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Corporate governance

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  • 1. Transparency 10-1Chapter 10Corporate GovernanceMichael A. HittR. Duane IrelandRobert E. Hoskisson©1999 South-Western College Publishing
  • 2. Transparency 10-2CompetitivenessChapter 3InternalEnvironmentChapter 2ExternalEnvironmentThe StrategicThe StrategicManagementManagementProcessProcessThe StrategicThe StrategicManagementManagementProcessProcessStrategic IntentStrategic MissionStrategicCompetitivenessAbove AverageReturnsFeedbackStrategy FormulationChapter 4Business-LevelStrategyChapter 5CompetitiveDynamicsChapter 6Corporate-LevelStrategyChapter 8InternationalStrategyChapter 9CooperativeStrategiesChapter 7Acquisitions &RestructuringStrategicInputsStrategicActionsStrategicOutcomes
  • 3. Transparency 10-3CompetitivenessChapter 3InternalEnvironmentChapter 2ExternalEnvironmentThe StrategicThe StrategicManagementManagementProcessProcessThe StrategicThe StrategicManagementManagementProcessProcessStrategic IntentStrategic MissionStrategicCompetitivenessAbove AverageReturnsFeedbackStrategy FormulationChapter 4Business-LevelStrategyChapter 5CompetitiveDynamicsChapter 6Corporate-LevelStrategyChapter 8InternationalStrategyChapter 9CooperativeStrategiesChapter 7Acquisitions &RestructuringChapter 10CorporateGovernanceChapter 11Structure& ControlChapter 12StrategicLeadershipChapter 13Entrepreneurship& InnovationStrategicInputsStrategicActionsStrategicOutcomes
  • 4. Transparency 10-4Corporate Governance is a relationship amongCorporate Governance is a relationship amongstakeholders that is used to determine and control thestakeholders that is used to determine and control thestrategic direction and performance of organizationsstrategic direction and performance of organizationsCorporate GovernanceCorporate Governance
  • 5. Transparency 10-5Corporate Governance is a relationship amongCorporate Governance is a relationship amongstakeholders that is used to determine and control thestakeholders that is used to determine and control thestrategic direction and performance of organizationsstrategic direction and performance of organizationsConcerned with identifying ways to ensure thatConcerned with identifying ways to ensure thatstrategic decisions are made effectivelystrategic decisions are made effectivelyCorporate GovernanceCorporate Governance
  • 6. Transparency 10-6Used in corporations to establish order between theUsed in corporations to establish order between thefirm’s owners and its top-level managersfirm’s owners and its top-level managersCorporate Governance is a relationship amongCorporate Governance is a relationship amongstakeholders that is used to determine and control thestakeholders that is used to determine and control thestrategic direction and performance of organizationsstrategic direction and performance of organizationsConcerned with identifying ways to ensure thatConcerned with identifying ways to ensure thatstrategic decisions are made effectivelystrategic decisions are made effectivelyCorporate GovernanceCorporate Governance
  • 7. Transparency 10-7Separation of Ownership and Managerial ControlSeparation of Ownership and Managerial Control
  • 8. Transparency 10-8Basis of the modern corporationBasis of the modern corporationSeparation of Ownership and Managerial ControlSeparation of Ownership and Managerial Control
  • 9. Transparency 10-9Basis of the modern corporationBasis of the modern corporationShareholders purchase stock, becoming...Shareholders purchase stock, becoming...Residual ClaimantsResidual ClaimantsSeparation of Ownership and Managerial ControlSeparation of Ownership and Managerial Control
  • 10. Transparency 10-10Basis of the modern corporationBasis of the modern corporation- Shareholders reduce risk efficiently by holding- Shareholders reduce risk efficiently by holdingdiversified portfoliosdiversified portfoliosShareholders purchase stock, becoming...Shareholders purchase stock, becoming...Residual ClaimantsResidual ClaimantsSeparation of Ownership and Managerial ControlSeparation of Ownership and Managerial Control
