Course Catalogue

Module Code and Title:      MGT305 Fundamentals of Corporate Governance                                               

Programme:                                      Bachelor of Business Administration

Credit Value:                                     12

Module Tutors:                                 Karma Lhaden, Dr. Swati Chakraborty,

Module Coordinator:                        Dr. Swati Chakraborty

General Objective: The objective of the module is to introduce students to corporate governance principles in real business scenario. Upon understanding global and country practices in the corporate world, students will be able to examine and critically analyse the roles of corporate governance in business setting.

Learning Outcomes – On completion of the module, students should be able to:

  1. Relate the role and nature of corporate governance in different environments
  2. Apply key concepts of corporate governance to study the corporate governance structure of an organization
  3. Analyse the contexts, both endogenous and exogenous, that underpin and contribute to corporate governance structures locally and internationally
  4. Analyse the trade-offs in corporate governance issues from the perspectives of key stakeholders
  5. Assess the importance of the inter-relationship between board of directors, management, and shareholders
  6. Evaluate the role and importance of agency cost in the business world
  7. Assess the significance of the growing importance and impact of E-fraud on the corporate world
  8. Evaluate the role and nature of corporate governance

Teaching and Learning Approach:

Approach

Hours per week

Total credit hours

Lecture and case studies

3

45

Tutorials and group work

1

15

Independent study

4

60

Total

 

120


Assessment Approach:

A. Written Assignment: Portion of Final Marks-10%

In their respective groups, students are required to do a detailed analysis on the nature, causes and the remedial measures of shareholder activism in an international corporation, which will be pre-assigned to each group. The assignment report should not be more than 2000 words.

1.5%    introduction to the concept of shareholder activism

1.5%    nature of shareholder activism of the assigned international corporation

2.5%    causes of the shareholder activism in that corporation

2.5%    remedial measures of shareholder activism in the corporation

2%       individual assessment component (ability to respond to questions)

B. Quizzes: Portion of Final Marks-10%

Each student will complete two short written individual quizzes of 15 min duration each, covering 2 weeks of subject matter. Each quiz worth 5% will be fact-based in-class quizzes to evaluate their knowledge of agency problems and board-management relationship.

C. Case study/Project including presentation: Portion of Final Marks-25%

Case study: Each group will have to select an international organization that has not been operating smoothly (unethical organization). A detailed analysis needs to be done as to what went wrong in these organizations and what could be the remedial measures. All the groups have to select different organizations. The maximum time duration for the presentation is 10 minutes, followed by question and answer session for 5 minutes.

2%       introduction to the concept of unethical organization

5%       why is the selected organization considered as unethical?

10%     underlying factors which resulted in the organization to be considered as unethical

            5%       suggested remedial measures

            3%      individual assessment component (ability to respond to questions)

Project: Each group has to select an organization in Bhutan. Students’ should carry out a mini-field observation to the chosen organization to study the corporate governance structure. Each group has to submit a written report of not more than 3000 words. Students’ are also expected to give a presentation of 10 minutes.

2%       introduction to the concept of corporate governance

4%       identifying the loopholes in the corporate governance structure of  

                                   the organization

8%       reasons for the loopholes in the corporate governance structure of

            the organization.

8%       possible solutions and remedial measures for improvement.

3%       individual question and answer.

D. Class participation: Portion of Final Marks-5%

Each student will be assessed based on their participation in the class by contributing to the class discussions by answering questions, stating their opinions, listening to others and actively taking part in class activities during the sessions.

E. Midterm Exam: Portion of Marks-20%

Students will take a written exam of 2-hour duration covering topics up to the mid-point of the semester.

F. Semester-end Examination: Portion of Final Marks-30%

The module will have a semester-end exam for 2 hours covering the entire syllabus. The question will be divided into two parts – Part A (carrying 40% of the exam weightage) will be mostly of short answer including objective questions. Part-B (carrying almost 60% of the exam weightage) will be mostly of essay type or an extended response to the given question. This part of the question requires students to apply, analyse, and evaluate or construct knowledge and skills. Cases will also be used to test the levels of knowledge.

