PAM 5334

Corporations, Shareholders, and Policy

Course Description

Course information provided by the Courses of Study 2014-2015.

The term "firm" has very broad usage. It refers to any organizational form that people use to create teams or groups that focus on achieving a specific purpose. Firms provide a structure through which people can organize themselves into those groups or teams. They are categorized by the nature of the property rights owners hold in the firm, and by the details of the firm's contractual arrangements. Common firm types include partnerships, sole proprietorships, non-profits, mutuals, and publicly traded corporations, among others. This course focuses on one important firm type: the modern publicly traded, privately owned corporation. The course uses economic and statistical analysis to study the interaction of the public corporation, the market, and the law, and how those interactions affect the welfare of managers, shareholders and consumers. The costs and benefits of that standard corporate form of organization are examined. A variety of legal institutions, some of which have evolved over decades, are analyzed. Those institutions define and govern the corporation. They include limited liability, fiduciary duties, the business judgment rule, and shareholder voting. The mechanisms of corporate governance, i.e., those legal and market-based forces that help control the corporation and ensure that managers operate it in shareholders' interest, are examined. Corporate governance mechanisms include hostile takeovers, insider trading, outside directors on the board, the monitoring role of institutional investors, audits, and executive compensation plans. State corporate law and anti-takeover devices are also discussed. The role and impact of federal policies, such as the 1933-34 Exchange Acts, the Sarbanes-Oxley Act and the Dodd-Frank Act in affecting corporate structure and managerial behavior will be an important focus. Other institutions and policies related to publicly traded corporations, such as sovereign wealth funds and government-sponsored enterprises, will also be examined along the way.

When Offered Spring.

Prerequisites/Corequisites Prerequisite: Principles of Microeconomics; Principles of Statistics.

• Students will be able to explain what a publicly traded corporation is, how it is organized, why it exists, its benefits and costs to society, how it is governed, controlled, and regulated, and its broader role in society.
• Be able to describe the structure and effect of the law and policy surrounding the public corporation.
• Students will be able to analyze and engage in policy controversies surrounding the corporation.
• Students will be able to explain and demonstrate the role and importance of alternative organizational forms, including private partnerships, mutuals, and non-profit enterprises.

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