  • 11. Transparency 10-11Basis of the modern corporationBasis of the modern corporation- Shareholders reduce risk efficiently by holding- Shareholders reduce risk efficiently by holdingdiversified portfoliosdiversified portfoliosShareholders purchase stock, becoming...Shareholders purchase stock, becoming...Residual ClaimantsResidual ClaimantsProfessional managers contract to provide decision-Professional managers contract to provide decision-makingmakingSeparation of Ownership and Managerial ControlSeparation of Ownership and Managerial Control
  • 12. Transparency 10-12Basis of the modern corporationBasis of the modern corporation- Shareholders reduce risk efficiently by holding- Shareholders reduce risk efficiently by holdingdiversified portfoliosdiversified portfoliosShareholders purchase stock, becoming...Shareholders purchase stock, becoming...Residual ClaimantsResidual ClaimantsProfessional managers contract to provide decision-Professional managers contract to provide decision-makingmakingModern public corporation form leads to efficientModern public corporation form leads to efficientspecialization of tasksspecialization of tasksSeparation of Ownership and Managerial ControlSeparation of Ownership and Managerial Control
  • 13. Transparency 10-13Basis of the modern corporationBasis of the modern corporationProfessional managers contract to provide decision-Professional managers contract to provide decision-makingmaking- Risk bearing by shareholders- Risk bearing by shareholders- Strategy development and decision-making by- Strategy development and decision-making bymanagersmanagers- Shareholders reduce risk efficiently by holding- Shareholders reduce risk efficiently by holdingdiversified portfoliosdiversified portfoliosShareholders purchase stock, becoming...Shareholders purchase stock, becoming...Residual ClaimantsResidual ClaimantsModern public corporation form leads to efficientModern public corporation form leads to efficientspecialization of tasksspecialization of tasksSeparation of Ownership and Managerial ControlSeparation of Ownership and Managerial Control
  • 14. Transparency 10-14Agency TheoryAgency TheoryAn agency relationship exists when:An agency relationship exists when:
  • 15. Transparency 10-15An agency relationship exists when:An agency relationship exists when:ShareholdersShareholders(Principals)(Principals)Firm OwnersFirm OwnersAgency TheoryAgency Theory
  • 16. Transparency 10-16An agency relationship exists when:An agency relationship exists when:ShareholdersShareholders(Principals)(Principals)Firm OwnersFirm OwnersManagersManagers(Agents)(Agents)DecisionDecisionMakersMakersHireHireAgency TheoryAgency Theory
  • 17. Transparency 10-17An agency relationship exists when:An agency relationship exists when:ShareholdersShareholders(Principals)(Principals)Firm OwnersFirm OwnersAgency RelationshipAgency RelationshipRisk Bearing SpecialistRisk Bearing Specialist(Principal)(Principal)ManagersManagers(Agents)(Agents)DecisionDecisionMakersMakerswhich createswhich createsManagerial Decision-Managerial Decision-Making SpecialistMaking Specialist(Agent)(Agent)HireHireAgency TheoryAgency Theory
  • 18. Transparency 10-18TheThe AgencyAgency problem occurs when:problem occurs when:- The desires or goals of the principal and agent conflict- The desires or goals of the principal and agent conflictand it is difficult or expensive for the principal toand it is difficult or expensive for the principal toverify that the agent has behaved appropriatelyverify that the agent has behaved appropriatelyAgency TheoryAgency Theory
  • 19. Transparency 10-19TheThe AgencyAgency problem occurs when:problem occurs when:- The desires or goals of the principal and agent conflict- The desires or goals of the principal and agent conflictand it is difficult or expensive for the principal toand it is difficult or expensive for the principal toverify that the agent has behaved appropriatelyverify that the agent has behaved appropriatelyExample:Example: Overdiversification because increased productOverdiversification because increased productdiversification leads to lower employment riskdiversification leads to lower employment riskfor managers and greater compensationfor managers and greater compensationAgency TheoryAgency Theory
