Corporate Governance

Defining corporate governance

• “As a system by which companies are directed and controlled” -
Cadbury Report, 1992.
• “ The process by which corporations are made responsive to the
rights and wishes of stakeholders.” – Demb and Neubauer
• “Deals with the ways in which suppliers of finance to corporations
assure themselves of getting a return on their investments.” – Shleifer
and Vishny
G20/ OECD Principles of Corporate
Governance: Areas
• Ensuring the basis for an effective corporate governance framework
• The rights and equitable treatment of shareholders and key
ownership functions;
• Institutional investors, stock markets, and other intermediaries
• The role of stakeholders
• Disclosure and transparency
• The responsibilities of the board
Theories of Corporate Governance

• Transactional economics
• Agency theory
• Resource dependency theory
• Stewardship theory
• Stakeholder theory
• Shareholder theory
• Dynamic Capability Approach
References
• The Essential Book of Corporate Governance, 24 October 2016
by G. N. Bajpai, SAGE
Clarke, T. & Branson, D. The SAGE Handbook of Corporate Governance.
Thousand Oaks, CA: Sage, 2012.
• Corporate Governance, 5ed (MISL-WILEY) 2013 by Robert A.G. Monks
and Nell Minow
• Corporate Governance: Principles, Policies and Practices 5 July 2018
by A. C. Fernando and E. K. Satheesh
• Harvard Business Review on Corporate Governance
• New Corporate Governance, Martin Hilb, Springer
Case study discussion
 Johnson & Johnson Weathering
Turbulence
Pearson
Question 1

• Which approaches had been adopted to

legitimize bribery by J&J w.r.t. DPI (Greece),
MD&D Poland (Poland) and Janssen-Cilag
(Iraq)?
Question 2
• If you were made responsible for consumer protection in J&J, then
what would be the strategic approaches to ensure consumer care &
to win their confidence?
Olympus
Question 1

• Why did Kikukawa hire Michael Woodford

when there was pervasive fraud?
Question 2

• What constraints do you think Woodford

could have anticipated before he took on
this job?
Question 3

• What were the alternatives for Woodford

other than exposing the fraud?
Question 4

• How did the Japanese corporate governance

system impacted the developments at
Olympus?
 Designing a
Compliance Program at
AB InBev
Discussion questions
• Why are employees and managers so skeptical of compliance?
Why don’t employees report
misconduct?
Discussion questions
• How do you determine how many/ much resources to be allocated to
a compliance program? How “empowered” should compliance be
within an organization?
Discussion questions
• How would you evaluate effectiveness of a compliance program?
Discussion questions
• Which aspects of compliance program you find attractive? Were there
any areas you were concerned about?