CORPORATE GOVERNANCE

Guidelines for Presentation

I. DETAILED DESCRIPTION FOR THE PRESENTATION

The class is divided into 6 groups being equivalent to 6 presentations. There are 6 topics
which are randomly assigned to each presenting group. (see page 2)

Each group prepares for a 20-minute presentation to:

- Analyse the corporate governance structure of the firm in the given case including:

+ Shareholder structure

+ Voting rights/ Voting mechanism

+ Structure of Board of Directors

+ Compensation for Board of Directors and CEO

+ Rights of the shareholders

+ Risk management

- Analyse the corporate governance issues of the corporations in the given cases:

+ Decribe the corporate governance issues faced by the firm

+ Analyze the causes and consequences of the issues

+ Propose recommendations

Prepare a submission package including the required documents coded as followed:

1. PowerPoint slide: [Name of the theoretical matter].ppt

2. All sources related to the presented cases with citation: [Sources of news].docx

3. Peer assessment

Submit the package coded [Group number].[Case number] at least 3 days prior to the
presentation via email to the teacher.
II. SIX CASES OF CORPORATE GOVERNANCE ISSUES

1. Case 1: Enron

Enron was, at one point, one of the largest companies in the United States. Despite being a
multi-billion dollar company, Enron began losing money in 1997. Although Enron's
management had the responsibility to care for the shareholder’s best interests, the agency
problem resulted in management acting in their own best interest.

Many analysts believe the company's board of directors failed to carry out its regulatory
role in the company and rejected its oversight responsibilities, causing the company to
venture into illegal activity. The company also started racking up a lot of debt. Fearing a
drop in share prices, Enron's management team hid the losses by misrepresenting them
through tricky accounting resulting in confusing financial statements. The company ended
up filing for bankruptcy in December 2001.

Enron became the largest U.S. bankruptcy at that time with its $63 billion in assets.
Criminal charges were brought up against several key Enron players including former chief
executive officer (CEO) Kenneth Lay, chief financial officer (CFO) Andrew Fastow, and
Jeffrey Skilling, who was named CEO in February 2001 but resigned six months later.

Discussing questions: How did agency problems lead the company to bankruptcy?
Analyse the company’s corporate governance failure?

Sources:https://www.investopedia.com/ask/answers/041315/what-are-some-famous-
scandals-demonstrate-agency-problem.asp

2. Case 2: Lehman Brothers

Lehman Brothers is often cited as an example of corporate governance failure largely due
to poor oversight by the board. Lehman Brothers had a high-leverage, high-risk-taking
business strategy supported by limited equity. For instance, it took its leverage ratio up to
30 times its equity. It also had a culture of aggressive growth strategy, which focused on
risky and complex financial products such as subprime, derivatives and commercial real
estate markets.

After Lehman Brothers collapsed, many obervers have pointed out that it should not have
taken excessive debts, diversified product portfolio and the board of directors should have
monitored its strategy and risk management more carefully. All of the root causes of
Lehman’s failures can be traced back to the dysfunction of the board of directors and the
agency problem.

Discussing questions: How did Lehman’s board of directors not effectively oversee
Lehman and leave it bankrupt? Analyze any weeknesses withthin the company’s
corporate governance which allow agency problems to be constituted?

Sources:
https://publish.illinois.edu/illinoisblj/2016/04/28/the-agency-problem-of-lehman-
brothers-board-of-directors/
https://www.linkedin.com/pulse/lehman-brothers-example-corporate-governance-failure-
pradeep-malu

3. Case 3: Samsung

South Korean business conglomerate Samsung has been struggling with a number of
obstacles in the first half of 2019. The escalating trade war between the United States and
China has negatively impacts the company’s revenues. Amid such turbulences, Samsung
is facing another central challenge. A series of emerging fraud and bribery scandals have
called Samsung’s family-based corporate governance into question.

Lee Jae-yong assumed leadership of Samsung Electronics in 2014 after his father and
former Samsung head Lee Kun-hee suffered a heart attack, becoming unable to continue
as head of the business. The chaebol system, which fosters the ownership of a corporation
by a family, heavily influences Samsung’s corporate governance dynamics. Given that
Samsung’s governance model is based on family succession, it appears highly unlikely that
a non-family member would take the place of Lee Jae-yong.
In August 2017, Lee was sentenced to 5 years in prison after he bribed former South
Korean President Park Geun-hye and her adviser Choi Soon-sil. His removal has hampered
new business investments and innovation of the conglomerate.

