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Corporate Governance-Module Handbook

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Corporate Governance
Module Handbook




Muhammad Irfan
Faculty of Business Administration
Department of Management Sciences









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Table of Contents
1. Introduction...3
2. Objectives..3
3. How to Contact Module Instructor....4
4. Rationale Including Aims...4
5. Participants understanding after studying this course4
6. Teaching Methodology.....4
7. Course Requirements and Expectations.5
8. Academic Dishonesty.6
9. Final Project...6
10. Module Contents....8













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1. Introduction
Corporate governance involves a set of relationships between a companys management, its
board, its shareholders and other stakeholders. Corporate governance also provides the
structure through which the objectives of the company are set, and the means of attaining
those objectives and monitoring performances are determined. This course explains the
relationship of owners (shareholders) and control (management), the issues involved and
providing track how to resolve it. Furthermore, the reader will understand the status and
remuneration related to executives and how they are compensated in terms of incentives
and grants. Further study will enhance the understanding of analysing the role of
accountants as well as auditors and their responsibilities in terms of creating favourable
environment between the share holders and management. Similarly, this course will flourish
your understanding about the Board of Directors (BODs), its strategic position in terms of
creating opportunities for businesses, various hiring of executives including CEO and
creating Good Board which will ensure that the shareholders money is safe and,
simultaneous, providing perks to its employees. Further study will give the understanding of
corporate takeovers as a governing mechanism while discussing its pros and cons as well as
considering corporations social responsibilities toward the economic and social welfare of
society.

2. Objective
The main objective of this module is to build up a clear understanding of two basic entities
i.e. owner (shareholders) and control (management), their relationships as well as conflicts. In
other words, 'good corporate governance' is simply 'good business'. It ensures:
Adequate disclosures and effective decision making to achieve corporate objectives;
Transparency in business transactions;
Statutory and legal compliance;
Protection of shareholder interests;
Commitment to values and ethical conduct of business;
Analysing and investment forecast about any company.
This is a 3 credit hour course, comprising 3 hours of teaching per week.


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3. How to Contact Module Instructor
You can contact the module instructor in the following prioritised ways:
1. Email: Muhammad_irfan@comsats.edu.pk
2. SMS: 0312-2263361 (Name, Module Name, Class, Registration No., Matter)
3. Call: 0312-2263361 (Better to get permission through sms to call to avoid any
inconvenience)
4. Office Meeting: By appointment only (Please do confirm your appointment either
through email or sms)

4. Rationale Including Aims
After studying this course, the attendants will be able to understand the corporate culture,
ethics and main issue related to shareholders and management. This course will also,
somehow, explore the understanding of SEC functions, how it works and some knowledge
about how to make investments.

5. Participants understanding after studying this course
To understand the relationship of shareholders and management.
To understand the issues raised with the separation of owner (shareholders) and
control (management)
To understand the key position of CEO in the Board of Directors (BODs).
To understand the analytical position of Auditors and Accountants.
And above all, to understand the aspect of corporate social responsibility.

6. Teaching Methodology
Teaching methodology would be like two-way process i.e. participating with the course
instructor during the class. Spoon feeding would be highly discouraged. Being graduate
students you are asked to prepare your lecture before entering into the class which will
facilitate the mutual discussion environment rather than having one sided delivery. During
the semester you will be asked to have different quizzes and assignments which will,
definitely, be considered while having your assessment and evaluation.

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6.1.Assessment Scheme
Mid-term examination I after 04 week 10%
Mid-term examination II after 10 week 15%
Quiz/Assignments/Projects/Presentations 25%
Terminal Examination after 16 week 50%

6.2.Reading Materials

Core Texts:
1. Corporate Governance by Kenneth A.Kim & John R.Nofsinger (2
nd
ed), Pearson
Prentice hall
2. Corporare Governance by A.C. Fernando, Dorling Kinderseley (India) Pvt. Ltd,
Licensees of Pearson Education in South asia.
3. Corporate Governance by Safdar A. Butt, Azeem Academy.
4. Corporate Governance and Accountability by Jill Solomon (3
rd
ed), John Willey &
Sons Ltd.
5. Manual of Corporate Governance Securities & Exchange Commission of Pakistan.

