Week 10 - FINA 4370 701 Advanced Investment Management,...

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FINA 4370 701 Advanced Investment Management, Ethics and Society Christopher K. Merker, CFA Adjunct Professor, Marquette University College of Business, Department of Finance AIM Program Week 10 – March 24, 2010 Christopher K. Merker ©2010
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Agenda Mary Ellen Stanek, CFA, Managing Director, Baird Advisors (rescheduled for April 21) Mid-term Exam Results Assignment – Report #2 Lecture –Corporate Governance: Executive Compensation, Takeovers and Shareholder Rights Christopher K. Merker ©2010
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Mid-term results Christopher K. Merker ©2010 A AB B BC C CD D F • 70% of the class scored in the A range. • 85% passed C or better, most in the B range plus • High score 99.5%, three +98% (extra credit helped)
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Assignment #2 Two parts Part A – 3 page paper (corp. gov / accounting practices) Part B – 2 page paper (social responsibility overlay) Select your industry, two benchmark cos. and one focus co. Divide up assignment with your group Group presentation – 20 minutes Topics due by April 7 (Week 12) Christopher K. Merker ©2010
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Financial Analysis Use the data to tell a “story.” Story must be consistent with economic and financial principals- “must make sense.” Story must be consistent with all the data. Using past/ historical data to predict the future. Make an investment recommendation. Due and presented on April 21 (after Ms. Stanek)
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Buy, Sell, or Hold? Shareholder Rights Board of Directors CEO Compensation Accounting Practices Past Financial Performance Each of these components are interrelated and telling you something about the company. Report #A This is a smaller Piece than in Traditional Analysis.
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Buy, Sell, or Hold? Shareholder Rights Board of Directors CEO Compensation Accounting Practices Past Financial Performance Social Responsibility Report #B Overlay this piece into Analysis
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Module 3: Investing in Companies with Good Corporate Governance Practices Topic 2: Corporate Governance: Executive Compensation, Takeovers and Shareholder Rights Christopher K. Merker, CFA Adjunct Professor, Marquette University College of Business, Department of Finance AIM Program Week 10 – March 24, 2010 Christopher K. Merker ©2010
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(c) 2008 Sarah W. Peck Corporate Governance Executive Compensation 9
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(c) 2008 Sarah W. Peck Management Compensation Ethical Issues Incentive Issues (Agency Theory) 10
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Moral Hazard (in many guises) Several ways the management will not act in the best interest of owners. Insufficient effort (oversight of subordinates e.g. SocGen Jerome Kerviel) Extravagant investments – pet projects / empire building (e.g. 70s oil industry investing in non-core businesses; study of windfall cash from court actions not returned to shareholders) Entrenchment strategies – actions that hurt shareholders to keep or secure positions (invest in certain lines of activities, manipulate
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This note was uploaded on 03/19/2011 for the course ACCT 440 taught by Professor Smith during the Spring '11 term at Saginaw Valley.

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Week 10 - FINA 4370 701 Advanced Investment Management,...

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