PGPX 2019-20
Course: Corporate Governance (CG)
Area: Business Policy
Instructors: Naman Desai,
Anish Sugathan,
Academic Associates:
Section-B: Harshit Khameshra (harshitk@iima.ac.in, ph: 4881)
Section-A: Kanchi Sanghvi (kanchis@iima.ac.in, ph: 8137)
Introduction
The corporate form of business organization with its distinctive feature of limited liability has evolved over
the last two centuries. While the format fostered innovation and risk taking on an unprecedented scale, it
also led to concentration of economic power in the hands of a few - corporate boards and top executives.
Originating from concerns about the possibility of misuse of the immense power corporations enjoy,
Corporate Governance is focused on ensuring that the processes adopted by corporations for creation of
wealth for their owners (shareholders) are with due regard to their impact on the larger society. This course
provides insights into tenets of good governance and how systems may be designed to ensure good
governance.
Objectives
This course will prepare you to deal confidently with the variety of issues directors of companies face in the
demanding business environment of today. The course will enhance your competency by apprising you of
the concepts and frameworks from governance, ethics and decision making. The interactive pedagogy, with
presentations and role plays, will sharpen your skills in using the knowledge acquired in practice.
The discussions in the course will essentially revolve around the following two themes:
Functioning of Boards – constitution and charter of boards; constitution and charter of board committees;
role of boards in strategy formulation and execution, performance evaluation of management,
determining compensation to top management, ensuring compliance with regulations and laws, ensuring
ethical functioning of the company, risk management, transparent reporting and clear communication,
and ensuring good corporate citizenship.
Functioning of Directors – role of the chairman; role of non-executive independent directors; role of
non-executive nominee/institutional directors; role of the executive/whole-time directors; dealing with
conflict of interest; contributing to board deliberations; coping with challenges to independent functioning;
challenging executive management to improve organization functioning; setting the agenda for innovation
and change.
The specific objectives of the course would include (but not limited to) the following:
● Understand and explore the relationships between and among the corporation, the state and the society
in carrying on business for the benefit of shareholders and other stakeholders.
● Understand the relationships between and among shareholders and other stakeholders, boards and
executive management.
● Develop an appreciation of the legal and financial requirements of corporate governance in India and
international best practices.
● Develop ability to critically evaluate the processes required to effectively manage board matters in
private and public sector corporations, with dominant and dispersed ownership.
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● Develop an understanding of the importance of corporate reputation based on business ethics, social
responsibility, corporate citizenship, integrity and transparency as building blocks.
Pedagogy
Sessions will be largely case based. The class will be grouped into teams. In each session (after the first) one
randomly chosen team will be asked to make a short presentation on the case scheduled and another
randomly chosen team will be asked to critique the presentation. The grade for the group class participation
will be based on the quality of presentation and critique. The teams will be expected to work together in
syndicate sessions and analyse the prescribed cases pre-class, in preparation for discussion and presentation
in the class.
● Each Group will identify two or three key issues arising from the case (scheduled for the session) with
reasons for their choice and prepare a short note (maximum length: one page) suggesting how the
governance issues identified may have been dealt with better. The short note should be submitted to the
TA (Teaching Assistant) before the class session.
● The presentation time would be about fifteen minutes. If a power point presentation has been
prepared by the group, the number of slides used shall not be more than five to six. The presentation
should focus on the issues and possible action in the situation based on principles derived from
theory and corporate best practices.
● Following the presentation/critique of the case/presentation, the instructor will open the discussion on
the case to the entire class. Participants would be encouraged to draw on their organizational and
larger experience to contribute to class discussion. New perspectives brought into discussion will be
given much higher weight compared to parroting points already made in the class.
Evaluation
The evaluation of performance in the course will be based on the following three components:
Group Submissions
This component of the evaluation will be based on the quality of group assignments/presentation in the class.
This component will carry a 20% weight in the total evaluation.
Class Participation and Presence
This component of the evaluation will be based on the quality of participation in discussions in the class as
well as attendance. The component will carry a 20% weight in the total evaluation.
Examination
The third element in evaluation will be two examinations (30%+30%).