7. Course Requirements and Expectation
Grades: Grades will be assigned on the CIITs grading scale
Being Prepared for Class: You should be ready to discuss the undergoing concepts by
different perspectives
Attendance: Students are required to attend all the classes; minimum attendance requirement
by rule is 80% in CIIT.
Quizzes: Quizzes will be announced and there will be no make-up for missed quizzes.
Assignments: In fairness to students who complete assignments on time, late assignments
will not be accepted. You must turn in the assignments at the end of the lecture on the day
they are due.
Minimising disruptions: All cell phones should be turned off during class. Do not involve in
side conversations.
Report: Students are required to write a project report on the assigned topic and they have to
defend their work.
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Class Participation: Positive, healthy and constructive class participation will be monitored
for each class. Particular emphasis will be given during the presentation sessions. The manner
in which the question is asked or answered will also be noted. Your behaviour as business
executives in the class will contribute to the class participation marks.
8. Academic Dishonesty
Academic dishonesty is an offence that will not be tolerated in any form. Any student who is
involved in any such activity will be penalised according to the university regulations.
Plagiarism and Cheating: A student caught in plagiarism and cheating of documents would
be penalised according to the CIIT regulations.

9. Final Project
Each group has to select a company registered at ISE, making analysis with the following
points (not compulsory), come up with the answer why the chosen company is best for the
investment point of view and , if, you started your business/investment with the company
would be highly appreciated.
Part 1.
1. Introduction/brief history of the Corporation
2. Objectives
3. Vision and Mission Statement
4. Products manufactured or services offered by the organization
5. Board of Directors
a. Committees of the Board and its significances
6. Landmark Achievements of the corporation

Part 2.
1. CEOs of the Corporation since Corporations inceptions
2. The most important CEO
a. Contribution made by CEO
i. Shaping the company
ii. Promoting the Corporation

Part 3.
1. Corporations present scenario
2. Prospect for the future
3. Analyse current business challenges and future outlook
4. Increase in profit due to new product/services introduction
5. Achievements in regards to its competitors
6. Strategies for future growth (in the light of directors of the BODs & other
stakeholders)
Part 4.
1. Pattern of shareholding
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2. Major shareholders
3. Increase/decrease in the value of shares during the last five years
4. Earnings per share and payment of dividend to the shareholders
5. CEO/senior executive compensation pattern

Part 5.
1. Analysing corporation CSR (corporate social responsibility)
2. Corporate governance practices i.e.
a. Financial scam
b. Fraud
c. Corruption


3. Punishments (received by its executives) and its impact on;
a. Corporations profit
b. Corporations reputation

Part6.
1. Analysis
2. Recommendations
3. Conclusion
4. References/Bibliography



Some more information

1. Maximum number of members in each group is five (5) and the minimum number is
three (3).
2. Two groups cant go for one (1) company.
3. So if you arent feeling comfort with any of your group member, just divide your
work that must be mentioned in the project. You will be marked individually for your
work.
4. But if the group members didnt inform in advance about the project division, the
whole group will get the same marks.
5. The criterion for a company selection is on the basis of first come first serve. So
book your company to avoid in inconvenience.
6. Two similar companys project will be marked ZERO.
7. Your project must look like Project, having proper page numbers, table of contents
and references.
8. Make it colourful with ideas, thoughts and understanding, not just colourful diagrams.
9. Last date for submission of project will be announced in the class.
10. Good luck.







