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Corporate Governance

ON PAGE 1:
1a. The value creation goal of corporate governance focuses on shareholder value creation and enhancement
through the development of long-term strategies to ensure sustainable and enduring operational performance.
The value protection goal of corporate governance concentrates on the accountability of the way a company is
managed and monitored to protect the interests of shareholders and other stakeholders. These two concepts
should be considered within every company.
Discuss the significance and importance of investors (shareholders) as the first tier of the stakeholder hierarchy.
1b. External governance mechanisms are intended to monitor the company’s activities, affairs, and performance
to ensure that the interests of insiders (management, directors, and officers) are aligned with the interests of
outsiders (shareholders and other stakeholders). Examples of external mechanisms are the capital market, the
market for corporate control, and the labor market, as well as state and federal statutes, court decisions,
shareholder proposals, and best practices of investor activists. These mechanisms may be helpful in aligning
management incentives with shareholder interests, and controlling management behavior. Interestingly, the FBI
state the rise of digital technology and internet file sharing has caused of intellectual property theft to cost U.S.
businesses billions of dollars per year with loss of jobs and loss of tax revenues (Intellectual property theft,
2017).
Reference:
Intellectual Property Theft: Get Real Trends: Globalization and Digitization Usher In a New Era of Intellectual
Property Theft (2017). Retrieved from:
http://www.ncpc.org/topics/intellectual-property-theft/trends-globalization-and-digitalization-usher-in-a-new-era-ofintellectual-property-theft
Scenario:
Mary S, an independent petroleum geologist, has prepared a package of her maps, analysis, and other supporting
material to try to sell a company with sufficient capital the notion of drilling the well. Mary has worked on this
project for the past two years and expended $30,000 in acquiring information and additional software to develop
the drilling prospect. She cannot afford to lease the property, so she has prepared an agreement that a company
looking at her prospect agrees to not go around her and take her idea. Mary shows the idea to Big Dog Oil
Company (ABC Stock Exchange). Big Dog signs off agreeing to pay her $75,000 and to assign a 3 per cent
overriding royalty interest if they decide to do the deal. One of the managers, Joe D., working for Big Dog is
recruited by the board of directors of Little Cat Gas Company (XYZ Stock Exchange) to become their CEO. Joe
tells the board of Little Cat about his idea to drill a well. Little Cat leases the project area and drills a highly
successful well. Joe gets a huge stock award. Mary does not find out about Little Cat until afterwards. Mary is
upset that Joe has taken her idea; has her attorney file suit, a subpoena is issued for all the records of Little Cat,
effectively shut them down. This is the only commercial success Little Cat has had and has essentially rescued
them from bankruptcy. This geologically successful idea is worth several million dollars to Mary, who can
barely afford to support her family.
What are the corporate governance and ethics problems? Do not discuss legal problems!
ON PAGE 2:
Do you believe integrating corporate governance and business ethics education into the business curriculum of a
school is a good idea? Why or why not?

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