1. **Introduction to Corporate Governance**
1.1. What is Corporate Governance?
1.1.1. Basic governance Problem
1.1.2. Extended Agency Problem
1.1.3. What effects Corporate Governance?
1.1.4. Theory of the firm
1.1.5. Agency Costs
1.1.5.1. Size of Agency Costs
1.1.5.2. Mechanisms to prevent
1.1.5.3. What do you get for agency costs?
1.1.5.4. Monitoring becomes more difficult the more owners are included in the ownership structure
1.1.6. Coase’s calculus
1.1.7. Chandler (1977), on institutionalization
1.1.8. Two ways to view the firm
1.1.8.1. The firm-oriented view
1.1.8.2. The owner-oriented view
1.1.9. Jensen’s free cash flow hypothesis
1.1.10. Takeovers as a control mechanism
1.2. Agency Problems explain the need for corporate governance
2. International Corporate Governance
2.1. EU vs. US Corporate Governance
2.1.1. Europe
2.1.1.1. Strong concentration of ownership
2.1.1.2. More extensive stakeholder norms
2.1.1.3. Civil Law
2.1.1.4. One-tier Board structures (Two-tier German/Nordic)
2.1.1.5. Stakeholder approach
2.1.2. US
2.1.2.1. Dispersed ownership structure
2.1.2.2. More shareholder norms - profit max.
2.1.2.3. Common Law
2.1.2.4. One-tier boards with CEO duality and independent directors mostly
2.2. Major determinants
2.2.1. Social Peace
2.2.2. Property rights (PP.10, S.35)
2.2.3. Good institutions (PP.10, S.36)
2.2.4. Social norms
2.2.5. Say on Pay
2.3. Cases: Enron vs. Parmalat (PP.10, S.32)
2.3.1. SPE: Special Purpose Entity
2.3.2. Wistleblowers
2.3.3. Auditor's role
2.4. Russia Article
2.4.1. Big Bang
2.4.2. Gradualism
3. Nordic Corporate Governance
3.1. The Nordic Model
3.1.1. Nordic region survived 2007-2008 financial crisis better than other regions
3.1.2. Features
3.1.2.1. Blockholdings
3.1.2.2. Control enchancements
3.1.2.3. Stakeholder concerns
3.1.2.4. Labor influence
3.1.2.5. Sustainability
3.1.2.6. Left-wing political traditions
3.1.2.7. Anglo-Saxon features
3.1.2.7.1. Strong minority protection
3.1.2.7.2. Large and liquid stock markets
3.1.2.7.3. Easy access to finance
3.1.2.7.4. Many and large firms
3.1.2.7.5. High number of IPOs
3.1.2.7.6. Large inflow of foreign investments
3.1.2.7.7. Strong transparancy
3.1.2.7.8. Low minority expropriation
3.1.2.8. Continental European features
3.1.2.8.1. Strong owners, weak managers
3.1.2.8.2. Dual-class shares
3.1.2.8.3. Pyramids, business groups
3.1.2.8.4. Stakeholder orientation
3.1.2.8.5. Two-tier boards
3.1.2.8.6. Employee representation
3.1.2.8.7. Low executive compensation
3.2. Advantages of nordic model
3.2.1. Hybrid: Shareholder-stakeholder focus
3.2.2. Generates prosperity through balance of interest
3.2.3. Attractiveness lies in ability to function in a typical Anglo-Saxon way based on typical Continental European features
