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Session 1
Three Models of Corporate Governance
Does Corporate Governance Matter?
Lectures on Corporate Governance
School of American Law (SAL)
Faculty of Law and Administration
University of Gdansk
Gdansk, Poland August 2003
May 18, 2007 1
Definition
1
Corporate Governance - Definition
Three Models of
Corporate Governance
2
ANGLO-US CORPORATE GOVERNANCE SYSTEM
(THEORY)
(A System of Checks and Balances)
Responsible for the Powerful (in theory) because they elect
company’s daily operations board and vote at AGMs. In order to
and daily affairs. Provides exert influence, they should be:
and updates conditions and -committed
incentives for the company’s -knowledgeable
performance. -long-term.
MANAGERS SHAREHOLDERS
BOARD OF DIRECTORS
Role as: filter
The board is “the source and focus of proper monitor
accountability of management to overseer
shareholders.” 5
MANAGERS SHAREHOLDERS
Inside Outside
Directors Directors
BOARD OF DIRECTORS
A small group of some 12 members (U.S. average) who are
potentially uninformed and unmotivated. A potential rubber
stamp. But – they are mandated with outside review and
6
oversight and are accountable to shareholders.
3
Key Features of the Anglo-US Model
FEATURE ANGLO-US MODEL
Key Players
Share Ownership Pattern
Composition of Board
Regulatory Framework
Disclosure Requirements
Shareholder Rights
Interaction
7
GOVERNMENT KEIRETSU
MANAGEMENT BANK
Voting Agent
Lender Depository 8
4
A Keiretsu is a group of closely-related Japanese companies: They own each others’
shares and bonds, and give each other preferential treatment as business
partners. Each keiretsu is formed around a large bank. This diagram presents
the well-known Fuyo keiretsu with Fuji bank in the center.
YasudaTrust
Trust&&
Yasuda Yasuda Tokyo
BankingCo.
Co. Yasuda TokyoTatemono
TatemonoCo.
Co.
Banking
(insurance) (real
(fundmanagement)
management) (insurance) (realestate)
estate)
(fund
SAPPORO
PPORO
SA
Fuji Bank Oki
OkiElectric
ElectricIndustry
IndustryCo.
Co.
SapporoBreweries
Breweries
Sapporo
OKI
OKI
Canon
Canon Canon
Canon Nissan
Nissan
Motor
MotorCo.
Co.
NKK
NKKCorp.
Corp.
Marubeni (steel)
MarubeniCorp.
Corp. (steel) Hitachi
(retail) NKK
NKK HitachiLtd.
Ltd.
(retail)
Marubeni
Marubeni HITACHI
HITACHI
Key Players
Share Ownership Pattern
Composition of Board
Regulatory Framework
Disclosure Requirements
Shareholder Rights
Interaction
10
5
GERMAN CORPORATE GOVERNANCE SYTEM
FOREIGNERS
LENDER
BANKS VOTING AGENT
GERMAN DEPOSITORY
CORPORATIONS
SHAREHOLDERS EMPLOYEES
SUPERVISORY BOARD
(Only Outsiders)
MANAGEMENT
BOARD
(Only Insiders)
EMPLOYEES
11
Key Players
Share Ownership Pattern
Composition of Board(s)
Regulatory Framework
Disclosure Requirements
Shareholder Rights
Interaction
12
6
Comparison of the Three Models
FEATURE Anglo-US Japanese German
Key Players
Share Ownership
Pattern
Composition of Board(s)
Regulatory Framework
Disclosure
Requirements
Shareholder Rights
Interaction 13
Share
Registry Annual General Meeting of Shareholders Auditor
Supervisory Board
7
Key Features of the Polish Model
FEATURE POLISH MODEL
Key Players
Share Ownership Pattern
Composition of Board
Regulatory Framework
Disclosure Requirements
Shareholder Rights
Interaction
15
16
8
Does Corporate Governance Matter?
QUESTIONS
How does corporate governance impact the internal functions of
corporations?
17