Financial planning and corporate governance with Nandu Nagarajan

August 4, 2013

Going by the number of people who signed up for this course it should be one of the worst courses Sasin has to offer; the complete group consisted of only 10 students. Why that number is so low is unclear to me; the review of the course on our Facebook group was limited to “have case every class and need to read”, which does not sound particularly negative, and the official course description did not sound too scary either.

This does not sound so scary, or does it?

This does not sound so scary, or does it?

The amount of work this course demanded was about average compared to all courses we have done in our previous year. Also the calculations needed in reports and in class were not so grueling: in the professor’s own words we did mostly some “back-of-the-envelope” calculations. Even people who have trouble with the calculations in accounting and finance courses should be able to follow what was going on here without losing sleep at night.

The calculation needed for this course are pretty straightforward and can be done on the back of an envelope.

The calculations needed for this course are pretty straightforward and can be done on the back of an envelope.

Actually, the complete course does not cover that many concepts either; during the first lecture professor Nandu Nagarajan already admitted he could do this whole course in 3 hours. But to really understand the concepts we had to put them in practice, and this was done by writing 2 case reports and discussing cases in class. For me this type of teaching works very well: everybody reads the cases at home and in class we can start the discussion right from the start without losing time to go over the basics or to explain the situation.

The course is mostly based on cases; something that worked pretty well in humble opinion.

The course is mostly based on cases; something that worked pretty well in humble opinion.

Luckily for us the number of students was very limited meaning we could have some decent discussions that go further than the simple “question and answer” level you will see in most other courses. It was clear the professor really enjoyed teaching this course so he even encouraged us to discuss further or question him more when possible. This ended up in some nice discussions during the 5 weeks this course was running. And besides that, we also covered military strategies from the English-French war.

Professor Nandu Nagarajan teaching at Sasin

Professor Nandu Nagarajan teaching at Sasin

The course itself was mostly about corporate governance; the basic principal-agent problem as is mentioned in many other courses already. But instead of just taking that for granted the idea is to find ways to eliminate this problem as much as possible with, for example, contracts, performance measurement, and incentives. And while this seems relatively easy it became clear during the cases we discussed that it is often harder in practice then one might expect.  When you do not link your performance measures with the value drivers there is a big chance you will kill off exactly what you value most in a company.

While you did not need to know specifics of cases for the final exam, I still prefer to make as many notes as needed.

While you did not need to know specifics of cases for the final exam, I still prefer to make as many notes as needed.

So how applicable is this course in real life? I can easily come up with a Sasin related example: take for example how some of the student led committees work within Sasin. Here is a clear principal-agent problem where everybody is principal since it is our money in the class fund and committee members are agents who want to spend that money to organize activities and parties.

First of all the decision rights are pretty unclear; there are no budgets and as principals we are not consulted how our own money should be spend. So who does decide how much can be spend? I have no idea to be honest. Secondly, there is no output measurement being done. Activities are organized but there is no feedback mechanism implemented to decide if a good job was done or not. And finally there are almost no incentives for committee members to work hard. Maybe they get a bit of honor when they organize a good party or come up with great improvements, but that’s about it. There is no incentive to save money, to tackle more difficult problems, or to put in more effort than is minimally needed.

This example makes clear to me that what we learned in this course is not only very applicable in many circumstances, it is also not that obvious that everybody is applying it already. And due to the cases and the discussion we have had we now also understand the importance since things can go very wrong when the governance structure is lacking.

All together I have to say this was one of the most interesting and fun courses I have not only done this year, but that I have done at Sasin so far. It is in my top-3 so far for sure and I can highly recommend this course to everybody who has the chance of taking this course in the future.

For questions/remarks you can contact me at: eric@stuckinthailand.com

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