3.3. Internal pressure on Nordic Model
3.4. Capitalism integrated into the welfare model
3.5. Higher level of corporate ownership
3.6. Significant control-enhancement
3.7. Annual general meetings
3.8. Majority Shareholder Activism
3.9. The Board of Directors
3.10. Stakeholders
3.10.1. Balance of interests
3.10.2. Focus' of stakeholders
3.11. Soft law (recommendations on corporate governance in the Nordics)
3.11.1. Deviations from soft law
3.11.2. Danish Code (Danish recommendations)
3.11.2.1. Nørby Comitee (first code in 2001)
3.12. The Nordic model and agency problems
4. Stakeholders, ESG, and sustainability
4.1. Stakeholders (slide 7)
4.1.1. Firm accountability towards stakeholders
4.1.2. Firm considerations towards stakeholders
4.1.3. Stakeholder theory
4.1.3.1. Alternative/complement to agency theory (ethics and morals)
4.1.3.2. Normative view
4.1.3.3. Descriptive/practical view
4.1.3.4. Theories based on shareholder interests (value max / profit) unsuitable for a modern global economy
4.1.4. Stakeholder interests
4.2. Shareholder (slide 26)
4.3. Accountability problem
4.4. For whom does the firm exist? (stakeholders vs. shareholders, purpose of firm) (slide 14)
4.4.1. Duty is to benefit all shareholders (firm owners) - Berle (slide 15)
4.4.1.1. Arguments
4.4.2. Duty is to carry out bargains with stakeholders - Dodd (slide 18)
4.4.2.1. Arguments
4.4.3. Duty is to profit maximize (social responsibility) - Friedman (slide 22)
4.4.3.1. Arguments
4.4.3.2. Freeman 1947
4.5. CSR - Manne 1972 (slide 30)
4.5.1. Short-termism (slide 46)
4.5.1.1. US vs EU
4.5.2. Loyalty shares
4.5.3. Firm disciplination
5. Boards and Diversity
5.1. The role of the board
5.1.1. The tasks of the board (Topic 6, slide 12)
5.1.1.1. The monitoring task
5.1.1.1.1. Advantages of the board monitoring
5.1.1.2. Consultancy task
5.1.1.3. The networking task
5.1.2. Board duties
5.1.2.1. Fiduciary duty
5.1.2.2. Duty of Loyalty
5.1.2.3. Duty of fair dealing
5.1.2.4. Duty of care
5.1.3. Are Boards required to maximize profits?
5.1.3.1. Profit max case discussion
5.1.3.1.1. Business Judgement rule (US)
5.1.3.1.2. Cases that support profit maximizing
5.1.3.1.3. "Directors Duties" Study (2020)
5.2. How are Boards organized
5.2.1. Tiers of board
5.2.1.1. One-tier
5.2.1.1.1. Majority Executive
5.2.1.1.2. Majority non-executive
5.2.1.1.3. CEO Duality
5.2.1.1.4. Multiple board seats; COOP
5.2.1.2. Two-tier
5.2.2. The workload of a board
5.2.2.1. How long on the same board?
5.2.3. Board composition
5.2.3.1. The members background, experience, and personal characteristics
5.2.3.2. Independant directors
5.2.3.2.1. Definition of independance
5.2.4. How are boards elected?
5.2.4.1. Board Comittees
5.2.4.1.1. Audit Comittee (Required)
5.2.4.1.2. Nomination Comitte
5.2.4.1.3. Remuneration comittee
5.3. Diversity; Gender quotas
5.3.1. Evolution in gender diversity
5.3.1.1. The current situation in the EU
5.3.1.1.1. Quotas in Scandinavia
5.3.1.2. New EU directive as of autumn 2022
5.3.1.2.1. Effects of quotas (Eckbo et al. (2021)
5.3.2. Why is diversity important?
5.3.2.1. Problems from homogeneity
5.3.3. Are men and women different?
5.3.3.1. Source for arguments for and against gender quotas
5.3.3.2. Adams & Funk (2011)
5.3.4. Tokenism & Twokenism
5.3.5. The Board project at CBS
5.3.5.1. Summary of results
5.3.5.1.1. Consequences of results
6. Agency problems and CG mechanisms
6.1. Agency Theory
6.1.1. Agency relationships
6.1.2. Assumptions
6.1.2.1. Separation between principal and agent
6.1.2.2. Conflicting interests (selfishness)
6.1.2.3. Rationality
6.1.2.4. Asymmetric information
6.1.2.5. Uncertainty
6.1.2.6. Risk Aversion
6.1.3. Agency Problems
6.1.3.1. Types
6.1.3.1.1. **Type I:** (owner-manager problem) Conflict of interest between owners and managers
6.1.3.1.2. **Type II:** (majority and minority investors) Conflict of interest between controlling owners and minority shareholders
6.1.3.1.3. **Type III:** (shareholders and stakeholders) Conflicts between the owners/firm and stakeholders
6.1.3.2. Problems
6.1.3.2.1. Owner-manager problem/ the separation of ownership and control
6.1.4. Theories
6.1.4.1. Political theory
6.1.4.2. Psychology
6.1.4.3. Sociology
6.1.4.4. Resource dependency theory
6.1.4.5. Stewardship theories
6.1.4.6. Philosophy
6.1.5. Extenstions
6.1.5.1. Shareholders are agents (employees) rather than ultima-te owners - *Agents watching agents*
6.1.5.2. Recognize that there may not just be one single principal, but many, and they may have conflicting objectives
6.1.5.3. Agency problems often have a time dimension, or, in nother words, they are repeated games s (Kreps, 1980)
6.2. Mechanism
6.2.1. Aims to reduce agency problems
6.2.2. Culture
6.2.3. Law (monitoring & incentives)
6.2.4. Ownership (monitoring)
6.2.5. Board and committees (monitoring)
6.2.6. Auditor (monitoring)
6.2.7. Compensation (incentives)
6.2.8. Stakeholder pressures (monitoring & incentives)
6.3. Why is monitoring less effective?
6.3.1. Free-rider problem
6.3.2. Collective action problem
6.4. The corporation as a protector
6.4.1. Property rights
6.4.2. Contract rights
6.4.3. Coporate law
6.4.4. How does this relate to corporate law?
6.5. Interest Divergence
6.5.1. **Type I:** misuse of invested resources, that managers divert from profit maximization.