  • 20. Transparency 10-20TheThe AgencyAgency problem occurs when:problem occurs when:- The desires or goals of the principal and agent conflict- The desires or goals of the principal and agent conflictand it is difficult or expensive for the principal toand it is difficult or expensive for the principal toverify that the agent has behaved appropriatelyverify that the agent has behaved appropriatelySolution:Solution: Principals engage in incentive-based performancePrincipals engage in incentive-based performanceExample:Example: Overdiversification because increased productOverdiversification because increased productdiversification leads to lower employment riskdiversification leads to lower employment riskfor managers and greater compensationfor managers and greater compensationcontracts, monitoring mechanisms such as thecontracts, monitoring mechanisms such as theboard of directors and enforcement mechanismsboard of directors and enforcement mechanismssuch as the managerial labor market to mitigatesuch as the managerial labor market to mitigatethe agency problemthe agency problemAgency TheoryAgency Theory
  • 21. Transparency 10-21RiskRiskLevel of DiversificationLevel of DiversificationManager and Shareholder Risk and Diversification
  • 22. Transparency 10-22RiskRiskLevel of DiversificationLevel of DiversificationManager and Shareholder Risk and DiversificationDominantDominantBusinessBusinessUnrelatedUnrelatedBusinessesBusinessesRelatedRelatedConstrainedConstrainedRelatedRelatedLinkedLinked
  • 23. Transparency 10-23RiskRiskLevel of DiversificationLevel of DiversificationManager and Shareholder Risk and DiversificationDominantDominantBusinessBusinessUnrelatedUnrelatedBusinessesBusinessesRelatedRelatedConstrainedConstrainedRelatedRelatedLinkedLinkedShareholderShareholder(Business)(Business)Risk ProfileRisk ProfileSSAA
  • 24. Transparency 10-24RiskRiskLevel of DiversificationLevel of DiversificationManager and Shareholder Risk and DiversificationDominantDominantBusinessBusinessUnrelatedUnrelatedBusinessesBusinessesRelatedRelatedConstrainedConstrainedRelatedRelatedLinkedLinkedShareholderShareholder(Business)(Business)Risk ProfileRisk ProfileManagerialManagerial(Employment(Employment) Risk Profile) Risk ProfileSSMMAABB
  • 25. Transparency 10-25Principals may engage inPrincipals may engage in monitoringmonitoring behavior to assessbehavior to assessthe activities and decisions of managersthe activities and decisions of managers- However, dispersed shareholding makes it difficult and- However, dispersed shareholding makes it difficult andand inefficient to monitor management’s behaviorand inefficient to monitor management’s behaviorAgency TheoryAgency Theory
  • 26. Transparency 10-26Principals may engage inPrincipals may engage in monitoringmonitoring behavior to assessbehavior to assessthe activities and decisions of managersthe activities and decisions of managers- However, dispersed shareholding makes it difficult and- However, dispersed shareholding makes it difficult andand inefficient to monitor management’s behaviorand inefficient to monitor management’s behaviorFor example:For example: Boards of Directors have a fiduciaryBoards of Directors have a fiduciaryduty to shareholders to monitorduty to shareholders to monitormanagementmanagement- However, Boards of Directors are often accused of- However, Boards of Directors are often accused ofbeing lax in performing this functionbeing lax in performing this functionAgency TheoryAgency Theory
  • 27. Transparency 10-27Governance MechanismsGovernance MechanismsOwnership ConcentrationOwnership ConcentrationBoards of DirectorsBoards of DirectorsExecutive CompensationExecutive CompensationMarket for Corporate ControlMarket for Corporate ControlMultidivisional Organizational StructureMultidivisional Organizational Structure
  • 28. Transparency 10-28Ownership ConcentrationOwnership ConcentrationGovernance MechanismsGovernance Mechanisms
  • 29. Transparency 10-29Ownership ConcentrationOwnership Concentration- Large block shareholders have a strong incentive to- Large block shareholders have a strong incentive tomonitor management closelymonitor management closelyGovernance MechanismsGovernance Mechanisms
  • 30. Transparency 10-30Ownership ConcentrationOwnership Concentration- Large block shareholders have a strong incentive to- Large block shareholders have a strong incentive tomonitor management closelymonitor management closely- Their large stakes make it worth their while to spend- Their large stakes make it worth their while to spendtime, effort and expense to monitor closelytime, effort and expense to monitor closelyGovernance MechanismsGovernance Mechanisms