Areas of assignments

Quantity

Weighting

A.    Written assignment

1

10%

B.    Case study analysis/Project

1

25%

C.   Quizzes

2

10%

D.   Class Participation

 

5%

E.    Midterm Examination

 

20%

Total Continuous Assessment (CA)

 

70%

F.    Semester-end Examination (SE)

 

30%

TOTAL

 

100%


Pre-requisites:None

Subject Matter:

  1. Corporation
    • Concept and characteristics of incorporated entities
    • Overview of the evolution of joint stock companies
    • Difference between incorporated and unincorporated business entities
    • Incorporation of companies under the Companies Act
    • Benefits of incorporation
    • Corporation and Corporate Governance (CG)
      • Meaning of Corporation and CG
      • Features of CG
      • Historical development of Corporate Governance
      • Advantages and disadvantages of incorporation
    • Fundamentals of Corporate Governance
      • Theories of Corporate Governance
      • Principles of Corporate Governance
      • Regulation
      • Codes of best practice
    • Disclosure
      • Concepts of disclosure
      • Reporting on corporate governance and reporting requirements, management commentary and voluntary disclosures
    • Mechanisms to control managerial behaviour and to enhance transparency
    • Power and influence of corporation
    • Ethical corporations
    • Purpose and role of corporations in society
    • Agency cost
      • Case Study: Union Carbide and Bhopal
    • Control mechanisms
      • Governance Committee
      • Audit Committee: Role and function of audit committee
      • Risk Committee
      • Internal audit
        • Criteria of a good internal audit
        • Importance of internal audit
        • Role and Process of internal audit
  1. Stakeholders
    • Private vs. Public corporation
      • Ownership and Control
      • Ownership and responsibility
    • Private and institutional investors
      • Power, size and type of institutional investors
      • Mutual Funds and Venture capital
        • Advantages
        • Disadvantages
      • Pension and Insurance Funds
        • Advantages
        • Disadvantages
      • Shareholder activism
        • A case study on shareholder activism: Myners shifts the burden of proof on activism
  1. Directors
    • Role and responsibilities of directors
    • Board of Directors:
      • Features of the Board
      • Legal duties and functions of the board
      • CEO succession planning
    • Board-management
      • Relationship Issues
      • Information flow
    • CEO/Chairman: Ex-CEO as directors
    • Director nomination, election and compensation
    • Independent directors
    • Non-Executive Directors
  1. Management
    • Levels of management
    • CEO
      • Roles and responsibilities
      • Compensation
    • Stock options
      • Restricted options
      • Repricing option grants
    • Shareholder concerns
    • Employment contracts
    • ESOP: Merits and demerits
    • Effective monitoring of management
  1. International Corporate Governance
    • Corporate Governance
      • Growth of CG and its various trends
      • Universal codes
      • Global CG guidelines
    • OECD
      • OECD principles of CG
      • OECD guidelines on state –owned enterprises
    • ICGN Statements
    • Comparative Analysis of OECD and ICGN statements
    • Cadbury report
    • Sarbanes-Oxley Act
    • Fraud risk assessment
    • E-fraud costs and risks
  1. Corporate Governance in Bhutan
    • Corporate governance in Bhutan
    • Historical development of corporate governance
    • DHI corporate governance code
    • RMA corporate governance regulations
    • Royal Security Exchange of Bhutan Ltd (RSEBL) market
    • Future development and regulations of corporate governance

Reading Lists:

  1. Essential Readings
    • Tricker, B. (2015). Principles of corporate governance: Principles, policies, and practices (3rd ed.). Oxford University Press.
    • Monks, R.A., & Minow, N. (2011). Corporate governance (5th ed.). Wiley.
    • Ministry of Finance. (2014). Internal Audit charter (2014). Royal Government of Bhutan.
    • Druk Holding and Investments Ltd. (n.d.). Corporate governance code.
  2. Additional Readings
    • Solomon, J. (2014). Corporate governance and accountability (4th ed.). New Delhi: Wiley India Pvt. Ltd.
    • Velasquez, M.G. (2012). Business ethics: Concepts and cases (7th ed.). New Delhi: Pearson.
    • Cases on Business Ethics Business World.

Date: July, 2017
Royal Thimphu College