| Course | BUS 551 Corporate Financial Management |
|---|---|
| Module | Module 2 |
| Paper type | Corporate governance review |
| Length | About 1,059 words, 6 pages |
| Format | APA 7 student paper |
| School | Aspen University |
| Program | MBA |
| Updated | October 2026 |
Free sample paper for BUS 551 Module 2
Ten Votes per Share and a Board That Meets Twice a Year: A Governance Review of a Newly Public Company
Student Name
MBA Program, Aspen University
BUS 551: Corporate Financial Management
Instructor Name
Month Day, Year
Ten Votes per Share and a Board That Meets Twice a Year: A Governance Review of a Newly Public Company
Summit Fire Grills, a composite company based in Fort Collins, Colorado, designs and sells outdoor grills, pizza ovens and smokers through retailers and online. Its founder built the company over fifteen years and took it public two years ago, selling shares to raise money for expansion. The founder kept shares that carry ten votes each, so although he owns 28% of the company's shares, he controls 61% of the votes. Since the offering, the stock has traded at a lower multiple of earnings than comparable consumer products companies, and several institutional investors have raised concerns about governance. The board has asked for an independent review. This paper provides it.
What Governance Is For
Shleifer and Vishny (1997) defined corporate governance as the ways in which suppliers of finance to corporations assure themselves of getting a return on their investment. Investors who give money to managers they cannot directly control need protection: legal rights, boards that monitor management, incentives that align interests and, in some cases, large shareholders with the power to intervene. When these protections are weak, investors either demand higher returns, raising the company's cost of capital, or decline to invest.
The Evidence on Shareholder Rights
Gompers et al. (2003) constructed an index of 24 governance provisions, such as staggered boards and limits on shareholders' ability to call meetings or amend bylaws, that restrict shareholder rights, and studied about 1,500 large U.S. firms during the 1990s. Firms with the strongest shareholder rights had higher firm values, higher profits, higher sales growth and lower capital spending and acquisitions than firms with the weakest rights, and an investment strategy that bought the former and sold the latter earned abnormal returns. Their findings suggest that provisions entrenching management carry costs that investors eventually recognize.
Summit's Governance Scorecard
| Feature | Current practice | Rating |
|---|---|---|
| Share structure | Founder's class carries ten votes per share with no sunset | Weak |
| Board independence | Five of eight directors independent | Adequate |
| Board leadership | Founder serves as chair and chief executive; no lead independent director | Weak |
| Director elections | Staggered terms, a third elected each year | Weak |
| Audit committee | Three independent directors, one a certified public accountant | Strong |
| Compensation committee | Chaired by a director who is the founder's longtime friend | Weak |
| Shareholder meetings | Shareholders cannot call special meetings | Weak |
| Disclosure | Timely, with clear segment reporting | Strong |
The Dual-Class Structure
The greatest concern is the dual-class structure. With 61% of votes, the founder can elect directors, approve or block any merger and defeat any shareholder proposal, regardless of the other 72% of shares. This arrangement protects his long-term vision from short-term pressure, which some investors value, but it also means outside shareholders have no effective way to replace management if performance falters. A sunset, a provision converting high-vote shares to ordinary shares after a set number of years or when the founder leaves, would preserve his control during the company's growth phase while limiting it indefinitely.
Board Leadership and Committees
Combining the roles of chair and chief executive concentrates authority in one person, who then sets the agenda for the board meant to monitor him. A lead independent director, chosen by the independent directors, could chair executive sessions without management present. The compensation committee chair's personal relationship with the founder undermines its independence in appearance, if not in fact, and should be addressed.
Legal Minimums
The Sarbanes-Oxley Act, at 15 U.S.C. § 78j-1(m), requires that every member of a listed company's audit committee be independent and that the committee be directly responsible for appointing and overseeing the outside auditor. Summit meets this requirement. Stock exchange listing rules also require a majority of independent directors and independent compensation and nominating committees, though companies controlled by a single holder may qualify for exemptions from some of these rules. Summit has not used those exemptions, which works in its favor.
The Case for Founder Control
A fair review must weigh the arguments for Summit's structure. Founders with protected control can pursue long-term plans without pressure to meet quarterly expectations, and some of the most valuable public companies of recent decades went public with dual-class shares. Investors who bought Summit's shares knew the structure in advance and, in principle, paid a price that reflected it. The concern is not founder control itself but its permanence: the advantages of a founder's vision fade over time, while the costs of entrenchment can grow, especially once the founder is no longer running the company. That is why the first recommendation limits control in time rather than removing it.
What Institutional Investors Have Said
Three of Summit's five largest outside shareholders, all index and pension funds, voted against the reelection of the compensation committee chair last year and have written to the board asking for a sunset provision. Proxy advisory firms recommended withholding votes from the nominating committee. Because the founder's votes guaranteed reelection, these protests had no formal effect, but they signal concerns that are likely reflected in the stock's valuation and that will matter when Summit next raises equity.