  • 31. Transparency 10-31Ownership ConcentrationOwnership Concentrationmonitor management closelymonitor management closelytime, effort and expense to monitor closelytime, effort and expense to monitor closely- Large block shareholders have a strong incentive to- Large block shareholders have a strong incentive to- Their large stakes make it worth their while to spend- Their large stakes make it worth their while to spend- They may also obtain Board seats which enhances- They may also obtain Board seats which enhancestheir ability to monitor effectively (although financialtheir ability to monitor effectively (although financialinstitutions are legally forbidden from directly holdinginstitutions are legally forbidden from directly holdingboard seats)board seats)Governance MechanismsGovernance Mechanisms
  • 32. Transparency 10-32Boards of DirectorsBoards of DirectorsGovernance MechanismsGovernance Mechanisms
  • 33. Transparency 10-33Boards of DirectorsBoards of Directors- Insiders- Insiders- Related Outsiders- Related Outsiders- Outsiders- OutsidersGovernance MechanismsGovernance Mechanisms
  • 34. Transparency 10-34Boards of DirectorsBoards of Directors- Review and ratify important decisions- Review and ratify important decisions- Insiders- Insiders- Related Outsiders- Related Outsiders- Outsiders- OutsidersGovernance MechanismsGovernance Mechanisms
  • 35. Transparency 10-35Boards of DirectorsBoards of Directors- Review and ratify important decisions- Review and ratify important decisions- Set compensation of CEO and decide when to- Set compensation of CEO and decide when toreplace the CEOreplace the CEO- Insiders- Insiders- Related Outsiders- Related Outsiders- Outsiders- OutsidersGovernance MechanismsGovernance Mechanisms
  • 36. Transparency 10-36Boards of DirectorsBoards of Directors- Review and ratify important decisions- Review and ratify important decisions- Set compensation of CEO and decide when to- Set compensation of CEO and decide when toreplace the CEOreplace the CEO- Lack contact with day to day operations- Lack contact with day to day operations- Insiders- Insiders- Related Outsiders- Related Outsiders- Outsiders- OutsidersGovernance MechanismsGovernance Mechanisms
  • 37. Transparency 10-37Recommendations for more effectiveRecommendations for more effectiveBoard GovernanceBoard GovernanceGovernance MechanismsGovernance Mechanisms
  • 38. Transparency 10-38Recommendations for more effectiveRecommendations for more effectiveBoard GovernanceBoard Governance- Increase diversity of board members backgrounds- Increase diversity of board members backgrounds- Strengthen internal management and accounting- Strengthen internal management and accountingcontrol systemscontrol systems- Establish formal processes for evaluation of the- Establish formal processes for evaluation of theboard’s performanceboard’s performanceGovernance MechanismsGovernance Mechanisms
  • 39. Transparency 10-39Executive CompensationExecutive CompensationGovernance MechanismsGovernance Mechanisms
  • 40. Transparency 10-40Salary, Bonuses, Long term incentive compensationSalary, Bonuses, Long term incentive compensationExecutive CompensationExecutive CompensationGovernance MechanismsGovernance Mechanisms
  • 41. Transparency 10-41Salary, Bonuses, Long term incentive compensationSalary, Bonuses, Long term incentive compensation- Executive decisions are complex and non-routine- Executive decisions are complex and non-routine- Many factors intervene making it difficult to establish- Many factors intervene making it difficult to establishfor outcomesfor outcomeshow managerial decisions are directly responsiblehow managerial decisions are directly responsibleExecutive CompensationExecutive Compensation- In addition, stock ownership (long-term incentive- In addition, stock ownership (long-term incentivemarket changes which are partially beyond their controlmarket changes which are partially beyond their controlcompensation) makes managers more susceptible tocompensation) makes managers more susceptible toGovernance MechanismsGovernance Mechanisms
