m4l1 - LECTURE ONE CORPORATE GOVERNANCE I Defining...

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LECTURE ONE CORPORATE GOVERNANCE
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I. Defining Corporate Governance -separation of ownership and control - the agency problem: “ The directors of joint stock companies. However, being the managers of the people’s money rather than their own, cannot be expected to watch over it until the same anxious vigilance as the owners themselves. Adam Smith
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II. The Growth and Purpose of the Publically Traded Corporation 1. It makes possible for firms to raise large amounts of capital – far in excess of what an individual owner or family cold provide 2. It enables large number of investors, who include pension and mutual funds, to participate in the market economy 3. It enables investors to diversify their portfolios and offers them limited liability
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III. How Corporate Governance Works – in Principle Shareholders elect boards of directors who in turn selected the CEO There are important gatekeepers: 1. Institutional investors 2. Investment bankers 3. Stock analysts 4. Independent Accounting firms
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m4l1 - LECTURE ONE CORPORATE GOVERNANCE I Defining...

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