Chapter8 - CG Chapter 8 Models of Corporate Governance How...

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Models of Corporate Governance How context and culture affect corporate governance Two primary influences for some fundamental differences in corporate governance around the world: - Culture - Context Pattern of Ownership US: individual and institutional investors account for 92% of shareholdings UK: 77% France: 35% Germany, Japan, Netherlands: many listed companies are held within corporate groups and their boards find themselves responsible to a holding company in the long run the pattern of ownership fundamentally affects the ability of a board to exercise power over a company company with a wide spread of shareholders: board has more freedom to act on its own initiative Markets for Corporate control countries with high proportion of external investors: strong market for countries with relatively low proportion of external investors: weak market for Financing Corporate Entities Countries with large equity markets have widespread shareholding power over company lies with the voting shareholder (US,UK) Countries with relatively small stockmarkets power over company may be in hand of the lenders for example ( other ways of financing possible) Culture Influence on Corporate Governance 5 basic models to review context and culture of corporate governance: American Rule Based Model UK/Commonwealth Principle Based Model Continental European Two-tier Model Japanese Business Network Model model reflects CG practices required in the US and the influence of the US on other countries - company law is based on common law – which s rooted in legislation that evolves with a continually growing body of case law at both the federal and the state level - unitary board – with a predominance of outside - company law is based on common law, rooted in legislation extended by case-law - principle based (“is this right?”) – “comply or explain” approach – codes of CG or good practice determine board responsibilities - self-regulation is underlying theme - CG codes for listed - rule based - two-tier boards with social component - market for corporate control is weak – higher influence of banks etc. Keiretsu – networks connected cross-holdings and with interlocking directorship – companies tend to inter trade extensively -frequently network include financial institution -unity throughout the organization, non-adversarial relationships, lifetime employment, enterprise unions, personnel policies encouraging commitment. . -large board of directors –
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Chapter8 - CG Chapter 8 Models of Corporate Governance How...

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