Financial Issues on Corporate Governance

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1 Financial Issues on Corporate Governance Güler Manisalı Darman, PhD Founder, Principal, Corporate Governance & Sustainability Center Former Vice-Chair, Commission on Financial Services and Insurance International Chamber of Commerce (ICC Paris) Author, ICC Book Corporate Governance Worldwide Bağlıca Bulvarı Yalınkılıç Sitesi No:13 B2 Ankara Phone: Mobile: Textbook: Corporate Governance Worldwide, A Guide to Best Practices for Managers ICC Publishing S.A.Güler Manisalı Darman, 2001 ISBN Corporate Governance of Non-listed Companies, Joseph A. McCahery and Erik P.M. Vermeulen COURSE DESCRIPTION In the 20th century, modern corporations became one of the world s dominant institutions. Consequently, the way they do business is now under close scrutiny. The relationship between ownership structure, performance and the demands of society requires that companies exercise a high degree of diligence in their governance. This course discusses corporate governance practices worldwide, including the; responsibilities of the board, the growing role of institutional investors as shareholders, the importance of transparency and accountability especially in financial reporting and auditing as the two main pillars of good corporate governance internal control and risk management which go side by side by corporate governance Importance of corporate governance for competitive capital markets 1

2 Impact of corporate governance on the value of companies The course aims to show that there is no tailor-made, one-size-fits-all governance structure given the variety of ownership structures, cultural differences and the changing nature of capital markets and legal environments,. It will be shown how the turmoil resulting from poor corporate governance can lead to sharp share price declines that can destroy, in a matter of hours, market values built up over years. It will emphasize upon the financial evaluation of the relation between share prices as company performance and good corporate performance. COURSE OBJECTIVES Students who have taken this course will: Learn what corporate governance is and understand the difference between management and corporate governance Grasp the great diversification in governance and organization structure of the companies worldwide Discuss the importance of corporate governance in all types of companies, listed, unlisted, closely-held, widely-held, SMEs, family owned Driving forces behind corporate governance (privatization, company ratings, mergers and acqusitions, stock echange rules Learn the importance of boards, management (CEOs, CFOs) Learn the rights of shareholders, the role and the importance of institutional investors, Learn the responsibilities of institutional investors (hedge funds,private equity investors soverign funds etc), and their governance challenges Discuss the role of stakeholders Understand the importance of transparency accountability in financial reporting and auditing Understand the relationship between internal control, risk management and corporate governance Evaluate and measure the impact of good corporate governance on financial performance Discuss the impact of corporate governance on financial markets 2

3 Discuss the importance of responsible business conduct and sustainability (especially in multionationals) Finally corporate governance developments in Turkey, new commercial code and it s impact on non-listed companies from corporate governance perspective COURSE REQUIREMENTS AND TENTATIVE GRADING Students will be required to discuss real case studies in workshops. The case studies will include an evaluation of a national and/or a multinational company. Project (Case Study-through company site visits): 30% Class Participation and Quiz/Homework: 15% Midterm Exam: 25% Final Exam: 30% COURSE SCHEDULE Week 1 : Understanding corporate governance worldwide (Anglo- Saxons versus Germany and Japan), and discussion of the difference between management and corporate governance. Week 2: Driving forces behind corporate governance, such as privatizations, Mergers & Acquisitions, globalization listing requirements, Agency Cost versus Stewardship theory, Diversification of countries according the legal systems. Week 3: Developments in Corporate Governance at the global level, OECD principles, World Bank, IFC etc, and the early developments on corporate governance in Turkey parallel to global practices Week 4:. Importance of Board and board practices, and different board structures around the world-boards go global Week 5: Legislative developments in Corporate Governance in the European Union Modernization of Company Law and Action Plan 2003 and Action Plan 2014, USA (SEC), SOX, NYSE requirements, Eminent Company meltdowns such as Enron and Parmalat 3

4 Week 6:. Legislative developments in Corporate Governance in UK, UK Stewardship Code 2012, France and G20 countries such as Russia and China Week 7: Corporate Governance Risk Management and Internal Control- Coso Principles, Impact of 2008 financial crises on rating agencies from CG perspective Week 8 : Case study project 1- A global company Week 9: Evolving role of institutional investors. Responsibilities of institutional shareholders as shareowners. Developments in private equity funds, hedge funds, sovereign wealth funds and transparency of these funds as institutional investors and their governance structure Week 10: Corporate governance as a clear set of investment criteria. How corporate governance affects financial markets. The disclosure challenge. Definition and implications of ADR s; Corporate Governance and company performance Week 11: Corporate Governance principles updated by the Capital Markets Board in 2012, CG ratings, CG index and the CG implications in the new Commercial Code issued in 2011 Week 12:. Corporate governance and sustainability, Fine Line between Corporate Governance and responsible business conduct. Driving forces behind corporate responsibility. Corporate responsibility ratings and indexes such as Dow Jones, Ethibel Sustainability Indexes Week 13 : Corporate Governance in Family Owned Companiesperpetuating family business Week 14 Case Study Project 2- A Turkish listed company 4

5 Reading List 1. Corporaet Governance Principles of Turkey 2005, 2011, 2012, Capital Markets Board of Turkey 2. Coombes, Paul and Mark Watson. Three Surveys on Corporate Governance. The McKinsey Quarterly, no 4 (2000): La Porta, Rafael, Florencio Lopez-de-Silanes and Andrei Shleifer. Corporate Ownership Around the World. The Journal of Finance. LIV, no 2 (1999): The Future of Corporate Governance. Transcript of Roundtable Discussions. The Brooking Institution Claessens, Stijn, Simeon Djankov, and Larry H. P. Lang. Who Controls East Asian Corporations? The World Bank Financial Sector Practice Department Conger, Jay A., et al. Appraising Boardroom Performance. Harvard Business Review, 76 no 1 (1998): Mattie A. J., Hanley F.P, Cassidy L. D. (2005). Internal Controls: The Key to Accountability. PriceWaterHouseCoopers 8. UK Stewardship Code OECD Corporate Governance Principles 2004, CG Principles in EU Guide 11. EU Action Plan

CORPORATE GOVERNANCE FRAMEWORK FOR LISTED & NON- LISTED COMPANIES

CORPORATE GOVERNANCE FRAMEWORK FOR LISTED & NON- LISTED COMPANIES Güler Manisali Darman I.S.I.G. 11 th International Summer School 2 August 2005 Author, "Corporate Governance Worldwide" Corporate Governance