What a corporate governance paper asks you to do
A corporate governance paper for an MBA course evaluates how a company is directed and controlled, and whether those arrangements protect shareholders and other stakeholders. Most prompts give you a company or a failure case and ask three things: what the governance structure is, where it works or breaks down, and what should change.
The common mistake is to describe the board and stop there. Graders want an argument. Every fact you report about directors, pay or ownership should support a claim about accountability, incentives or risk.
| Prompt wording | What the grader is looking for |
|---|---|
| Evaluate the governance of Company X | A verdict on each mechanism (board, pay, ownership, disclosure), backed by evidence |
| What role did governance play in the failure? | A causal chain: which checks failed, when, and why nobody acted |
| Recommend governance reforms | Specific, feasible changes with owners, timing and expected effect |
| Compare two governance models | Clear criteria applied evenly to both, then a reasoned preference |
The theories graders expect you to use
Theory gives your paper a lens, so pick one or two and apply them rather than listing all of them. Agency theory is the default in most courses, but a strong paper often tests it against an alternative.
| Theory | Core idea | What it predicts you should look for |
|---|---|---|
| Agency theory | Managers (agents) may pursue their own interests at owners' (principals') expense | Monitoring by independent directors, pay tied to performance, takeover threat |
| Stewardship theory | Managers can be trustworthy custodians who want the firm to do well | Empowered executives, combined CEO and chair roles can work |
| Stakeholder theory | Firms answer to employees, customers, lenders and communities, not only shareholders | Board attention to non-shareholder interests and long-term risks |
| Resource dependence theory | Boards bring access to money, contacts and legitimacy | Director backgrounds that match the firm's strategic needs |
Use the theory to generate questions, then answer them from the case. For example, agency theory suggests that a CEO who also chairs the board faces weaker monitoring. Your job is to check whether that weakness actually showed up in decisions, not to assume it did.
Analyzing the board
The board is the center of most governance papers. Assess its composition, its structure and its behavior, because a board can look independent on paper and still defer to a dominant executive.
| Area | Questions to ask | Evidence to find in the case |
|---|---|---|
| Independence | How many directors have no material tie to management? | Director biographies, past employment, business dealings |
| Leadership | Are CEO and chair roles split? Is there a lead independent director? | Proxy statement or annual report |
| Committees | Are audit, pay and nomination committees made up of independent members? | Committee charters and membership lists |
| Expertise | Does anyone understand the firm's main risks (technology, finance, regulation)? | Skills matrix or director profiles |
| Tenure and refresh | Have directors served so long that independence has worn thin? | Years on board; recent appointments |
| Behavior | Did the board ever challenge management? | Minutes, press coverage, resignations, votes against |
Behavior is the hardest to evidence and the most persuasive. A board that approved every acquisition without questions, or that learned of a crisis from the press, tells you more than a headcount of independent seats.
Executive pay, with worked figures
Pay design shows what the board is really rewarding. Break the package into parts, work out how much depends on performance, and check whether the measures match long-term value creation.
CEO pay package (hypothetical company)
Base salary $1,200,000. Target annual bonus 150 percent of salary. Long-term incentive award (performance shares) with a grant value of $6,000,000.
Target bonus = 1.5 x 1,200,000 = $1,800,000.
Total target pay = 1,200,000 + 1,800,000 + 6,000,000 = $9,000,000.
Variable share = (1,800,000 + 6,000,000) / 9,000,000 = 7,800,000 / 9,000,000 = 86.7 percent.
If median employee pay is $60,000, the pay ratio is 9,000,000 / 60,000 = 150 to 1.
A high variable share looks aligned with shareholders, but only if the measures are sound. Ask what triggers the bonus. Revenue growth and earnings per share can be lifted by acquisitions or buybacks without creating value, while relative total shareholder return or return on invested capital is harder to manipulate. Also look for clawback provisions, holding periods and whether targets were lowered mid-year.
