Professional Documents
Culture Documents
Appoints &
Supervises
Officers
(Managers)
Lien on Regulatory/Legal
Creditors System
Company Stake in
Own
German Model
Also known as two-tier board model
Management Board
Employees and
(Including Labour Shareholders
labour unions Relations Officer
Manage
Own
Company
The Japanese Model
This is the business nerwork model
It reflects the cultural relationships
seen in the Japanese Keiretsu
network, in which boards tend to be
large, predominantly executive and
often ritualistic.
Features of Japanese corporate
governance mechanism
The president who consults both the
supervisory board and the executive
management is included
Importance of the lending bank is
highlighted
The Japanese Model Provides managers,
monitors and acts in
Appoint Supervisory Board emergencies
(Including President)
Ratifies the president’s decisions Provides
managers
President
Shareholders Main Bank
Consults
Executive Management
(Primarily Board of
Directors)
Manages
Provides loans
Own Company
Owns
Common features in German and
Japanese models
Banks and financial institutions have substantial
stakes in the equity capital of companies. Besides,
cross holding among groups of firms is common in
Japan.
Institutional investors in both the countries view
themselves as long term investors. They play a fairly
active role in corporate managements
The disclosure norms are not very stringent, checks
on insider trading are not very comprehensive and
effective, and the emphasis on liquidity is not high.
All these factors lead to the efficiency of the capital
market
There is hardly any system of corporate control in
these countries; mergers and take-overs are rare
occurrences.
Indian Model Governance
Similar to UK model
The Indian corporates are governed by the
Company’s Act of 1956
The pattern of private companies is mostly
that of closely held or dominated by a
founder, his family and associates.
India has adopted the key tenets of the
Anglo- American external and internal
control mechanism after economic
liberalisation.
Indian corporate governance model
External environment
Government regulations, Corporate culture, structure,
Depositors,
Policies, guidelines etc. Characteristics, indluences
Borrowers,
Internal Environment Customers
Company Vision, Mission,Policies,Norms and
Other
Company Act external
Auditors
SEBI Internal Board of Stakeholders
stakeholders Corporate
Stock Exchange directors
Governance
Proper governance System
Shareholder Value
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The Good Governance Model developed by
Governance International provides a new
framework for policy-makers, public managers
and community leaders who want to improve
the governance capacity of their
organisation.
"brings together the three main elements
of governance:
(1) multiple stakeholders (2) political and
social values
(3) policy outcomes
The Good Governance Model offers a flexible
framework which can be used in a number of
different ways:
As a self-assessment test to develop a first
understanding of how well your organisation
manages governance issues.
As a tool for benchmarking stakeholder
perceptions and developing a 'Governance
Balanced Scorecard'.
As a tool for the Governance Health Check
to improve your partnership working.
Corporate Governance Mechanism
Internal Mechanisms
Ownership Concentration
Board of Directors
Executive compensation
Multi-divisional structure
External Mechanism
Market for corporate control
Internal governance mechanisms
Ownership concentration:- High relative
amounts of shares owned by individual
shareholders and institutional investors
Board of Directors:- Individuals
responsible for representing the firm’s
owners by monitoring top-level managers’
strategic decisions
Executive Compensation:- The use of
salary, bonuses and long term incentives to
align manager’s interests with
shareholders’ interests.
Internal mechanism
Multi-divisional structure:- The creation
of individual business divisions to closely
monitor top-level managers’ strategic
decisions
External Governance mechanism
Market for corporate control:- The
purchase of a firm that is
underperforming relative to industry
rivals in order to improve its strategic
competitiveness.
Governance Mechanisms
Ownership Concentration
Large block shareholders have a strong incentive to
monitor management closely.
In Canada such shareholders account for 65% to
70% of publicly traded stocks (59% in the U.S.)
replace
-May lackthe CEO. with day to day operations.
contact
Insiders A firm’s CEO & other top-level managers
Individuals not involved with a firm’s
Related day-to-day operations, but who have
Outsiders a relationship with the company
! National/regional
Professional
Functional
Industry
Company
National Cultures
(Hofstede)
Country clusters:
Anglo
Germanic
Nordic
Latin European
Latin America
Arab
...