Read the summary and the most important questions on Corporate Governance

• Lecture 1 - part 1

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• Responsible Corporate Governance is aimed at securing the continuity of the firm. Why?

  
  - Shareholders get their share of the profit
  - Customers get products or services
  - Suppliers have their customers
  - Employees keep their job
  - Management receives their bonuses
  - Society receives taxes

• What is the feasibility space?

  The feasibility space represents a situation which is satisfying for all stakeholders (e.g. employees, shareholders, society and customers). Refer to picture in the slides.

• What can you tell about the size of the feasibility space?

  The feasible region is shown as being relatively small. This is amost by definition the case: if the feasible region increases, the groups will adjust their demands in usch a way that is relatively small again.

• What are examples of gatekeepers and watchdogs?

  
  - Supervisors
  - Oversight bodies
  - Auditors
  - Analists/investment bankers
  - Credit rating agencies
  - Remuneration advisors
  - Lawyers
  - Press
  
  Most importantly, every member of the chain must commit to collaboration with all others. This chain is only as strong as its weakest link.

• What are the backbones of good Corporate Governance?

  
  - Transparancy
  - Integrity

• What's the difference in the vision on CG in the past and nowadays?

  In the past, it focused on Return on Assets for the suppliers of finance. It did not include any other stakeholders or mentions the continuity of the firm. Nowadays it is called "the process used to manage the business affairs of the company towards enhancing business prosperity and corporate accountability when the objective of realizing long term shareholder value, while taking into account the interest of the other stakeholders".

• Why won't Directors just do what the shareholders want?

  
  1. Keeping stock is a different profession than managing a business
  2. It is not always easy to determine what the "best interest" for the shareholders is. E.g. If the executive directors do not listen well enough to the firm's employees (e.g. lower wages and more dividend), an unmotivated workforce may endager the shareholder value.

• What is the main task of directors?

  The task of the directors may be viewed as maintaining the activities of the organization within the feasible region determined by the intersecting acceptable sets of the stakeholders.

• What kind of Directors do exist?

  
  - Non-executive Directors - in many countries they form the supervisory board
  - Executive Directors

• What are the two generic modes of reaction?

  
  - Feedforward mechanisms
  - Feedback mechanisms