Reforms, Ranked
First, the board should propose a sunset converting the founder's high-vote shares to ordinary shares after seven more years or upon his departure. Second, it should appoint a lead independent director. Third, it should replace the compensation committee chair with an independent director without personal ties to the founder. Fourth, it should declassify the board so all directors stand for election each year. Fifth, it should allow holders of 15% of shares to call special meetings. The founder's support is required for the first and fourth; the others can be adopted by the board.
The Company's Benefit
Stronger governance would likely narrow the valuation gap with comparable companies, lowering Summit's cost of equity at a time when it plans to raise more capital for international expansion. For the founder, whose wealth is concentrated in Summit shares, a higher valuation is a direct benefit.
Conclusion
Summit's disclosure and audit committee are sound, but its dual-class shares without a sunset, combined leadership, staggered board and close ties on the compensation committee limit outside shareholders' protection. Research links such provisions to lower firm value. A ranked set of reforms, beginning with a sunset and a lead independent director, would strengthen investor protection while preserving the founder's influence during the company's growth.
References
Gompers, P., Ishii, J., & Metrick, A. (2003). Corporate governance and equity prices. Quarterly Journal of Economics, 118(1), 107-156. https://doi.org/10.1162/00335530360535162
Sarbanes-Oxley Act of 2002, 15 U.S.C. § 78j-1 (2002).
Shleifer, A., & Vishny, R. W. (1997). A survey of corporate governance. Journal of Finance, 52(2), 737-783. https://doi.org/10.1111/j.1540-6261.1997.tb04820.x
What the BUS 551 Module 2 instructions ask for
Aspen's catalog for BUS 551 pairs agency theory with corporate governance, and a governance module usually asks students to evaluate a company's governance and recommend improvements. Use the Module 2 directions in your classroom for scope; this example reviews one company. Explain what corporate governance is for, using research rather than a list of best practices. Describe the company's actual structures, such as share classes, board composition, committees and takeover defenses. Evaluate each against evidence about its effect on investors. Identify legal and listing requirements the company must meet. Recommend reforms in order of importance and say which are realistic given who controls the company. Address how the company would benefit, not only how outside investors would.
How this BUS 551 Module 2 example is built
The paper opens with Summit Fire Grills, its initial public offering and the founder's 61% of votes on 28% of the shares. Shleifer and Vishny's Journal of Finance survey defines governance as the ways suppliers of finance assure themselves of a return. Gompers, Ishii and Metrick's Quarterly Journal of Economics study of 24 governance provisions found that firms with fewer restrictions on shareholders had higher firm values and stock returns. A scorecard rates eight features as strong, adequate or weak, including dual-class shares without a sunset, a staggered board, a combined chair and chief executive, and a compensation committee chaired by the founder's college roommate. The Sarbanes-Oxley audit committee independence rule is explained with its section of the U.S. Code. Five reforms follow, led by a sunset on the extra votes and a lead independent director.
Where the marks sit in the BUS 551 Module 2 rubric
A governance review earns credit for describing structures exactly, use of evidence on their effects, attention to legal requirements and realistic recommendations. This example grounds its purpose in Shleifer and Vishny's Journal of Finance survey and its evaluation in Gompers, Ishii and Metrick's Quarterly Journal of Economics study, rather than in opinion. The scorecard rates each feature and gives a reason, so the grader can see how judgments were reached. The audit committee discussion cites the statute's section and explains what it requires. Recommendations are ranked and assessed for feasibility, recognizing that the founder controls the vote, which shows judgment about how governance changes actually happen. The paper also explains benefits to the company, such as a lower cost of capital.
Common BUS 551 Module 2 mistakes, and how to avoid them
A frequent weakness in Module 2 is a checklist of best practices applied without evidence or context. Explain why each feature matters to investors and support it with research. Another is ignoring who controls the company; recommendations a controlling founder will never adopt are less useful than those he might accept. Describe actual structures precisely, such as the number of votes per share and whether directors serve staggered terms. Separate legal requirements from voluntary practices. Rank recommendations rather than listing them equally. Consider the company's perspective, such as how better governance could lower its cost of capital. Avoid assuming that every founder-controlled firm is poorly run; the evidence concerns average effects, and the case's specific facts matter.
Write yours, or have the desk draft it
This paper is an original model document written by our desk, not a submitted student paper and not an official Aspen University document. Read it for the moves, then write your own to the instructions in your classroom. If you want one built to your exact prompt and rubric, the first custom sample is free and arrives in 24 to 48 hours.
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BUS 551 Module 2 questions, answered
What does BUS 551 Module 2 usually ask for?
Aspen's BUS 551 covers corporate governance in this module, so evaluating a company's governance structures and recommending improvements is typical. Follow your classroom prompt.
What is corporate governance?
Shleifer and Vishny described it as the ways suppliers of finance assure themselves of getting a return on their investment, through boards, rights, laws and incentives.
What are dual-class shares?
Share classes with different voting rights, often used by founders to keep control after a public offering while selling shares with fewer votes.
Where can I find a free BUS 551 Module 2 sample paper?
The complete review is shown above: a newly public company with founder control, a governance scorecard, evidence on shareholder rights and value, and ranked reforms.
Does governance affect firm value?
Gompers, Ishii and Metrick found that firms with stronger shareholder rights had higher valuations and stock returns during the period they studied.