  • 42. Transparency 10-42Salary, Bonuses, Long term incentive compensationSalary, Bonuses, Long term incentive compensation- Executive decisions are complex and non-routine- Executive decisions are complex and non-routine- Many factors intervene making it difficult to establish- Many factors intervene making it difficult to establishfor outcomesfor outcomeshow managerial decisions are directly responsiblehow managerial decisions are directly responsibleExecutive CompensationExecutive Compensation- In addition, stock ownership (long-term incentive- In addition, stock ownership (long-term incentivemarket changes which are partially beyond their controlmarket changes which are partially beyond their controlcompensation) makes managers more susceptible tocompensation) makes managers more susceptible toIncentive systems do not guarantee that managersIncentive systems do not guarantee that managersmake the “right” decisions, but they do increase themake the “right” decisions, but they do increase thelikelihood that managers will do the things for whichlikelihood that managers will do the things for whichthey are rewardedthey are rewardedGovernance MechanismsGovernance Mechanisms
  • 43. Transparency 10-43Multidivisional Organizational StructureMultidivisional Organizational StructureGovernance MechanismsGovernance Mechanisms
  • 44. Transparency 10-44Designed to control managerial opportunismDesigned to control managerial opportunismMultidivisional Organizational StructureMultidivisional Organizational StructureGovernance MechanismsGovernance Mechanisms
  • 45. Transparency 10-45Designed to control managerial opportunismDesigned to control managerial opportunism- Corporate office and Board monitor business-unit- Corporate office and Board monitor business-unit- Increased managerial interest in wealth maximization- Increased managerial interest in wealth maximizationmanagers’ strategic decisionsmanagers’ strategic decisionsMultidivisional Organizational StructureMultidivisional Organizational StructureGovernance MechanismsGovernance Mechanisms
  • 46. Transparency 10-46Designed to control managerial opportunismDesigned to control managerial opportunism- Corporate office and Board monitor managers’- Corporate office and Board monitor managers’- Increased managerial interest in wealth maximization- Increased managerial interest in wealth maximizationstrategic decisionsstrategic decisionsMultidivisional Organizational StructureMultidivisional Organizational StructureGovernance MechanismsGovernance MechanismsM-form structure does not necessarily limit corporate-M-form structure does not necessarily limit corporate-level managers’ self-serving actionslevel managers’ self-serving actions
  • 47. Transparency 10-47Designed to control managerial opportunismDesigned to control managerial opportunism- Corporate office and Board monitor managers’- Corporate office and Board monitor managers’- Increased managerial interest in wealth maximization- Increased managerial interest in wealth maximizationstrategic decisionsstrategic decisionsMultidivisional Organizational StructureMultidivisional Organizational StructureGovernance MechanismsGovernance MechanismsM-form structure does not necessarily limit corporate-M-form structure does not necessarily limit corporate-- May lead to greater rather than less diversification- May lead to greater rather than less diversificationlevel managers’ self-serving actionslevel managers’ self-serving actions
  • 48. Transparency 10-48Designed to control managerial opportunismDesigned to control managerial opportunism- Corporate office and Board monitor managers’- Corporate office and Board monitor managers’- Increased managerial interest in wealth maximization- Increased managerial interest in wealth maximizationstrategic decisionsstrategic decisionsMultidivisional Organizational StructureMultidivisional Organizational StructureGovernance MechanismsGovernance MechanismsM-form structure does not necessarily limit corporate-M-form structure does not necessarily limit corporate-- May lead to greater rather than less diversification- May lead to greater rather than less diversificationBroadly diversified product lines makes it difficult forBroadly diversified product lines makes it difficult fortop-level managers to evaluate the strategic decisionstop-level managers to evaluate the strategic decisionsof divisional managersof divisional managerslevel managers’ self-serving actionslevel managers’ self-serving actions
  • 49. Transparency 10-49Market for Corporate ControlMarket for Corporate ControlGovernance MechanismsGovernance Mechanisms
  • 50. Transparency 10-50Market for Corporate ControlMarket for Corporate ControlOperates when firms face the risk of takeover whenOperates when firms face the risk of takeover whenthey are operated inefficientlythey are operated inefficientlyGovernance MechanismsGovernance Mechanisms
