Faculty Development Programme in Corporate Governance

Programme Objectives, Structure & Coverage

This Programme at the IIMB Campus is organized by the IIMB Centre for Corporate Governance and Citizenship, as a modest contribution towards building and strengthening academic capacity in the field of corporate governance which is emerging as a major discipline with both academic and practical significance. It is intended to highlight theoretical and empirical developments in this area during the last decade or so, and building upon earlier experience in India and elsewhere.

Corporate Governance is assuming increasing significance around the world especially following instances of substantive high profile corporate misdemeanors. United States has been particularly highlighted but the problem is not limited to that country and is quite widespread on the continent, and elsewhere. India too has had in the recent past her share of such examples and considerable legislative, regulatory and voluntary attention has been given in recent years to this important aspect of successful and transparent business operations. Training and awareness programmes are considered a reasonable means of assisting company directors in the discharge of their onerous responsibilities. Even more importantly, incorporating good governance principles and practices in business management curricula would help tomorrow’s managers and directors to appreciate and internalize the relevance and imperatives of good governance to be applied in their day to day work environments.

While much of the responsibility and accountability is laid at the doors of company boards and directors, it is often overlooked that the board, being non-executive in nature, can only have an oversight and surveillance role in most matters and that the executive management of the company is the primary source both for originating strategies and implementing them, creating and protecting corporate wealth and wealth-creating assets, and ensuring ongoing sustainable growth of the corporation, within the value framework prescribed by the board. This programme is designed to highlight, in an academic frame, these complementary dimensions of executive and directorial initiatives towards the basic corporate objective of wealth creation. The importance of achieving corporate objectives within an appropriate and acceptable ethical and value based framework will be especially emphasized.

The six-day intensive Programme is designed to provide rigorous training and inputs to assist participants enhance and enrich their knowledge and teaching skills in this emerging field. Content would cover such areas as board/directorial and executive responsibilities in corporate governance, strategy formulation and performance monitoring, risk management and internal control frameworks, communication policies, top management and leadership issues, and value frameworks and business ethics, business and society, sustainability, financial reporting and disclosure, legislation and regulation, etc. The Programme will address three interlinked dimensions of updating subject content including providing research leads, developing teaching materials including cases, and improving delivery skills and methodologies.

Content updating will be through refresher sessions on governance theories and practice internationally and in India, governance models and best practice including on corporate citizenship and responsibility, and stakeholder theories and empirical approaches. Case development will be experientially explored, while delivery skills improvements will be through interactive sessions of using case methodology and other pedagogical approaches. The endeavour throughout the programme would be to encourage intra-group learning and building upon the participants’ strengths and expertise for common benefit.

The subject of course is quite vast, and while individual teachers and researchers could in practice choose their own areas of interest within this broad umbrella-frame, the programme has the limited objective of arousing such interest and providing a catalytic lead to encourage further pursuit. Past experience in other programmes has shown that participants learn as much as from among themselves, and often much more than from the faculty, whose programmed role combines instruction, inspiration, and challenging.

As a corollary to these objectives, the programme would seek to offer participants bibliographical and resource-intensive leads which they can use in their pursuit of desired personal academic agenda of future action.

The following brief description of session-wise coverage is intended to assist participating faculty not only in structuring their own inputs, but also to appreciate the context and setting in which their sessions fit in within the overall design of the programme.

Session - wise Coverage

Day 0: Sunday, May 20, 2007 - 7.00 pm (NB-PGA)

Inauguration of the Programme and participants fellowship. Prof N Balasubramanian will welcome the participants and briefly introduce the programme content and structure. Participants will be requested to introduce themselves and briefly outline their expectations from the programme. Prof Prakash Apte, the Institute Director will deliver the Inaugural Address. This will be followed by a Course Welcoming Dinner.

Day 1: Monday, May 21, 2007

Session 1: Corporate Governance Perspectives (NB)

This session sets the modern Corporation in the context of its role and responsibility to Society within a corporate governance framework, internationally and within the country. International developments are useful to appreciate global trends since more often than not most of these have relevance to Indian corporations already operating globally or with such aspirations. The background to expectations of corporate good behaviour and transparency will be highlighted, and the stage set for further study of the different strands in subsequent sessions. Origins of the modern corporation, directors' fiduciary responsibilities, and board accountability will be discussed. Corporate governance developments in India and elsewhere will be noted. Apart from specifics of governance rules and regulations, this session is also intended to bring out the overall context in which business operates in society and to provide a glimpse of how these interdependent and interrelated dimensions need to be harmoniously managed to provide sustainable long term prosperity to the corporations and its stakeholder communities.

Session 2: Case Developing (RTK)

Issues in case method of teaching. Stages in developing a good teaching case; sources material, confidentiality and intellectual property rights. Elements of a good teaching case. Teaching notes. Critiquing a specimen teaching case

Session 3: Case Method Teaching (RTK)

While case method of teaching is a valuable tool in management and governance education, it is necessary to use the method innovatively for obtaining results. This session would explore some techniques in case method teaching, using role plays as medium of instruction.

