Professional Documents
Culture Documents
Governance - Shareholders
- Government agencies
Essence of Model: - Stock exchanges- play important role in
o L continuous Learning by establishing listing, disclosure &
o O - Oversight other req.
o G - Guidance - Self regulatory organizations
o I - Information - Consulting firms
o C Culture Developed within the context of free
Aim: market economy- Assumes the
o To incorporate not only structural separation of ownership and control in
aspects of governance but also most publicly held corporations.
behavioural aspects. Agency Costs - cost of the separation of
o To check whether there is sound, ownership and control.
integrated approach to governance. *Investor avoid legal liability by giving
Factors that determined Corp. up management control and paying
Governance: management for acting.
o Legal and Regulatory framework Composition of Board of Directors:
o Public acceptance of realities o Insiders person who is either
o Each corporations articles of employed by the corporation or
association somebody who has significant
Models in Developed Capital Markets personal/business relationship with
o Anglo-US Model management. Ex. Executive, Manager
o Japanese Model o Outsiders person or institution w/c
o German Model
has no direct relationship with the
ANGLO-US MODEL corporation or management.
o Same person as Chairman & CEO-
Characterized by share ownership of Led to abuses, including:
1. Concentration of power in 1 hands
individual and increasingly institutional,
only.
investors not affiliated with the
2. Concentration of power in small
corporation known as outsiders.
group of persons.
Equity Financing- common method of 3. Attempts to retain power over a
raising capital for corp. in UK & US. long period of time
US 4. BOA disregard for interest of
- largest capital market in the world and outside shareholders.
home of most developed system of Disclosure Requirements: Included in
proxy voting & shareholder activism by the Annual report in the Annual
institutional investors. General Meeting (Proxy Statement) are:
- London Stock Exchange is the third o Corporate financial data (quarterly)
largest stock exchange next to New o Breakdown of Capita Structure
York & Tokyo. o Substantial Background of all nominee
- Has the most comprehensive disclosure to BOD
requirement & a complex, well- o Aggregate compensation of executive
regulated system for shareholder officers
communication. o All shareholders holding 5% of CS
Key Players: o Information on proposed mergers
To balance powers of: o Proposed amendments to articles
CORPORATE GOVERNANCE o Names of auditors
TRIANGLE Corporate Actions Requiring
- Management Approval of Shareholders
Routine Actions: % of foreign ownership in Jap. Stock is
o Election of directors Small.
o Appointment of Auditors
Non Routine Actions: Key Players:
o Establishment or amendment of stock
option plans To link relationships of:
o Mergers or takeover Main Bank is generally a major
o Restructuring shareholder in corp. unlike is U.S
o Amendment of Articles Keiretsu/Affiliated company
Shareholder proposal shareholder Management
are allowed to submit proposal to be Government
included on agenda AGM. OPEN ENDED HEXAGON
(Annual General Meeting). Shareholder Jap.System of Corporate
owning 10% may convene in EGM Governance is many-sided.
(Extraordinary General Meeting). It center around MAIN BANK &
Note: Voting for Dividend proposed is KEIRETSU OR FINANCIAL/INDUSTRIAL
not allowed for BOD in US but allowed NETWORK they are different yet
in UK. overlapping and complementary.
link rather than balance of power .
Monitors of Performance and In contrast to Anglo-US model non-
Corp. Governance affiliated shareholders have little or no
Specialized investment funds voice in Japanese govt.
Venture capital funds
Rating agencies SHARE OWNERSHIP PATTERN:
Auditors
Funds that target investment in Financial institutions &
bankrupt and problem corporations Corporations firmly hold ownership
of the Equity market.
Note: All registered shareholder receive In Japanese & German Model
mail to agenda of meeting including BANKS are key shareholders and
background of all proposal. Shareholder may develop strong relationship to
vote by proxy- they exercise right to vote w/o Corporation. In contrast to Anglo-US
attending AGM. which relationship is prohibited by
Antitrust Legislation.
JAPANESE MODELS
Composition of Board of Directors:
Characterized by a high level of stock
of ownership by affiliated banks and o Almost completely of Insiders
companies o Average of 50 members
Legal, public policy and industrial
policy framework designed to promote Note: If profits fall, main bank and
KEIRETSU- Refers to industrial group keiretsu may remove directors and appoint.
linked by trading relationship, : Appointment of retiring government
crossholding of debt and equity & bureaucrats to board is common.
informal business contracts. : Government ministries have
BOA composed almost solely of traditionally been extremely influential in
insiders and comparatively low developing industrial policy.
sometimes non-existent of outside REGULATORY FRAMEWORK
shareholders. Government Ministries been extremely
Equity Financing is also important in influential in developing industrial policy
Jap.Corp
Comprehensive Industrial Policy AGM is always pro forma and corp.
weakens due to: discourage shareholder to dissent
o Growing role of Jap. Corp Shareholder Activism is restricted
o Increasing internationalization of Jap.
Corp made them less dependent on
domestic market. Corporate Actions Requiring Approval of
o Growth of Japanese capital market Shareholders
Greenwashing Sins: