Type:
Solution Manual
Resource:
Corporate Governance
Edition:
5th Edition
Author(s):
S. David Young Jacob Cohen Daniel A. Bens
INSTRUCTOR’S MANUAL TO ACCOMPANY CORPORATE GOVERNANCE ( 5 T H ED I T I O N )
CO N T EN T S
• Suggestions for Effective Teaching
2
• Law 7 • Performance 7 • The Separation of Ownership and Control, Part 2: The Takeover Era 10
• Social Investing 12 • Shareholder Rights: Evolution 12 • The Board-Management Relationship 15 • CEO Succession Planning and Director Nomination 15
• Executive Compensation 19
• Ownership and Responsibility 11
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INSTRUCTOR’S MANUAL TO ACCOMPANY CORPORATE GOVERNANCE
OVERVIEW
SUG G EST I O N S F O R E FFEC T I V E T E AC H I N G This subject matter and the material in this book are best suited for classroom discussion and debate rather than straight lectures. One very effective way to present the issues is to assign groups of students different “sides” ahead of time and have them present point/counterpoint assessments of some of the policy issues. It can also be effective to assign groups of students the responsibility of presenting two or three of the cases in point at each class meeting, requiring them to do some research on their own to provide additional background and insight. There is no better way to begin this class than to tell the students that the newspaper is part of their assigned reading for the course. The ideal study materials to accompany the textbook are the unfolding events that will inevitably provide the most provocative and instructive examples of the challenges and confl icts that arise in trying to create and sustain a corporate structure whose interests are aligned with those of society at large. Recent examples at this writing include the impact of the Dodd–Frank legislation, the rising “no” votes on executive compensation, and increased shareholder interest in sustainability and risk management disclosures. Scarcely a day passes where there is not some story in the press that illustrates the themes of this class and applying the principles and questions presented in this book more effectively than any of its case studies, just by virtue of their immediacy. There are a number of excellent recent documentaries. If at all possible, we strongly recommend showing these fi lms to the class. Capitalism: A Love Story. Twenty years after his groundbreaking Roger & Me, documentarianprovocateur Michael Moore returns to some of the same themes with Capitalism: A Love Story, about the fi nancial meltdown and what it shows about the failures of our fi nancial and political systems. Inside Job. Charles Ferguson’s Oscar-winning documentary about the financial meltdown explores the perverse incentives and confl icts of interest, “massive private gains and public loss.” The Flaw. David Sington’s documentary about the fi nancial meltdown focuses on the demand side – the way that Americans made up for less buying power from wages by mortgaging their homes – and their future. Enron: The Smartest Guys in the Room. This documentary, based on the expose by Fortune Magazine writers Peter Elkind and Bethany McLean, is a classic tale of hubris, almost epic. The Solid Gold Cadillac. This is a charming 1954 comedy based on a Broadway hit about a small shareholder who takes on a big conglomerate – remarkably timely. The Hudsucker Proxy. A Coen brothers saga about a naïf who becomes CEO of a company with a corrupt board of directors. Other People’s Money. Uneven satire about a corporate raider.
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INSTRUCTOR’S MANUAL TO ACCOMPANY CORPORATE GOVERNANCE
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Roger & Me. Michael Moore documentary about GM lay-offs from the workers’ perspective. Wall Street. Oscar-winning drama of a corrupt corporate raider. Boiler Room. Pump and dumpers with dreams of striking it rich. Executive Suite. Post World War II artefact about a boardroom struggle between a by-the-numbers CFO and a visionary veteran. Owning Mahoney. Based on the real-life story of the bank employee responsible for the biggest bank embezzlement in Canadian history – $20 million, which he gambled away. This fi lm superbly portrays the way that everyone, bank loan officers, casino managers, gamblers, and law enforcement officers, constantly assess risk. Erin Brocovich. A young woman in a law office uncovers corruption at an enormous corporation responsible for toxic pollution. Based on a true story. Silkwood. A nuclear facility employee uncovers corruption. Based on a true story. The Corporation. Documentary “diagnosing” corporate pathology. Modern Times. Classic silent Chaplin fi lm with an early treatment of corporate depersonalization. How to Succeed in Business Without Really Trying. Satiric musical portrayal of ambition in a bureaucratic setting. Offi ce Space. Cult classic of corporate subversion. Tucker. Based on the true story of the man who tried to fight the big three automakers and was beaten not by the market but by corporate thuggery. Who Killed the Electric Car? Documentary about corporate involvement in politics to undermine environmental standards. We have also found that it works well as a final project to assign each group of students an underperforming public company and have them present to the class their assessment of its governance flaws and vulnerabilities, with their proposed plan for shareholder initiatives to address the issues and elicit improvements. Students should begin with the brief introduction to the textbook. Each group should be assigned one of the notorious scandal companies of the past few years to make a brief presentation on the role of governance in the failures of Bear Sterns, Lehman Brothers, General Motors, Chrysler, Enron, WorldCom, Global Crossing, Tyco, HealthSouth, Hollinger, and others. What do they think about the outcomes? Who paid a fine and who is in jail? Has justice been served?
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INSTRUCTOR’S MANUAL TO ACCOMPANY CORPORATE GOVERNANCE
1 WHAT IS A CORPORATION?
Suggested additional reading: The Big Short, Michael Lewis (2010) 13 Bankers, Simon Johnson and James Kwak (2010) The End of Wall Street, Roger Lowenstein (2010) Freefall: America, Free Markets, and the Sinking of the World Economy, Joseph E. Stiglitz “An Approach to Corporate Social Responsibility,” David L. Engel, Stanford Law Review, 32, 1 (November 1979), pp. 1–98. Who Will Tell the People?: the Betrayal of American Democracy, William Greider (1993) Gatekeepers: The Role of the Professions in Corporate Governance, John C. Coffee (2006) The Battle for the Soul of Capitalism, John C. Bogle (2005) When Corporations Rule the World (2nd Edition), David C. Korten (2001) Strong Managers, Weak Owners, Mark J. Roe (1996) Intangibles: Management, Measurement, and Reporting, Baruch Lev (2001) Gangs of America: the Rise of Corporate Power and the Disabling of Democracy, Ted Nace (2005) The Corporation in Modern Society, Edward S. Mason (1958) Corporate Law, Robert Clark (1986) Corporations and Other Business Organizations Cases and Materials (9th Edition), Melvin Aron Eisenberg (1995) The Curse of Bigness, Louis Brandeis (1935) The Legitimacy of the Business Corporation in the Law of the United States, 1780–1970, James Willard Hurst (1970) In order to understand and appreciate the current events fully, however, students will need the background and context of the textbook and lectures. Chapter 1 sets the stage for the topics ahead by covering the history and theoretical constructs that led to the modern corporation. Henry Ford once said, “A great business is really too big to be human.” Indeed, that is the purpose of the corporate structure, to transcend the ability and lifespan of any individual. And it is also the challenge of the corporation. The efforts by humans in directing and
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