  • 51. Transparency 10-51Market for Corporate ControlMarket for Corporate ControlOperates when firms face the risk of takeover whenOperates when firms face the risk of takeover whenthey are operated inefficientlythey are operated inefficiently- Changes in regulations have made hostile takeovers difficult- Changes in regulations have made hostile takeovers difficult- Many firms began to operate more efficiently as a result of- Many firms began to operate more efficiently as a result of- The 1980s saw active market for corporate control, largely- The 1980s saw active market for corporate control, largelyas a result of available pools of capital (junk bonds)as a result of available pools of capital (junk bonds)the “threat” of takeover, even though the actual incidencethe “threat” of takeover, even though the actual incidenceof hostile takeovers was relatively smallof hostile takeovers was relatively smallGovernance MechanismsGovernance Mechanisms
  • 52. Transparency 10-52Market for Corporate ControlMarket for Corporate ControlOperates when firms face the risk of takeover whenOperates when firms face the risk of takeover whenthey are operated inefficientlythey are operated inefficientlyThe market for corporate control acts as an importantThe market for corporate control acts as an importantsource of discipline over managerial incompetence andsource of discipline over managerial incompetence andwastewaste- Changes in regulations have made hostile takeovers difficult- Changes in regulations have made hostile takeovers difficult- Many firms began to operate more efficiently as a result of- Many firms began to operate more efficiently as a result of- The 1980s saw active market for corporate control, largely- The 1980s saw active market for corporate control, largelyas a result of available pools of capital (junk bonds)as a result of available pools of capital (junk bonds)the “threat” of takeover, even though the actual incidencethe “threat” of takeover, even though the actual incidenceof hostile takeovers was relatively smallof hostile takeovers was relatively smallGovernance MechanismsGovernance Mechanisms
  • 53. Transparency 10-53International Corporate GovernanceInternational Corporate GovernanceGermanyGermany
  • 54. Transparency 10-54GermanyGermanyOwner and manager are often the same in private firmsOwner and manager are often the same in private firmsPublic firms often have a dominant shareholder too,Public firms often have a dominant shareholder too,frequently a bankfrequently a bankInternational Corporate GovernanceInternational Corporate Governance
  • 55. Transparency 10-55GermanyGermanyOwner and manager are often the same in private firmsOwner and manager are often the same in private firmsMedium to large firms have a two-tiered boardMedium to large firms have a two-tiered boardPublic firms often have a dominant shareholder too,Public firms often have a dominant shareholder too,frequently a bankfrequently a bank- Vorstand monitors and controls managerial decisions- Vorstand monitors and controls managerial decisions- Aufsichtsrat selects the Vorstand- Aufsichtsrat selects the Vorstand- Employees, union members and shareholders appoint- Employees, union members and shareholders appointmembers to the Aufsichtsratmembers to the AufsichtsratInternational Corporate GovernanceInternational Corporate Governance
  • 56. Transparency 10-56GermanyGermanyOwner and manager are often the same in private firmsOwner and manager are often the same in private firmsMedium to large firms have a two-tiered boardMedium to large firms have a two-tiered boardPublic firms often have a dominant shareholder too,Public firms often have a dominant shareholder too,frequently a bankfrequently a bank- Vorstand monitors and controls managerial decisions- Vorstand monitors and controls managerial decisions- Aufsichtsrat selects the Vorstand- Aufsichtsrat selects the Vorstand- Employees, union members and shareholders appoint- Employees, union members and shareholders appointmembers to the Aufsichtsratmembers to the AufsichtsratFrequently there is less emphasis on shareholder valueFrequently there is less emphasis on shareholder valuethan in U.S. firms, although this may be changingthan in U.S. firms, although this may be changingInternational Corporate GovernanceInternational Corporate Governance
