You are a star performing analyst at an independent research firm, who has been tasked with analysing the corporate gove

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You Are A Star Performing Analyst At An Independent Research Firm Who Has Been Tasked With Analysing The Corporate Gove 1 (211.88 KiB) Viewed 61 times

You Are A Star Performing Analyst At An Independent Research Firm Who Has Been Tasked With Analysing The Corporate Gove 2 (13.35 KiB) Viewed 61 times

You are a star performing analyst at an independent research firm, who has been tasked with analysing the corporate governance of the firm “CoFin”. This company is domiciled in the US and is into the business of manufacturing cars. Preliminary analysis of the company's operations suggests cost of equity of nearly 8%. CoFin is seen as a safe bet amongst investors, who note that the firm has always managed to stay just ahead of the analyst target prices. JP Morgan's internal research and analysis division conducted an internal review and suggested a cost of equity of 6.1%. Their argument being that the company is not too risky and has managed its operations quite well This is further validated by JP Morgan's decision to issue a $500 million new loan facility to CoFin. The following two figures demonstrate excerpts from their corporate governance disclosures in the 2019 annual report. Compensation Report: Executive % Stocks % Salary 5% 5% % Bonus 25% 20% % Options 50% 40% % Pension and Deferred Pay 10% 15% Total Pay ($) 20,000,000 10,000,000 10% 20% 5% 10% 25% 20% 40% 8,000,000 CEO CFO Vice President 1 Vice President 2 Vice President 3 5% 5% 20% 25% 45% 7,200,000 10% 5% 25% 20% 40% 6,500,000 Board Structure Outside Inside Directors Independent? Tenure start Directors Independent? Tenure start Director 1 Yes 2010 CEO No 2010 Director 2 Yes 2000 CFO No 2014 Director 3 Yes 2015 VP-1 No 2005 Director 4 Yes 2014 VP-2 No 2009 Director 5 Yes 2017 VP-3 No 2008 Director 6 Yes 2015 Director 7* No 2012 Director 8** No 2000 Director 9 Yes 2001 Director 10 No 2009 * Director 7 is a representative of GreenRock that currently owns 10% of outstanding stock of CoFin. GreenRock has ownership across various other companies, including MarFin (9.12% ownership) that is a key producer of raw materials for various products, including automobiles. ** Representative of JP Morgan that owns 7.75% of outstanding equity “CoFin”.
As a star governance analyst, shed light on the state of governance mechanisms in CoFin and recommend any best practices that you feel are necessary to mitigate existing agency conflicts.