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C ORNELL U NIVERSITY C OLLEGE OF H UMAN E COLOGY D EPARTMENT OF P OLICY A NALYSIS ANAGEMENT PAM 3340: C ORPORATIONS , S HAREHOLDERS , AND P OLICY F ALL 2008 The directors of such companies . . . being the managers rather of other people’s money than of their own, it cannot well be expected that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own. Adam Smith, Wealth of Nations Rick Geddes Office : 251 Martha Van Rensselaer Hall Phone : 255-8391 e-mail : [email protected] Office hours and availability : In classroom directly after class (or before class if preferred); Wednesdays, 10AM to noon; and by appointment Teaching Assistant Benjamin L. Wagner e-mail : [email protected] Course Description Firms are defined by a particular set of property rights and contractual arrangements. They provide a structure into which people can organize themselves to achieve some objective. The best type of organization depends on the objective. A different type of firm will be appropriate depending on whether people are trying to make steel, design computers, offer legal services, or run a university. This course focuses one important type of firm – the large publicly traded corporation. It uses economic and statistical analysis to study the interaction of the public corporation, the market, and the law, and how those interactions affect the welfare of shareholders and consumers. The costs and benefits of the corporate form of organization are examined. The legal institutions defining and governing the corporation, such as limited liability and shareholder voting, are analyzed. The mechanisms of “corporate governance,” i.e., those legal and market-based mechanisms that help control the corporation and ensure it is operated in shareholders’ interest, will be examined. Such mechanisms include hostile takeovers, insider trading, outside directors on the board, the role of large investors, and executive compensation plans, among others. Anti-takeover devices will also be discussed. The role and effect of policy in affecting corporate structure and managerial behavior will be a special focus. This includes the Sarbanes-Oxley Act, sovereign wealth funds, and government-sponsored enterprises. The impact of economic regulation on the corporation will also be examined. Additional topics, depending on time constraints, include alternative organization forms, such as government-owned enterprises, partnerships, and non-profits. 1
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Course Goals A student should leave this course with a deeper understanding of how a corporation is organized, its social benefits and costs, how it is governed, controlled, and regulated, and its role in society. The course will refine the student’s knowledge of the structure and effect of the law and policy
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