Governance and Public Policy

The value of a firm depends on good corporate governance practices protecting investors. Greater protection of shareholders lowers the cost of capital due to better risk mitigation. Thus, the set of governance practices, rules, and regulations that promote private sector investment and jobs creation also promote firm value. Topics include the role and responsibilities of shareholders (principals), the boards of directors (the principals' representatives), and the executive management (agent). They also include executive compensation policies, boardroom structure and practices, corporate disclosure and transparency, and the value of the shareholder vote. The course looks into corporate pyramidal structures, hostile takeovers, and the failure of the market for corporate control. It examines the role of financial institutions and credit rating agencies in promoting corporate governance, and how transparency, accountability, responsibility, and fair and equitable treatment of all shareholders help improve corporate governance and reduce agency conflicts between principals, management, and the board of directors.