11:30 –12:45Corporate Governance and Leadership—1 ...



Introduction to Corporate Governance Sessions: GEMBA X, Theme 9, 2015Corporate governance is the overall system by which business corporations are directed and controlled. Corporate governance includes rights and responsibilities of various stakeholders (board of directors, managers, shareholders, and others) as well as rules and procedures for decision making. We will focus on the role of the Board of Directors and the key issues that boards face today. The board of directors is empowered with oversight responsibilities of the corporation, and is ultimately responsible for the corporation’s strategy and performance, along with its compliance with laws, rules and customs in the society. Boards must achieve balance and alignment among external and internal factors, sustainability and risk considerations, and competitive behaviors. There are many challenges in achieving this balance, but ultimately, successful management of these disparate and often competing factors is the benchmark against which boards and entire corporate governance systems are evaluated.Tuesday, January 2011:30 –12:45Corporate Governance and Leadership—1—Professor BlumenthalThe Governance Problem, Role of the BoardIn our first session, we will provide a framework for thinking about corporate governance, and consider the points of view of various stakeholder groups. We will discuss the distribution of rights and responsibilities among board members, shareholders, and management. We will focus our analysis of the role and responsibilities of the board of directors, and attempt to answer the question, “What makes for an effective board?” Required Reading:Report of the Task Force of the ABA Section of Business Law Corporate Governance Committee on Delineation of Governance Roles & Responsibilities, August 1, 2009. Berkshire Hathaway 2002 Annual Report. Excerpt.Thain, D. and Leighton, D. The Director’s Dilemma: What’s My Job?12:45 – 1:45Lunch1:45 – 3:00Corporate Governance and Leadership—2—Professor BlumenthalCase of an Effective BoardIn this session, we will discuss the CCL case, which concerns an effective board that seeks to become more effective as it addresses new strategic issues and environmental concerns. This case will serve as an example of effective board practices, before we analyze several boards later in the theme where serious board dysfunctions will be apparent.Required Case: CCL Industries Case Questions:Analyse the development of the CCL board. Identify problems that could have arisen under the various board structures.If you were consulting to CCL management, what recommendations would you make to improve the effectiveness of the CCL board?3:00 –3:15Break3:15-4:30Corporate Governance and Leadership—3—Professor BlumenthalCorporate Governance Standards, Investor RelationsGuest Speaker: William Coffin, Founder/ Former CEO, CCG Investor RelationsChairman of the Board, California Council on Economic EducationWilliam Coffin is founder and longtime CEO of CCG Investor Relations, one of the largest investor relations agencies in the country, with offices also in overseas markets. He will speak to us about evolving standards and expectations in corporate governance and effective approaches to investor relations, emphasizing issues pertaining to corporate disclosure. Wednesday, January 218:30 – 9:45Corporate Governance and Leadership—4—Professor BlumenthalThe Board’s Audit and Risk Oversight RolesGuest Speakers : Michael Flynn and Omid Yasdi, Partners, KPMGMichael Flynn is an Audit partner in the Banking & Finance practice and Omid Yasdi is a partner in Forensic Advisory Services, both in the Los Angeles office of KPMG LLP. Together, they have extensive experience in US and international financial statement audit and audit of internal control services, fraud risk management, forensic accounting, economic recovery analysis and litigation advisory services. Their remarks will focus on a range of challenges for board members in the current environment, including dealing with increased economic pressures, emphasis on emerging markets for growth, regulatory matters, risk management, and shareholder demand for information. They will stimulate our thinking concerning financial challenges for board members, global trends, and board and audit committee responsibilities—all with an eye toward enhancing corporate governance.Required Reading:KPMG (2013) Fraud Risk Management paper.KPMG (2011) Global Anti-bribery and Corruption surveyKPMG (2013) Integrity SurveyCOSO Internal Control -- Integrated FrameworkThursday, January 228:30 - 9:45Corporate Governance and Leadership—5—Professor BlumenthalThe Board’s Role in Executive Succession and Executive Compensation One of the board’s most important responsibilities is selecting, and if necessary replacing the CEO. Yet board’s routinely report that this is an area which does not receive