  • 57. Transparency 10-57JapanJapanInternational Corporate GovernanceInternational Corporate Governance
  • 58. Transparency 10-58JapanJapanObligation, “family” and consensus are important factorsObligation, “family” and consensus are important factorsInternational Corporate GovernanceInternational Corporate Governance
  • 59. Transparency 10-59JapanJapanKeiretsus are strongly interrelated groups of firms tiedKeiretsus are strongly interrelated groups of firms tiedtogether by cross-shareholdingstogether by cross-shareholdingsBanks (especially “main bank”) are highly influentialBanks (especially “main bank”) are highly influentialwith firm’s managerswith firm’s managersObligation, “family” and consensus are important factorsObligation, “family” and consensus are important factorsInternational Corporate GovernanceInternational Corporate Governance
  • 60. Transparency 10-60JapanJapanKeiretsus are strongly interrelated groups of firms tiedKeiretsus are strongly interrelated groups of firms tiedtogether by cross-shareholdingstogether by cross-shareholdingsBanks (especially “main bank”) are highly influentialBanks (especially “main bank”) are highly influentialwith firm’s managerswith firm’s managers- Powerful government intervention- Powerful government intervention- Close relationships between firms and government sectors- Close relationships between firms and government sectors- Passive and stable shareholders who exert little control- Passive and stable shareholders who exert little control- Virtual absence of external market for corporate control- Virtual absence of external market for corporate controlOther characteristics:Other characteristics:Obligation, “family” and consensus are important factorsObligation, “family” and consensus are important factorsInternational Corporate GovernanceInternational Corporate Governance
  • 61. Transparency 10-61It is important to serve the interests of multipleIt is important to serve the interests of multiplestakeholder groupsstakeholder groupsCorporate Governance and Ethical BehaviorCorporate Governance and Ethical Behavior
  • 62. Transparency 10-62Shareholders are one important stakeholder group,Shareholders are one important stakeholder group,which are served by the Board of Directorswhich are served by the Board of DirectorsIt is important to serve the interests of multipleIt is important to serve the interests of multiplestakeholder groupsstakeholder groupsCorporate Governance and Ethical BehaviorCorporate Governance and Ethical Behavior
  • 63. Transparency 10-63Product market stakeholders (customers, suppliers andProduct market stakeholders (customers, suppliers andhost communities) and Organizational stakeholdershost communities) and Organizational stakeholders(managerial and non-managerial employees) are also(managerial and non-managerial employees) are alsoimportant stakeholder groupsimportant stakeholder groupsShareholders are one important stakeholder group,Shareholders are one important stakeholder group,which are served by the Board of Directorswhich are served by the Board of DirectorsIt is important to serve the interests of multipleIt is important to serve the interests of multiplestakeholder groupsstakeholder groupsCorporate Governance and Ethical BehaviorCorporate Governance and Ethical Behavior
  • 64. Transparency 10-64Product market stakeholders (customers, suppliers andProduct market stakeholders (customers, suppliers andhost communities) and Organizational stakeholdershost communities) and Organizational stakeholders(managerial and non-managerial employees) are also(managerial and non-managerial employees) are alsoimportant stakeholder groupsimportant stakeholder groupsShareholders are one important stakeholder group,Shareholders are one important stakeholder group,which are served by the Board of Directorswhich are served by the Board of DirectorsAlthough controversial, some believe that ethicallyAlthough controversial, some believe that ethicallyresponsible firms should introduce governanceresponsible firms should introduce governancemechanisms which serve all stakeholders’ interestsmechanisms which serve all stakeholders’ interestsIt is important to serve the interests of multipleIt is important to serve the interests of multiplestakeholder groupsstakeholder groupsCorporate Governance and Ethical BehaviorCorporate Governance and Ethical Behavior

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