6.5.1.1. Commonly seen in the US
6.5.2. **Type II:** Controlling owner has other objectives than profit, so called 'private benefits of control'.
6.5.2.1. **Type II (costs)**: - Controlling owner overpays himself - Tunneling = contractual arrangements that favor the owner - Selling control at a premium - Private benefits, i.e. use the company jet etc. - Agency problems between family members
6.5.2.2. Commonly seen in Europe and the developing world
6.5.3. **Type III:** Often refers to conflicts between owners and employees. Profit maximization might require a reduction of the workforce, while employees have an interest in keeping their jobs.
6.5.3.1. Can always occur
6.5.3.1.1. In the US: problems arise due to a strong focus on profit-maximization and lower concern for stakeholder perspectives
6.5.3.1.2. In Europe: rise due to strong formal stakeholder influence (for example strong labor laws, codetermination, climate/environmental laws + strong public opinion -> political pressure)
6.5.4. Between owners and owners
6.5.4.1. Minority owners
6.5.4.2. Controlling owners
6.6. Information asymmetries
6.6.1. Adverse selection
6.6.2. Moral Hazard
6.7. Ownership
6.7.1. Dispersed ownership
6.7.1.1. Can give rise to Type I agency problem
6.7.2. Concentrated ownership
6.7.2.1. Can give rise to Type II aegncy problem
6.7.3. La Porta et al.’s suggestion
6.7.3.1. Legal systems
6.7.4. Legality
6.8. Limited liability feature
6.8.1. Connection with agency theory
6.9. Agency costs
7. Institutional Investors
7.1. Agency Problems
7.1.1. Are institutional investors a solution to agency problems? PP.4, S.36
7.1.2. Freerider problems and Collective Action
7.1.3. Agency problem 3
7.1.4. Conflict between fiduciary duty and monitoring duties
7.1.5. Contributions to improve CG by institutional Investors (Gilson & Kraakman)
7.2. Definitions
7.2.1. Institutional investors.
7.2.1.1. Characteristics (PP. 4, S.6)
7.2.2. Actively managed funds
7.2.3. Index funds
7.2.4. Proxy advisors (PP.4, S.45)
7.2.5. Annual General Meeting (AGM)
7.2.5.1. 3 necessary prerequisites for shareholders at AGM
7.2.6. Activism
7.3. Internationalization
7.3.1. Convergence of legal structures
7.3.2. Increasing the agency costs
8. Corporate Ownership
8.1. Two categories of ownership (slide 5)
8.1.1. Concentrated ownership
8.1.2. Dispersed ownership
8.2. Agency problems linked to different ownership structures (slide 6)
8.3. Control-enhancements mechanisms (CEM) (slide 9)
8.3.1. Types of CEMs (slide 10-11)
8.3.1.1. Shareholder agreements
8.3.1.2. Cross-shareholdings
8.3.1.3. Multiple voting rights shares
8.3.1.4. Non-voting shares
8.3.1.5. Non-voting preffered shares
8.3.1.6. Pyramid structures
8.3.1.7. Depository certificates
8.3.1.8. Voting right ceilings
8.3.1.9. Ownership ceilings
8.3.1.10. Golden shares
8.3.1.11. Super-majority provisions
8.3.1.12. Partnerships Ltd. by shares
8.3.2. Different CEMs in different countries (slide 14-16)
8.4. Control structures and pyramidal holdings (slide 17)
8.5. Ownership: how to evaluate?
8.5.1. If dispersed ownership (slide 22)
8.5.2. If controlled ownership (slide 25)
8.5.3. Grey areas between dispersed & controlled (slide 26)
8.5.4. The 10% threshold and other thresholds (slide 27)
8.5.5. Owner's identities (slide 34)
8.5.5.1. Significant owner identities (slide 37)
8.5.6. Ownership in the world (slide 36)
8.5.6.1. Who controls the world's firms? (slide 41-42)
8.5.6.2. Ownership patterns are systemetic (slide 43)
8.6. Factors that affects minority protection, access to finance, size of capital markets and size of stock markets
8.6.1. Alternative measures of minority protection (slide 60)
8.6.1.1. Shareholder rights (slide 61)
8.6.1.2. Governance structure (slide 62)
8.6.1.3. Transparency (slide 63)
8.6.2. Common law vs Civil law (slide 46)
8.6.2.1. Impact of law (slide. 48 + 64)
8.6.2.1.1. La Porta study (slide 49-59)
8.6.2.1.2. How to measure legal protection (slide 52)
8.6.3. The influence of politics (slide 75)
8.6.3.1. The link to agency theory (slide 76 + slide 82 for conclusions)
8.6.3.2. Underlying assumptions (slide 78)