Discussing questions: Analyse the strength and weakness of Samsung’s family

Source:https://www.globalriskintel.com/insights/leadership-scandals-call-samsungs-
corporate-governance-question

4. Case 4: Vinamilk

Ten years ago, Vietnamese dairy firm Vinamilk already occupied an enviable position: it
was one of the biggest public companies listed on the Ho Chi Minh City Stock Exchange,
and its name was synonymous with the country’s dairy industry. But Vinamilk’s leaders
were concerned with what the company lacked: an advanced corporate governance
framework to promote long-term efficiency. Without it, the company’s prospects for
sustainability promised to be far less rosy than its past.

So in 2012, Vinamilk joined the Asian Corporate Governance Association (ACGA) and
committed to implement corporate governance best practices as outlined in International
Finance Corporation’s Corporate Governance Manual for Vietnamese public companies.
The idea of corporate governance—a system of rules, principles, and processes by which
a company is directed and controlled—was relatively new in Vietnam at that time.
Vinamilk’s board decided to lead by example.

Recently, Vinamilk has become the very first and only Vietnamese company recognized
as "ASEAN ASSET CLASS" and at the same time, led Vietnam's Top 3 Listed Companies
according to the 2019 ASEAN Corporate Governance Scorecard results, a part of the
ASEAN Capital Market Forum (ACMF)'s ASEAN Corporate Governance Initiative.
Discussing questions: Analyse how did Vinamilk established a robust corporate
governance framework that is in sync with international best practices? How has
changes and improvement in Corporate Governance nourished Vinamilk’s Growth?

Source:
https://www.ifc.org/wps/wcm/connect/news_ext_content/ifc_external_corporate_site/new
s+and+events/news/impact-stories/vinamilk-vietnam
https://finance.yahoo.com/news/vinamilk-named-asean-asset-class-084600898.html

5. Case 5: McDonald’s

McDonald’s board will likely face tough questions from shareholders on Thursday at its
annual meeting about how it handled the firing of former CEO Steve Easterbrook.
Easterbrook was ousted in November 2019 for having a relationship with an employee in
violation of company policies. McDonald’s fired him without cause, which allowed him
to walk away with a severance package currently valued at as much as $56 million.

In August, McDonald’s filed suit against Easterbrook to claw back that package, alleging
that he lied about having additional relationships with employees. The lawsuit has opened
McDonald’s up to questions and criticism of the board’s original investigation into
Easterbrook, like why the third-party inquiry was wrapped up in a week and why
investigators didn’t check the company’s servers for more evidence.

Discussing questions: Analyze why former CEO Steve Easterbrook was fired and sued?
Do you think the shareholders can win the case and claim compensation? In addition,
to which extent the Board of Directors should be jointly responsible for causing these
agency cost?

Source:https://www.msn.com/en-us/money/companies/mcdonald-s-board-faces-
shareholder-pushback-over-its-handling-of-ceo-ouster/ar-BB1gV1og
6. Case 6: Facebook Inc
Social network company Facebook Inc has been severely criticized worldwide for lack of
stringent user data protection framework and virality of unlawful content across the
platform. The biggest scandal that rocked Facebook’s reputation beyond repair is the
infamous Cambridge Analytica data scandal last year.

In November 2018, Facebook CEO Mark Zuckerberg had announced that the company
was planning to create an independent body that would be responsible for content policy
decisions. Now the company has announced the structure of the Oversight Board and its
relationship to Facebook, in a charter.

Explaining its relationship with the board, Facebook said that it would provide information
required for the board to make its decisions. The company will request the board to review
content, seek policy guidance and also act on the basis of the board’s recommendations.

Discussing questions: What is the Facebook Oversight Board? Why did the company
create it? Analyze the functions and processes to be followed by the Board? Will
Facebook's Oversight Board help in better governance? Should it become a model that
other social media companies are likely to follow?
Source: https://www.entrepreneur.com/article/339628