Session 4: Agency Issues in Corporate governance (PC)

Shareholder primacy in corporate governance: agency issues, divorce between corporate ownership and control: potential non-alignment of financial interests of shareholders as principals and executive management as their agents running business operations; the fundamental premise of shareholder primacy - its support and challenge; shareholder wealth maximization as an end- objective of principal-agent theory; practical ramifications, problems, and possible solutions.

Session 5: Triple-Dimensions of Board Stewardship (NB)

Board as the bridge between shareholders and executive management. Board suzerainty in the corporate governance schema; the triple dimensions of board role: contributing, counseling, and controlling; board as a coach, as a mentor, as a referee, as an arbiter; meaning of stewardship and its practical application; its validity under different ownership structures: domestic groups, MNCs, State; Boards as facilitating instruments of national wealth creation.

Day 2: Tuesday, May 22, 2007

Session 6: Corporate Groups, Ownership & Control, Conflicts & Resolution (NB)

Ownership structures and their impact on governance; different kinds of concentrated ownership; concepts of pyramiding and tunneling, private benefits of control; protection of (minority) absentee shareholder interests; special issues relating to family and multinational groups. Measures to prevent or minimize potential corporate abuse of power.

Session 7 & 8: Strategy in Board Governance

Corporate strategy, its development, implementation and monitoring, are arguably the most important drivers of corporate wealth creation. Usually, strategy is seen as the preserve of executive management, with company boards passively approving them and then monitoring performance. While as domain experts and people at the forefront of action executive management has undoubtedly the capability and the responsibility for developing business strategies, the board has the responsibility, in its task of protecting and furthering the interests of the corporation and its shareholders, to participate actively in the strategy formulation processes and their content and direction. The level of board involvement and contribution would of course depend upon its own competencies and commitment, and its comfort level with the capabilities of executive management.

In terms of internal governance, robust processes for discussion and formulation of strategy are necessary, with the leadership role being played by the chief executive, and his/her top management team and support functions. How these processes are established and dynamically upgraded is of great importance.

This session will address, with the help of cases, how executive management and boards could work together in the discharge of their respective roles, what the executive could expect of the board, and what level of effective board intervention is feasible, and what internal governance measures contribute to success in strtegising.

Session 9: Executive Management Compensation (RS)

Appropriate systems for attracting, recruiting, and retaining talent, and when necessary replacing personnel at the senior most levels including that of a CEO, in the context of board’s own accountability to the company’s shareholders and stakeholders. Performance-based Variable Pay and Employee Stock Option Schemes. Trends in executive compensation internationally and in India. The role of the compensation committees of the board in relation to executive compensation.

Session 10: Knowledge Management & Protection (NMA)

A key element of modern day business is the creation, protection and legitimate exploitation of knowledge relating to company products, processes, research and innovation. Especially important in human-resource-centric services industries like computer software. Methods of managing knowledge. Acquisition of knowledge through internal development, joint ventures, purchases and licences, etc. Internalisation of knowledge and its retention especially in the context of employee attrition.

Day 3: Wednesday, May 23, 2007

Session 11 & 12: Corporate ethics and Values (DK/FS)

Role of ethics and values in business. Broad introduction to ethical theories and their evolution around the world. Do good ethics and good business go together ? Issues in teaching ethics to business students. Value statements and their value; walking the talk; some examples of leading value-managed companies. Role of corporate boards and top management in evolving, implementing and monitoring ethical values in organizations.

Session 13: The Corporation & its Shareholders (MPPP)

Origins of the corporate from of organization, related theoretical frameworks, and evolution of corporate legislation internationally, and with specific reference to India. The concept of shareholders limited liability and circumstances where exceptions may be warranted (lifting of corporate veil); Key concepts of corporations interface with the external world (such as the doctrine of indoor management ); inter se relationship between corporations and their shareholders; and minority shareholders and their legal rights and limitations

Session 14: Boards and Directors : Legal Dimensions (MPPP)

The legal status of company boards and directors; their powers, duties and liabilities; distinctions between executive management and boards can not do limitations on the powers of directors; board accountability, Residual Claimant theory; fiduciary responsibilities of directors, duties of care and loyalty; derivative litigation; and future directions in corporate legislation and regulation.

Session 15: Governance Issues in M&As and Restructuring Transcations [NV]

Mergers and acquisitions are a valuable source of inorganic growth of business, but they do come with governance and management problems that need attention. Stages in M&As The role of executive management and the board in M&As. Role of regulators and intermediaries. Organisational integration: values, capacities, human resources, finance, branding, etc. Dealing with surplus staff and outsourcing fallouts.

Session 16 (Pre-Dinner): Governance Implications of the 1992 Harshad Mehta Scam (SKB)

Analysis of contributing causes to the scam. Regulatory processes and failures. Opportunities for unethical transactions. Governance failings at the reserve bank (SGL), various commercial banks, and other intermediaries. Lessons.

Day 4: Thursday, May 25, 2007

Session 17 : Corporate Citizenship & Social Responsibility (DK)

Session 18: Corporate Citizenship in Practice (DK)

Business in society. Responsibility of corporations extends beyond shareholders, to other stakeholders. Triple Bottom Line and People-Profit-Planet approaches to Corporate responsibility. CSR developments international and Indian; CSR more than just philanthropy; embedding CSR in operations and decision-making processes. Issues in teaching CSR to business people & business students.