Interpreting the pay ratio
A ratio has no meaning on its own. Compare it with peers in the same industry and size band, and with the company's own trend. Say where your comparison figures come from rather than quoting a general norm.
Ownership structure and voting power
Who owns the shares shapes which governance problem matters most. With dispersed ownership, the risk is weak monitoring of managers. With a controlling owner, the risk shifts to the controller taking value from minority shareholders.
Dual-class voting (hypothetical)
The company has 100 million shares. The founder holds all 15 million Class B shares, each carrying 10 votes. The public holds 85 million Class A shares with one vote each.
Founder votes = 15,000,000 x 10 = 150,000,000. Public votes = 85,000,000 x 1 = 85,000,000. Total votes = 235,000,000.
Founder voting power = 150,000,000 / 235,000,000 = 63.8 percent, from an economic stake of 15 / 100 = 15 percent.
The gap between 15 percent of the cash flows and 63.8 percent of the votes is the heart of the debate. Supporters argue it lets founders invest for the long term without short-term pressure. Critics point out that the founder cannot be removed and bears only 15 cents of every dollar lost. Check whether the structure has a sunset clause, after which the extra votes expire, and present both sides before giving your view.
Stuck on the board or pay section of your governance paper?
Order your corporate governance paperGovernance codes and regulation
Place your company within the rules that apply to it. Requirements depend on the country of listing and the exchange, so name the framework and avoid treating one country's rules as universal.
| Framework | How it works | Use in a paper |
|---|---|---|
| Sarbanes-Oxley Act (United States, 2002) | Law: CEO and CFO certify financial reports; management assesses internal controls (Section 404) | Failures of financial reporting and internal control |
| Stock exchange listing rules | Requirements on board independence and committees for listed firms | Whether a US-listed firm met minimum structures |
| UK Corporate Governance Code | Comply or explain: firms follow the principles or explain why not | Judging the quality of explanations, not only compliance |
| G20/OECD Principles of Corporate Governance | International reference principles, last revised in 2023 | Comparing countries or emerging market firms |
Compliance is a floor, not proof of good governance. Several well-known collapses happened at firms that met the formal rules. A strong paper notes compliance, then asks whether the substance behind it was real.
Analyzing a governance failure case
Failure cases are popular because they show governance under stress. Build the analysis as a chain from warning signs to outcome, and identify the point at which each safeguard should have acted.
- Build a timeline Key decisions, warning signs, disclosures and the date the problem became public.
- Map the safeguards Board, audit committee, external auditor, internal audit, regulators, analysts, whistleblowers.
- Find where each one failed Did they lack information, independence, expertise or the will to act?
- Separate cause from symptom Aggressive accounting is a symptom; pay tied to short-term earnings may be the cause.
- Avoid hindsight bias Ask what a reasonable director could have known at the time.
Bring in the stakeholders who carried the losses, such as employees, creditors and pension funds, to show the wider cost. Our guide to stakeholder analysis for MBA assignments covers how to map those groups and their influence.
Writing recommendations that hold up
Recommendations are where many papers lose marks, usually because they are generic ("improve board independence"). Tie each one to a weakness you proved, then name the person responsible, the target date and the evidence that will prove it worked.
| Weak recommendation | Strong recommendation |
|---|---|
| Make the board more independent | Replace two long-serving directors with independent members who have audit and cybersecurity expertise before the next annual meeting; appoint a lead independent director |
| Fix executive pay | Replace the earnings per share bonus measure with three-year relative TSR and ROIC, add a three-year clawback and require the CEO to hold shares worth five times salary |
| Improve transparency | Publish committee attendance and the board skills matrix, and disclose related-party transactions above a stated threshold |
Acknowledge trade-offs. More independent directors can mean less industry knowledge, and longer pay horizons can make recruiting harder. Ethical questions often sit alongside governance ones, and our business ethics case analysis guide shows how to weigh them.
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