primary force responsible
for the corporate governance in a company.
2. Managerialism is the belief or the reliance on methods and concepts used by professional
managers in the planning or administration of an activity. Managerialism gives professional
managers the power to control all the management functions in a company such as monitoring,
planning, coordination, and decision making.
3. Financial intermediation is an activity in which an organization incurs liabilities on its account
intending to engage in market financial transactions to acquire financial assets. The institutions
responsible for the channeling of funds from the lenders to borrowers are referred to as
financial intermediaries. Examples of financial intermediaries include commercial banks, stock
exchanges, and investment banks.
4. Berle and Mean’s quote meant that corporations had destroyed the unity of the so-called
property and dissolved the atom of ownership because of several reasons. Firstly, shareowners
in a corporation are denied a large part of their rights associated with their property ownership
(Davis, 42). Secondly, shareholders are also denied the right to have direct control of the
organization or access to its property. As a result, the corporation takes total control and
management, hence destroying the unity of property and dissolving ownership.
5. When an investor buys shares in a company, he or she is entitled to no real influence on how
the company is managed, run, and by whom (Davis, 43). As a result, buying shares from a
company gives the investor no real influence on the management of the company.
6. Agency costs are the company's internal expenses that arise as a result of an agent's action
when acting on behalf of a particular principle. Agency costs are contributed by factors such as
disruption, dissatisfaction, and conflicts of interest between the management and shareholders.
7. The critics of Berle and Mean’s analyses all corporate managers are compelled to pay close
attention to the company's share prices. The analyses suggest that dispersed ownership leads to
lower attentions. However, the board of directors, takeover market, and managerial labor
market incorporates concentrated ownership hence compelling all corporate managers to pay
close attention to the company’s share price. (Davis, 47)

Part B

1. Finance capitalism was the first era in the 20 th century. This era arose during the merging wave
of the century when bankers maintained a strong influence on the control and management of
the largest corporations (Davis, 62). These new giants became a cartel controlled by street
financiers. As a result, other corporations and the public engaged in campaigns for the benefit of
the public.

Managerial capitalism was the second era during the 20 th century. In this era, professional
managers evolved who run independent financial corporations, which became common in many
social institutions (Davis, 63). The finance capitalism corporate ownership was dispersed, and
the managers broaden forms of ownership and management in the social institutions.

Shareholder capitalism was the third era during the 20 th century. The era ushered the takeover
wave and made a shift to post-industrialism, which continues today (Davis, 63). Post-industrial
 corporations replaced large manufacturers. Social institution ownership was dispersed, and the
companies relied on mutual funds for shareholding management.

2. Policymakers and citizens were the stakeholders during the managerial capitalism. The
management responded to the policymakers by enacting social policies through raising wages
and demands. The management responded to the citizens by offering equal employment
opportunities, environmental protection, and safe products.
3. Managerial capitalism declined because social institutions became challenging to sustain, and as
a result, large manufacturers were replaced by post-industrial corporations.
4. The goal of creating shareholders value had several implications which include; building
leadership brands on consumer goods, and achieving the corporate focus through the creation
of long term stockholder value.

Part C

1. Lehman Brothers had an effective board of directors before it collapsed. This is because the
board of directors did not cause its collapse, but instead, it collapsed when housing prices
reversed the course (Davis, 31). Other investments and commercial banks also collapsed as a
result of the housing price reverse, therefore indicating board of director were not the cause of
Lehman Brothers collapse.
2. The CEOs of other existing companies make a team of the qualified border of directors. This is
because they combine their knowledge and experiences,to produce and deliver a qualified
board of directors for a company.
3. A failure in the prior ventures shows an individual weakness and a trace of bad and undesirable
quality, which adversely impacts his or her future. As a result, the failure depicts the individual is
likely to hold a strong position in the future.

Part D

1. Rules-Based Standards- GAAP provides a set of rules instead of guiding principles. As a result,
GAAP is not well flexible to accommodate market changes, hence providing wrong information
to an investor (Dorward, np).
Asset valuation- GAAP uses historical cost of goods or an acquisition cost; hence it may not
provide accurate information on financial assessment to an investor (Dorward, np).
Private companies- small private companies assess their financial performances for lenders,
vendors, and other interested groups; hence GAAP may not provide the appropriate information
for an investor.
2. The analysis of Royal Dutch Shell indicated a broader problem related to the whole corporate
governance. This is because the failure of the corporation was as a result of the failure of the
entire management provided by corporate governance.

Part E

1. The efforts made in the Walmart proxy statement have a great meaning on corporate
governance. This is because the statement provides a set of rules on the company's voting
hence impacting the corporate governance of a company.

Walmart proxy statement identifies three areas where it focuses its efforts concerning
 Corporate governance. The three areas identified are the voting process in a company, stock
ownership and shareholding, and the company's compensation.

2. Walmart appears to take the issue of corporate governance seriously because the proxy
statement focuses on the key areas of corporate governance. The key areas are voting, stock
ownership, and compensation. As a result, Walmart takes the issue of corporate governance
seriously.
3. Stock performance, in this case, is not a valid metric to determine whether Walmart was
adequately for their efforts because it is just two years past, while stock performance assesses
the payout after the end of three years (John Q, 46). Therefore, because it is only two years that
have passed, stock performance is not a valid metric.
4. The total percentage of the company's stock owned by the directors and executive officers is
50.22% (John Q, 92). The number surprises me because only 21 persons own that larger part of
stock ownership.
Works cited

Davis, Gerald F. Managed by the markets: How finance re-shaped America. Oxford University Press,
2013.

Claessens, Stijn. "Corporate governance and development." The World Bank research observer 21.1
(2006): 91-122.

John Q. Hammons Center Rogers, Arkansas: Walmart; Notice of 2019 Annual Shareholders’ Meeting,
Wednesday, June 5, 2019

Dorward L. GAAP limitations, 2017