sufficient board attention and planning, resulting in board’s having to make sub-optimal choices under great pressure. At the same time, the rich level of many executive compensation packages has emerged as a major flashpoint for shareholders and for the public in general. There is widespread anger over what many see as excessive executive compensation, particularly in light of poor corporate performance and falling share prices. In fact, compensation committees today being scrutinized in much the same way that audit committees have been scrutinized since the major corporate accounting scandals a few years back. In this session, we will think about CEO succession and criteria that should be considered in setting performance incentives and executive compensation. Among other questions, we will ask whether there is an ethical limit for compensation. Our focus will be one the role of the board and the challenges boards face in executive succession and in determining both the level and mix of executive compensation.Required Case: Al Dunlap at SunbeamCase Questions:Do you agree with Dunlap’s view of shareholder primacy (see page 3)? What are the strengths and weaknesses of Dunlap’s compensation package? What type(s) of behavior did it motivate? Was the second compensation package well-structured? Did the board make the right decision in firing Dunlap? Is this an example of effective or poor corporate governance?Required Reading:.Charan, R. “CEO Compensation”9:45 – 10:00Break10:00 – 11:15Corporate Governance and Leadership –6—Professor BlumenthalThe Board’s Role in Executive Succession and Executive Compensation, cont.Friday, January 238:30 – 9:45Corporate Governance and Leadership—7—Professor BlumenthalThe Market for Corporate ControlIn an economic system where shares of companies are publicly traded, the "market for corporate control" refers to the process by which ownership and control of companies is transferred from one group of investors and managers to another. In this session, we will see how this works in practice, and explore reasons why the market for corporate control doesn’t always drive out poor governance practices and the management associated with them. Required Case: Circon (A) Case Questions:What motivated Circon chairman and CEO Richard Auhll? Did he have financial incentives that strongly aligned his interests with those of the shareholders? At the board meeting at the end of the case, what options are available to the board? Which is most attractive? Required Reading:Demski, J. Corporate Conflicts of Interest9:45 – 10:00Break10:00 – 11:15Corporate Governance and Leadership—8—Professor BlumenthalMarket for Corporate Control, cont. 11:15 – 11:30 Break11:30 – 12:15 Corporate Governance and Leadership—9—Professor BlumenthalInternational Corporate Governance, Part ICorporate governance issues take on increased complexity as we consider differences in legal frameworks and practices in different countries. In this session we will consider the global landscape of corporate governance, focusing on different governance systems around the world. While we will not attempt to become expert in corporate governance systems worldwide, we will take a brief survey of alternative governance systems that have evolved within different cultures and countries. We will look at how these systems are changing, and the role that globalization is playing. We will ask whether different models of corporate governance converging or diverging as international capital markets are becoming more integrated.Required Reading:Davies. A. Different Approaches to Corporate Governance: How Can Corporate Governance Be Made to Work? In Best Practice in Corporate Governance: Building Reputation And Sustainable Success. Gower Publishing . 2006.McFarlan, F. et al. Corporate Governance in China: Current Practice, Key Problems. HBR 9-309-058Sunday, January 258:30 - 9:45Corporate Governance and Leadership—10—Professor Blumenthal With Professor Baizhu Chen International Corporate Governance, Part 2In this session Professor Baizhu Chen will join me in a discussion of corporate governance in China. The agency issue is quite different between U.S. firms and Asian firms. As we have seen, in the U.S., it occurs mainly between shareholders and managers, while in China (and other Asian countries) it is mainly among different shareholders—between the controlling shareholder and minority shareholders.We will use the GOME situation as a focal point. GOME, the largest electronic store chain in China, is undergoing a remarkable power struggle in its board room. Mr. Huang Guangyu, its founder and once the richest man in China, is currently serving a 14 year prison sentence. Huang's family is fighting to regain control of the firm from chairman, Mr. Chen. Mr. Chen, who formerly was head of another firm taken over by GOME, had brought in a third investor, Bain, to dilute Huang's family stake. Required