Session 19: Corporate Reputation (SG)

Government ownership brings with it certain unique issues of governance, and usually these get exacerbated in cases where, due to some of these issues relate toboard composition and disproportionate voting rights for some directors audit, vigilance, procurement, appropriations, cross-investments and the potential for political or bureaucratic interventions.

Issues in public sector governance: international trends, Indian experience. Unique problem in partial disinvestments, with the presence of strategic partners and o/or external investors. The State as an investor.: mechanisms for administering shareholder rights and responsibilities. The State as a model dominate owner. OECD principles of corporate governance in state owned enterprises. Quasi-governmental and their governance.

Session 20: Board Financial Communication (SS)

A major requirement of corporate boards relates to their reporting back to their "principals", the shareholders, periodically on their companies' performance and financial results. This responsibility is delegated by the full Board to its Audit Committee for initial and detailed review and recommendation. Several statutory and regulatory provisions exist that mandate various disclosure requirements and leading-edge corporations often go beyond and voluntarily disclose much more.

Laying down appropriate communication policies for the company has been identified as a core responsibility in corporate governance. Whether it is financial communications to the shareholders and other market players or brand building communications, internally to employees and externally to customers and vendors, are regular features of executive management - over all philosophy of communications dealing with credible content and transparent quality. The relevance and practical application is illustrated by a case presentation.

Session 21: Public Sector Governance (SKB)

Corporate reputation as a competitive advantage. Building reputations. Key elements of corporate reputation. Reputation beyond product/service branding. Building a corporate brand: as a good employer, supplier, customer, borrower, citizen, and an attractive investment proposition. A simple seven-pillared corporate reputation model: sustainable wealth creation through good business ethics, corporate values trust integrity, social responsibility, philanthropy and credible information and transparent communication.

Day 5: Friday, May 25, 2007

Session 22: Internal Control in Practice (SB)

Concepts of risk and uncertainty. Risk as applicable to business. Risk as strategy. Risk and reward trade-ff identification, measurement and management. Bearing risk, sharing, risk exiting risk, attracting risk. Risk appetite and risk aversion. Reporting on risk. Board role on overseeing risk management in corporations.

Session 23: Governance & Accounting Standards (AKB)

Need for a common language in understanding published financials. The relevance of Accounting standards in governance as instruments of clear and transparent financial communication. The standard setting process, internationally and in India. Convergence in global accounting standards. Responsibility for complying with standards. Role of boards, audit committees, executive management, CFOs, and independent auditors.

Session 24: Independent Audit in Governance (AKB)

Origin and role of independent auditors in corporate governance. Auditing Standards and their relevance. Peer reviews. Auditors appointed by (and report to) the shareholders on the recommendation of the audit committee and the board. The audit profession: origins, competencies, responsibilities. Auditors as reputational agents in governance. Independence a key requisite of auditors: factors likely to impair audit independence and corrective measures. Interface with the audit committee; executive sessions and their importance in governance.

Session 25: Internal Control; in Practice (PS)

A key responsibility in governance relates to ensuring appropriate systems of internal control are in place in the organization, and that they are being followed in practice, with any deviant behaviour being promptly highlighted for attention. Assurance mechanism to ensure wealth creating assests and created wealth are duly protected. The COSO framework of internal control. Role of internal audit in reporting upon internal control in practice.

Session 26: Financial Disclosure & Practice (PS)

Disclosure as credible and transparent communication. Agents’ obligations to report back to principals. Mandatory disclosures under legislation and regulation. Voluntary disclosure as reputation enhancers. Disclosure and corporate performance. Indian and international experience.

Day 6: Saturday, May 26, 2007

Session 27: Bank Governance (MJ)

Unique issues relating to bank governance. Greater relevance of stakeholder responsibilities to depositors and borrowers. Higher financial leveraging a source of risk and concern, Capital adequacy norms. Importance of risk management in banks. Basel – II provisions. Special issues in Public Sector Banks, especially if they are also listed. Bank boards and governance.

Session 28: Governance in Host Country Operations (NB)

When trans-national corporations operate in host countries, some unique governance issues arise for consideration. Differences if any between home country and host country requirements; behavioural concerns of subsidiaries/affiliates as independent entities; subsidiary company boards especially in listed company situations. Parent company executives as non-executive directors in subsidiaries - role and responsibilities. International experience in host country governance management.

Session 29: Effective Teaching by Case Method ( - )

Changing patterns of corporate shareholding-from individual retail investors to institutional investors. The power and contribution of institutional investors , especially in the US and the UK Indian position. Types of institutional investors and their role in corporate governance in investee companies. Institution of Nominee Directors in India and its implications.

Session 30: Reflections, Action Plans & Valedictory (NB-SR)

This will be the wrap up session to review the programme; with participants sharing their action plans to take governance teaching forward in their institutions. Prof Shyamal Roy, the Institute Dean-Academic will deliver the valedictory address.