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10. Module Content

Lectures Topics
1,2 Corporations and Corporate Governance
3,4 Executives Incentives
5,6 Accountants and Auditors
7, 8 Financial Reporting
9,10 Board of Directors
11,12 Investment Bank and Securities Analysts
13,14 Shareholders and shareholder Activism
15,16 Internal Control
17,18 Creditors and Credit Rating Agencies
19,20 Risk Management
21 ,22 Corporate Takeovers: A Governance Mechanism
23,24 Business Ethics
25,26 Corporate Citizenship
27,28 New Governance Rules-Sarbanes Oxley Act 2002
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29,30 Manual of Corporate Governance-SEC Pakistan
31,32 Final Project



Course Outline Detail Based on Lectures________________________________________

1. Corporations and Corporate Governance
Lecture 1
What is Corporate Governance?
Defining different Economic Systems in the world
Why Capitalism is considered for Corporations growth?
How Companies can increase businesses?
Main focus of Corporate Governance.
Separation of ownership and control.
Forms of Business Ownership
Comparing corporations with sole proprietorship and partnership forms of
businesses.
Main disadvantages of Corporations.
Lecture 2
Running Corporations can be expensive.
Can Investors Influence Managers?
Forms of Proposals.
How to Monitor the corporations?
An Integrated System of Governance.
Improving Governance Performance: Rules-Based vs. Principles-Based
Approaches
Global Corporate Governance principles: Best practice and regulatory framework
for companies
2. Executive Compensation
Lecture 3
What is Executive Compensation
How Incentives can be a good solution.
Potential Managerial temptations.
Examples of self-serving managerial actions.
Types of Executives Compensation:
Does Incentives-Based Compensations work in general?
Potential Incentive Problems with Incentive based Compensation
Lecture 4
Expensive Executive Options: An Easy Solution
Real World Examples
Managements Behaviour at Xerox
Other Compensations
Crime and Punishments
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International perspective- CEO Compensation around the world
3. Accountants and Auditors
Lecture 5
Define Accounting?
Difference between Accountants and Auditors (A &A).
Importance of Accountants and Auditors (A & A).
Accounting for Inside use (management)
Accounting for outside use (Investors, Banks, The Governments, other
stakeholders)
Difference between Financial Accounting and Managerial Accounting.
Advantages & Disadvantages of Financial Accounting.
Advantages & Disadvantages of Managerial Accounting
Lecture 6
Financial statement/position explanation.
Accounting records are different for Managers and Public Financial Statement.
Reasons for differences in Financial Accounting and Managerial Accounting.
Problems that may occur in accounting.
Who are Responsible
Accountant or Manager
What is Auditing?
Types of Auditors
The Changing Role of Accounting-Managing Earnings
From manipulation to fraud
Auditors as Accountants
International Perspective
4. Financial Reporting
Lecture 7
What is Financial Report?
Notes to accounts
Qualities of Financial Statement
Functions of Financial Statement
Investors interest in Financial Statement
Keys issues related to fairness of Financial Statement
Misleading statements
Responsibility for health of Financial Statements
Audit reports
Auditors liability
Lecture 8
Professional monitoring of External Auditors
Guidelines to Audit firms
Non-Audit work
How to control non-audit work?
Rotations of External Auditors
Objectives of fixing Financial Statement
Directors responsibilities
Voluntary disclosures
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Role of Audit committee
External auditors and Audit committee
Audit cycle
5. Board of Directors
Lecture 9
What is Board of Directors (BODs)?
Who elects the BODs for a corporation?
Composition of BODs.
Functions of BODs.
Influence of corporate governance on directors power and duties
Overview of the Board: Instituting corporate governance standards
The Board Legal duties
Board Committees.
Historical Perspective- Is a Director simply a Figure-Head
Lecture 10
More attention on Directors.
Who are Directors (example)
Is being a director worth it?
Board structure in the US and around the World.
Good for the Goose, Good for the Gander?
Can Good Boards Lead to Better Firms Performance?
Potential Problems with Todays Board.
Disneys Board during the 1990s.
International Perspective Boards in Western Europe.
6. Investment Banks and Securities Analysts
Lecture 11
What is Investment Bank and IPO?
What is Security and who are Securities analysts?
Investment banking activities.
Methods of Issuing Stocks and bonds.
Criticism of Investment Banks.
IPO problems
Sell-side Analysts (Investment Bank)
What is Institutional Investors?