Case :GOME Case Questions:How would you vote if you were a shareholder at the GOME meeting?Based on the case, the readings, and our prior discussions, do you see Explain?Ms. Nahas serves on the Board of Directors of DineEquity, Inc. (NYSE:DIN) and Whittier Holdings, a privately held asset management firm.Active in many civic groups, Ms. Nahas is the corporate board chair for United Way of Greater Los Angeles. She also serves on the Board of Visitors and Executive Committee for the Anderson Graduate School of Management at UCLA.She is a member of the Trusteeship and the International Women’s Forum, a worldwide network of preeminent women. She is a frequent speaker, media spokesperson and author on executive management issues and board development.In 2004, she was recognized nationally by her peers, receiving the Association of Executive Search Consultants, Eleanor H. Raynolds Award, based on a career of excellence in executive search, as well as an ongoing dedication to volunteerism and improving the community. She has also received other honors, among them the Angeles Girl Scout Council’s Grace Award, YWCA of Los Angeles’ Silver Achievement Award and the UCLA Medical Center’s Aesculapius Service Award.Ms. Nahas received a bachelor’s degree from the University of California at Los Angeles.9:45 – 10:00Break- 10:00 – 11:15 Corporate Governance and Leadership—11—Professor Blumenthal Board Effectiveness Considerations in Deciding to Join a BoardIn this session, you will put yourselves in the position of someone who has been approached about joining a board. You will consider the kinds of questions you might ask and how you would go about making your decision (assuming you were ultimately offered the opportunity). This session will be built around the Jonathon Elderslie case, in which these questions are asked. You will think about criteria you would use to decide whether or not to join and what questions you would ask to help you decide. Required Case: Jonathon Elderslie and the Board DecisionCase Questions:What attitudes toward corporate governance are revealed in the comments made to Jonathon Elderslie by his friend, Jerome Haskins, as well as in Elderslie’s own experience as an executive reporting to a board?Do you think these attitudes are widespread or confined to few directors?To the extent that these attitudes exist, what needs to change to create more effective corporate governance?What questions should Elderslie be asking before deciding to take on a directorship?Required Reading:Lorsch, J. and Clark, R. Leading from the Boardroom. Harvard Business Review April 2008Nadler, D., Building Better BoardsSonnenfeld, J. What Makes Great Boards Great. NACD. Governance Challenges—2012 and Beyond. 2012 11:15 – 11:30 Break11:30 – 12:45 Corporate Governance and Leadership—12—Professor Blumenthal The CEO’s PerspectiveGuest Speaker: Carlos Alberini, CEO, Lucky BrandsCarlos Alberini will offer us perspectives on governance from his current role as CEO of Lucky Brands, a company funded through private equity, and also from his recent role as CEO of Restoration Hardware, a company that he took from private to public. He previously served as President of Guess?, Inc., a public company that evolved from a family-owned business to a successful S&P Midcap 400 firm , and also has prior experience in helping take other private firms public. He will describe his perspective on relationships and responsibilities among players in the corporate governance arena. He brings valuable insights about the complexities and nuances of corporate governance. 12:45 – 1:45Lunch3:15 – 4:30Joint Class—All FacultyThis session will provide an opportunity for us to integrate perspectives from the disciplines covered in Theme IX: Communication, Entrepreneurship, and Corporate Governance. The Restoring Trust and Worldcom case looks at the events that brought Worldcom from a high-flying young company, through a series of mergers, to financial wrongdoing, and ultimately to the removal of all directors. We are challenged to review what has already occurred and consider what it will take to “restore trust.”Required Case: Restoring Trust at WorldCom 9-404-138Case Questions:What are the three or four central objectives that Breeden hopes to achieve with the proposals in “Restoring Trust”?Will these proposals be effective in preventing another WorldCom or will they devolve into a checklist?Are Breeden’s recommendations aimed at avoiding major misconduct or at improving firm performance?Which of the five possible board models is ideal from the perspective of Capellas, the newly appointed CEO? From the perspective of a prospective board member? Which will be encouraged by Breeden’s proposals?Would you sign the Undertaking and Pledge as Capellas did? As the CEO of any public company? As a prospective director? Employee? ................
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