Lecture 3 Corporate Governance

Lecture 3 Corporate Governance - Lecture3CorporateGovernance

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1 Lecture 3 - Corporate Governance How are corporations structured and governed?  What are the central challenges and current  issues in managing the problem of agency in  modern corporations? The Structure of Corporations (handout) Film: The Corporation
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2 The Corporate Form An “artificial being” that can engage in all  forms of business activities (Canada  Corporation Act)  A business organization that is recognized  by the law as having a separate legal  existence can be sued, hold property and  incur debt Less than 20% of businesses are  corporations but they account for 90% of all  revenues (in the US)
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3 The Corporate Form Advantages (relative to sole proprietorships  and partnerships): Access to capital Infinite life Limited liability Transferability and liquidity of ownership Disadvantages: Double taxation Costs and disclosure Principal/Agent Problem - GOVERNANCE!!
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4 Corporate Governance The system by which business corporations are directed  and controlled. The corporate governance structure  specifies the distribution of rights and responsibilities  among different participants in the corporation, such as,  the board, managers, shareholders and other  stakeholders, and spells out the rules and procedures for  making decisions on corporate affairs. By doing this, it  also provides the structure through which the company  objectives are set, and the means of attaining those  objectives and monitoring performance.  OECD  April 1999 
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5 The   Rise of Managerial Capitalism
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Lecture 3 Corporate Governance - Lecture3CorporateGovernance

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