Readings
1. OECD Principles of Corporate Governance, 2015, https://www.oecd.org/daf/ca/Corporate-
Governance-Principles-ENG.pdf
2. Using OECD Principles for CG in the Board, 2008,
https://www.oecd.org/corporate/ca/corporategovernanceprinciples/40823806.pdf
3. Companies Act 2013 (Chapters XI, XII, XIII), www.mca.gov.in
4. CSR Analysis of Provisions in Section 135 of Companies Act, 2013:
http://www.taxmann.com/commentaries/samples/Volume3_SampleChapters.pdf
5. InGovern Board Evaluation Practice in India, http://www.ingovern.com/wp-
content/uploads/2016/05/Board-Evaluation-Practices-in-India-26-05-2016.pdf
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6. Corporate tax rates in response to profit shifting,
https://www.livemint.com/Opinion/fIjpgqI6X6mH27XDGsvx9I/Corporate-tax-rates
-in-response-to-profit-shifting.html
7. How the Quality of Macro-Institutions and Corporate Governance Influence
International Profit Shifting?,
https://rbr.business.rutgers.edu/sites/default/files/documents/rbr-020209.pdf
8. Deloitte Note: Performance Evaluation of Boards,
https://www2.deloitte.com/content/dam/Deloitte/in/Documents/risk/Corporate%20Governance/in-cg-perf
ormance-evaluation-of-boards-and-directors-noexp.pdf
9. Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015
http://www.sebi.gov.in/sebi_data/attachdocs/1441284401427.pdf
10. Putting Leadership Bank into Strategy, Cynthia Montgomery, HBR Article
11. The Social Responsibility of Business Is to Increase Its Profits, Milton Friedman
12. Handbook on CSR in India, published by CII
https://www.pwc.in/assets/pdfs/publications/2013/handbook-on-corporate-social-responsibility-
in-india.pdf
13. OECD Board Practices and Incentives in Governance Risks – 2011
http://www.oecd.org/daf/ca/49081438.pdf
Detailed Session Plan
Session 1 Overview of Corporate Governance
Case: Infosys Limited: Issues in Governance
Read: Reading 1, 5, 8
Session 2 Corporate Boards and Institutional Oversight: Roles, Structures & Processes
Case: Parmalat SpA: Impressive Milking System; Himachal Fertilizers
Read: Reading 2
Session 3 Corporate Boards: Roles, Structures & Processes
Case: Governance Failure at Satyam; Accounting Fraud At Toshiba; Molex
Read: Reading 2
Session 4 Corporate Boards & Board Committees
Case: Crisis at Tyco a Directors Perspective;
Optional Reading: US requirements on board composition and functioning, Weil,
January 2013. (www.weil.com/files/upload/Chart_of_Board)
Session 5 Corporate Boards & Board Committees
Case: Accounting fraud at WorldCom;
Session 6 Overview of Corporate Governance: Strategic Perspective
Case: Ratan Tata Or Cyrus Mistry: Tata Steel Shareholders' Dilemma
Read:
Letter from Cyrus Mistry
(http://www.business-standard.com/article/companies/full-text-of-cyrus-
mistry-s-letter-to-tata-sons-board-116102601571_1.html)
Response from Tata Sons to Mistry
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(http://www.business-standard.com/article/companies/full-text-of-tata-sons-
response-to-cyrus-mistry-s-statement- 116121901240_1.html)
Letter from Ratan Tata to Shareholders
(http://www.tata.com/pdf/ratan-tata-letter-to-shareholders.pdf )
OECD Principles of Corporate Governance, 2015 (Reading 1)
Session 7 Corporate Governance in India
Case: Ratan Tata Or Cyrus Mistry: Tata Steel Shareholders' Dilemma
Reading: NCLAT restores Cyrus Mistry as executive chairman of Tata Group
(https://www.livemint.com/companies/people/nclat-restores-cyrus-mistry-as-execu
ive-chairman-of-tata-group-11576662522616.html)
Readings: 3, 4, 5, 6, 7 & 8
Session 8 & 9 Corporate Risk Management and Conflict of Interest in Governance
Read: Crash course on how Boeing’s managerial revolution created the 737 max
disaster.
Session 10 & 11 Corporate Strategy and Governance. Parent-Subsidiary Interface: The Larger
Governance Challenge
Case: Walt Disney Co.: The Entertainment King
Read: Putting Leadership Back into Strategy, Reading 10
Session 12 Organizations with Public Purpose: Governance Issues
Case: Indian Railways
Session 13 & 14 Ethical Dilemmas of Individuals in Governance
Case: Theranos: The Unicorn that Wasn't
Session 15 Corporate Social Responsibility
Case: CSR at Ambuja Cement
Read: Readings 5, 11 and 12
