CORPORATE GOVERNANCE

Course instructor: Prof Arun K Tripathy

Email: arun.tripathy@mdi.ac.in | Phone: 9999040626

Course Introduction:
Corporations have grown enormously and the revenues of some of the dominant companies exceed the
GDP of sovereign nations. Corporates create enormous national wealth and they have tremendous power
to change society. There is a possibility of expropriation of the created wealth and wealth-creating assets
by those in operational control of the organization. Therefore, it is in the society’s interest to both monitor
the firms and limit any devious practices if observed. Both business and government have to work
together to explore and implement new ways in which they can grow and prosper into the future in a
manner which protects the interests of firms, society and the natural environment. All organizations, for
profit and non-profit, small and large, private and public, need governance mechanisms that monitor and
incentivize their top management team (TMT). The compelling reason for learning good corporate
governance practices is best exemplified by the recent challenges faced by the Tata Sons and the Infosys
boards, growing incidence of corporate failures and misdemeanors such as those in Yes Bank, IL&FS, DHIL,
Enron, WorldCom, Tyco, Lehman Brothers, and Satyam, and an equally growing concern for 'setting things
right in the boardroom'

Course Objectives:
Corporate Governance refers to the set of mechanisms used to manage the relationship among various
stakeholders that determines and control the strategic direction and performance of organizations. At its
core, corporate governance is concerned with identifying ways to ensure that strategic decisions are made
effectively. Value creation ultimately comes from the formulation and implementation of strategic
decisions made by strategic leaders. Numbers and models are helpful so long as they inform us and do
not blind us to the reality. Governments worldwide, after spending millions of taxpayer money in bail-out
packages to significant financial and non-financial companies, are now turning their attention to enact
significant changes in governance practices. This course explores the underlying basis for the governance
problem, and what are the various internal and external governance mechanisms to mitigate the agency
problem such as boards, executive compensation, ownership structure and the market for corporate
control. Some of the unique corporate governance issues pertaining to emerging economies such as family
ownership and business groups will also be discussed. Narayana Murthy while addressing the
shareholders of Infosys, after the resignation of Vishal Sikka, CEO, emphasizes on the importance of
understanding corporate governance practices in organizations

“Businesses will always have ups and downs. Business decisions are sometimes taken as bold bets that
may not pan out as expected. That is par for the course in any company. However, when there is a cloud
around how the organization is being governed, we must speak up. This is the key ingredient to keep an
institution healthy in the long-run and hold it accountable to all stakeholders.”

1
 Narayana Murthy, Aug 29, 2017

This is an integrative course and students will be encouraged to bring in perspectives from other functional
areas like law, economics, finance, organization behaviour and psychology in the class.

Pedagogy:
This course will require reading books, articles, case studies and literature from the field of Corporate
Governance. The sessions would be interactive where attempt will be made to understand the theories
and concepts through discussion of the readings and their application in cases. Student will be required
to prepare and effectively participate in class and make impromptu or scheduled presentations of issues
and learning’s. Besides the readings, groups of students will have to work on a comprehensive research
project to investigate and validate some of the key learnings.

Course material:
Text Book

• TB -. Corporate Governance- Principles, Policies and Practices: By Bob Tricker, 3rd Edition

Reference Books

• Corporate Governance: Robert A. G. Monks and Nell Minow. Blackwell Publishing, 5th Edition
• Corporate Governance – By Swami Parthasarthy
• The Theory of Corporate Finance, Jean Tirole, Princeton University Press.
• Corporate Governance in India – Jayati Sarkar and Subrata Sarkar

Course prerequisites: None

Evaluation scheme:
Evaluation Component Type (Individual/Group) Weightage

CP / Assignments & Learning Diary Individual 10%

Quiz Individual 15%

Group Project (Report and Group 20%
Presentation)
Mid Term Exam Individual 25%

End Term Exam Individual 30%

2
 Session Plan
Session Topics covered Case (if any) Pre-class readings
1-2 Introduction to Corporate TB: Chapter 1
Governance Milton Friedman “The Social
 Introduction to the course Responsibility of Business is to
• Preview of CG concepts Increase its Profits”, New York
• Role and purpose of Times Magazine, September13,
organizations 1970.

3-4 Theories and Philosophies of TB- Chapter-3

Corporate Governance

5-6 Ownership-shareholders TB – Chapter- 4

 Ownership structure and
firm performance
• Institutional Ownership
• Governance of Family
business/ Group Firms
7-8 Board of Directors TB- Chapter – 7, 8, 15, 16
&9-10
 TMT leadership
• Boardroom Practices
 Director and board
Structure, role, fiduciary
duties and responsibilities,
11-12 TB- Chapter - 12
 Executive compensation
• Corporate risk?

13-14 Internal & External Market for corporate control

Governance Mechanism
 Regulatory and legal TB- Chapter- 3, 13, 14
framework
 Understanding the Indian
context
15-16 International Corporate TB- Chapter - 17
Governance
Cross country comparisons of
CG practices
17-18 Board Process Simulation
19-20 Project Presentation