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HULT International Business School
ACC440 - Corporate Governance (Prof
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Willcox)
Outline of the Required Book (Tricker, ​Corporate Governance​)  

 

# 6  
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2 primary influences can be suggested for the basic differences in CG around the World: Culture and
Context
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- culture ​→ influences the practices of CG
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- individual and institutional investors: ​92% in US, 77% in the UK, 35% in France
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- Germany, Japan, Netherlands ​→ listed companies are held within corporate groups and
their boards find themselves responsible to a holding company
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In the long-term the pattern of ownership fundamentally affects the ability of the board to
exercise power over a company
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- Domination of a majority share ​→ less freedom, influence of decisions
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Widespread shareholding → board will have
more freedom to act in its own initiative
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Dominant owner => the other
SHH need to respond to its expectations, while
protecting the rights of the minority
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Markets for Corporate Control
High proportion of external investors (US & UK)
→ board can be faced with a​ hostile takeover b
​ id
and ​consequential loss of control​
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M&A activity is
likely to be widespread
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Financing corporate entities
Countries with ​Equity markets dominance​, high
liquidity, significant turnovers: SHH are often
widespread
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The US rules-based model
➔ The american model reflect the CG practices in the US and other countries under its influence
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➔ Investor protection​, auditing requirements ​and ​financial disclosure ​or public companies →
federal responsibilities regulated by the SEC
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➔ SOX 2002
➔ The american financial markets are the greatest and most liquid in the world, but their leader
particularly in IPO has been eroded
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➔ UK led the influence of CL in

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Comply or Explain => self-regulation
IFRS
SHareholders with ​10% of the voting rights ​in a public company can force an extraordinary
meeting and vote on strategic decisions or the removal of director
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- companies to explain when publishing the AGM results how they intend to engage with
the SHH when a significant percentage of them have voted against a resolution
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ie France => ​Napoleonic Law (required corporate behavior determined by

legally binding rules, evolves by further legislation)
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⅔ boards:​ required in Germany and Holland, found in France and Italy
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Societas Europaea (EU) enacts the rules of the EU providing for either Anglo-American or
continental Europe approaches
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- Member companies tend to inter-trade extensively
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- This classical model reflects the social cohesion within japanese society emphasis unity
throughout the organization
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- 1990s: ​method of K questioned with the economic stagnation
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→ the board are ​decision ratifying bodies rather than decision initiating and decision
taking forums, as in the West
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- represent the companies in its dealings with outside parties
- Code also calls for the appointment of individuals as full time ​statutory auditors​
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➔ Investors have traditionally played a relatively small part in corporate affairs
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Sound corporate governance is essential to the recreation of a more internationally
competitive corporate sector in japan and the longer term growth of the Japanese
economy and its capital markets
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- by failing to provide the return that are vitally necessary to protect Japan's
social

➔ Hybrid type: ​Japanese corporate governance is sad to evolve in a hybrid-type in which market
based structure are merged together (the ​performance of companies incorporating this
hybrid-type structure is significantly higher)
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The Asin-family based model
➔ In the governance of Chinese overseas companies the board tends to play a supportive role to
the real exercise of power, which is exercised through relationships between the key players,
particularly between the dominant head of the family and other family members in kye top
management
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- paternalistic in management style, in a sodial fabric dependent on relationships and
social harmony, avoiding confrontation and the risk of the loss of “face”
- Strategically intuitive, with the business seen as more of a succession of contracts or
ventures, relying on intuition, superstitio, and tough-minded bargaining rather than
strategic plans, brand-creation, ad quantitative analysis

Anglo-American Model on CG

German Model on CG

Japanese Model on CG

https://companylawandgovernance
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CG: convergence or differentiation?
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Forces of convergence

➔ CGC od Good Practice around the world have a striking similarity which is not surprising given
the way in which they have been influenced by each other
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OECD) clearly influenced this
convergence
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Enron case)
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CalPers) explicitly demand various corporate governance
practices if they are to invest in a specific country or a company; The international portfolio of
the institutional investors are creating a convergence force
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ICE acq
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2
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Institutions necessary for successful CG
➔ A reliable legal system:
- independent judiciary courts (free of bias & corruption)
- enforceable judgments
- free of state and other political pressures
➔ Stock market:
- liquidity
- international standing
- institutional investors
➔ Financial institutions (brookers, sponsors of new issues, financial advisers)
➔ regulatory authorities, covering corporations, stock markets, future markets
➔ company registry (comprehensive disclosures)
➔ Accounting and legal professions
➔ Auditing firms (professional/reliable/independent)
➔ Educational institutions
➔ Consulting organizations
➔ Financial & CG training
➔ CG research

CASE STUDIES
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Siemens AG
Tokyo Electric Power

 
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