Lecture 12
Quality of Analysts Recommendations.
Conservative predictions
Under promise and over delivery is the name of this game
Analysts working at Investment banks
7. Shareholders and Shareholders Activism
Lecture 13
Shareholders are considered innocent and helpless. Why?
To categories of investors
Individual investors
Institutional investors
What is Shareholders Activism?
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What is Mutual Funds?
Benefits of Mutual Funds
The advantage of professional investment management.
Funds managers have real access and information about the market.
Lecture 14
Individual shareholders activism
Monitoring by large shareholders
Institutional Shareholders: An Overview
Does Institution Shareholders activism works?
Potential roadblocks to effective shareholders
International perspective of disclosure of information
8. Internal Control
Lecture 15
What is Internal Control?
Objective of Internal Control
Tools of Internal Control
What is Internal Auditor?
Advantages of Internal Audit
Types of Internal Audit
Limitations of Internal Audit
Lecture 16
What is External Auditor?
Internal vs. External Auditor
Boards statement of Internal Control
Different aspects of Monitoring
What is Whistleblowing?
Classification of Whistleblowers
Types of Whistleblowers
9. Creditors and Credit Rating Agencies
Lecture 17
Introduction
Who care about the firm 1. Stockholders 2. Creditors
Two types of lenders
Commercial Banks
Individual (bondholders)
How did CRAs start?
High credit rating vs. Low credit rating
Another view of credit rating
New company vs. Mature company
The BIG 3
Lecture 18
PACRA
The Ratings
Criticisms
Consulting firms
First Amendment Right to CRAs
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International Perspective
10. Risk Management
Lecture 19
What is Risk?
Why take risks?
Risk management process
Risk identification
Classification of Risk
Risk Assessment
Risk management techniques
Risk transfer modes
Hedging
Options
Interest rate risk
Exchange rate risk
Financial assets risk
Lecture 20
Is risk management a Corporate Governance Issue?
Risk management reporting
Audit committees reports
Boards statement on Internal Control
Turnbull report
Risk assessment
Disaster recovery plan
11. Corporate Takeover: A governance Mechanism
Lecture 21
Definition
What are mergers and acquisitions?
Importance of discussing M & A in corporate governance.
General process: Acquisition
General process: Merger
Characteristics of M & A
Brief overview of M & A.
Lecture 22
Strategic reason (to reduce cost, to get new business)
Synergistic reason (combined effort)
Acquiree firms shareholders perspective
Is it appropriate to acquire successful as well as unsuccessful firm
Takeover Defenses
Assessment of takeover Defenses
12. Business ethics
Lecture 23
What is Ethics
Business ethics
Evolution of Business Ethics,
Why business is being ethical now?
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How to enforce ethics?
Advantages of Business Ethics
Difference between ethical codes and contracts
Impact of laws, regulations and codes of business on ethics
Professional accountants contribution of ethical behavior to public interest
Influence of ethics on business and accountants
Lecture 24
Characteristics of an ethical organizations and personal growth
Ethics: composition of integrity, objectivity, professional competence and due
care, confidentiality, and professional behavior
Different dimensions of corporate unethical behavior
How to eliminate unethical practices in a corporation?
Ethical practices in developing as well as developed economies.
Corporate governance, ethics and the law
13. Corporate Citizenship
Lecture 25
Introduction
Stakeholders of the firm and their benefits
Legal Foundation
Corporate Social Responsibilities
Lecture 26
Drivers of Corporate Citizenship
Benefits of CSR to firms
Governance and Stakeholders Theory
Criticism
14. New Governance Rules-SARBANES Oxley Act 2002
Lecture 27
Introduction
SOX
Public Company Accounting Oversight Board
Auditors independence
Corporate Responsibilities
Enhanced Financial Disclosure
Analysts conflicts of Interests
SEC Resources and Authority
Corporate and criminal fraud, accountability and penalties
Different sentences and penalties were introduces
Lecture 28
Will the act be beneficial?
The NYSE
NASDAQ
Corporate Governance Globally: UK (codes), Europe, South Africa, USA
15. Manual of Corporate Governance-SEC Pakistan
Lecture 29
Introduction
What is corporate governance: Pakistans perspectives
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The need for corporate governance
The stakeholders
Lecture 30
Promoting reforms and shareholder activism
Role and responsibilities of directors and managers
Scrutinizing financial statement-what every directors should know
Lecture 31 & 32: Final Project