Module Outline
Introductory Description
This module focuses on the way public companies are directed and controlled using a combination of law, soft law, market forces and investor pressure. This mix of constraints and incentives is called the ‘corporate governance system’. The module explores: how the corporate governance system impacts on the discretion given to corporate managers by company law; how it developed and whose interests it serves; how it is justified; the role of the UK Corporate Governance Code and the ‘comply or explain’ principle; the growth and types of institutional investors; the role institutional investors are expected to play by the Stewardship Code and in relation to executive pay; the changing role and scope of information disclosure; and the relationship between corporate social responsibility, corporate governance and sustainability.
Throughout the module, students will critically evaluate policies and instruments with reference to theories of shareholder primacy, stakeholding, team production, and social and environmental sustainability. We will discuss both the historical development of the corporate governance system and its future trajectory, and we will finish the module by evaluating its possible contribution to mitigating the climate crisis.
Tweet summarising the module:
Gain a critical understanding of the UK’s corporate governance system, which strongly influences how public companies are run and has been exported around the world.
Principal Module Aims
Understand how the corporate governance system influences the way companies are run, how and why it developed, and whose interests it serves
Understand the main structure of the UK Corporate Governance Code, UK Stewardship Code and the rules relating to executive pay
Understand the changing nature of institutional investors and the role they play, and the way in which law and the corporate governance system have sought to empower investors
Understand the changing scope and role of information disclosure
Understand the function of corporate social responsibility and the current move to embed sustainability in corporate governance in various ways
Evaluate and develop proposals for corporate governance reform
Module Outcomes
Students will be able to:
Understand how corporate governance has developed in the UK over the past 70 years
Critically evaluate the different interests at stake in companies and how they are or might be protected through corporate governance
Explain and critically evaluate the principal instruments that make up the UK corporate governance system, including the UK Corporate Governance Code, the Stewardship Code and shareholder ‘say on pay’
Explain the different types of institutional investors and evaluate their possible contribution to corporate governance
Explain the changing role and scope of information disclosure and how it reflects wider understandings of the scope of corporate governance
Explain and critically evaluate corporate social responsibility and current policy developments which aim to make corporate activities more socially and environmentally sustainable
Engage in critical analysis and application of the legal, economic and management literature relating to corporate governance
Evaluate and develop reform proposals relating to various aspects of corporate governance and the system as a whole
Syllabus
1. Introduction: from Company Law to Corporate Governance
2. Orientation of Corporate Governance: Shareholder Value, Stakeholding, Managerialism and Team Production, Sustainability
3. UK Corporate Governance Code
History
Contents
Evaluation
4. Information Disclosure
Financial accounts
Non-financial reporting
Sustainability reporting
5. Institutional Investment
Structure (AMs vs AOs)
Typology
Activist investors: hedge funds, private equity
Growth of indexers/universal owners
Growth of ESG investment
6. Shareholder Stewardship and Engagement
Informal engagement and shareholder proposals
Stewardship Code and SRDII Regulation
Implications of structural change in institutional investment for stewardship goals
7. Executive Pay
Theory and Practice (including brief discussion of share buybacks)
Remuneration committee
Shareholder ‘say on pay’
8. Corporate Social Responsibility
Voluntary activity, going beyond the law
Ex ante codes vs ex post reporting on activities
Connection with corporate activities?
Externality perspective
9. Embedding Sustainability in Corporate Governance
Why? Regulatory failure, voluntarism failure, shareholder failure
Information disclosure (e.g. EU Corporate Sustainability Reporting Directive) and market forces?
Due diligence
Commitment to and implementation of sustainability strategy
A Talis Aspire reading list is available from the library website with links to all the readings in this module guide: see https://warwick.rl.talis.com/modules/la9fp
A good starting
point for independent research is https://warwick.libguides.com/law/research which will guide you around Warwick’s
enormous digital library.
Important Notice: all materials made available on this Moodle site (e.g., lecture videos, lecture handouts/notes, or presentation slides) are provided for the personal studies of students enrolled on this module only. You MUST NOT share these with anyone outside the University. In particular, you MUST NOT share or post these on any other freely accessible or commercial website and not use these for personal gain. Failing to respect these conditions could amount to a disciplinary offence.