understanding corporate governance and the ANGLO US model.

1. Mohimenul Islam
ID: 17212003
Presented by :

2. Introduction
Corporate governance is the mechanisms, processes and
relations by which corporation are controlled and directed.
Governance structures and principles identify the distribution of rights
and responsibilities among different participants in the corporation
and includes the rules and procedures for making decisions in
corporate affairs.

3. Why Corporate Governance?
 Better access of external finance.
 Lower cost of capital – interest rates on loan.
 Improve company performance –sustainability.
 Higher firm valuation and share performance.
Reduce risk of corporate crisis and scandal

4. Principles and pillars
 Rights and equitable
treatment of shareholders
 Interests of other
stakeholders.
 Role and responsibilities of
the board.
 Integrity and ethical behavior.
 Disclosure and transparency
•Accountability
•Fairness.
•Transparency
•Independence

5. Corporate governance models
Different models of corporate
governance differ according to the
variety of capitalism in which they
are embedded.
Anglo-US model.
Japanese model.
German model.
Latin model .
African model.
Ottoman model.

6. Anglo-US model
• It is characterized by share ownership of individual, and
increasingly institutional, investors not affiliated with the
corporation known as outside shareholders or
“outsiders”.
• Tends to emphasize the interests of shareholders.
• A well-developed legal framework defining the rights and
responsibilities of three key players, namely management,
directors and shareholders.
• Equity financing.

7. Key players
 Management.
 Directors.
 Shareholder.
 Government agencies.
 Stock exchanges,
 Self-regulatory organizations and
 Consulting firms.

8. Major players diagram
 Management.
 Directors.
 Shareholders.

9. Share of ownership pattern
 UK corporation (1990)
Institutional Shareholder held approximately 61%.
Individual held approximately 21%.
 US corporation (1990)
Institutional Shareholder held approximately 53.3%.
Individual held approximately 38%.

10. Composition of Board of Directors
“Insiders” “Outsiders”

11. Composition of Board of Directors
Traditionally, the same person has served as both chairman of the board
of directors and chief executive officer (CEO) of the corporation. In many
instances, this practice led to abuses, including:
•Concentration of power in the hands of one person
•Concentration of power in a small group of persons .
•Management and/or the board of directors attempts to retain power over
a long period of time, without regard for the interests of other players.
•The board of directors’ flagrant disregard for the interests of outside
shareholders.

12. Factors
•The increase in institutional investment in both
countries;
• greater governmental regulation in the US. the takeover activityof the
mid- to late-1980s; excessive executive
compensation at many US companies and a growing sense of loss of
competitiveness vis-а-vis
German and Japanese competitors.
Contributed to an increased interest in corporate governance:
Influenced the trend towards an increasing percentage of
“outsiders” on boards of directors:
• The pattern of stock ownership.
• Recommendations of self-regulatory organizations

13. Regulatory Framework
US has the most
comprehensive
disclosure
requirements and a
complex, well-regulated
system for shareholder
communication.
The regulatory framework of
corporate governance in the
UK is established in
parliamentary
acts and rules established
by self-regulatory
organizations

14. Disclosure Requirements
• Corporate financial data.
• A breakdown of the corporation’s capital structure;
•Substantial background information on each nominee to the board of
directors
• The aggregate compensation paid to all executive officers (upper
management) as well as individual compensation data for each of the
five highest paid executive officers, who are to be named;
•All shareholders holding more than five percent
of the corporation’s total share capital;
• Information on proposed mergers and restructurings; proposed
amendments to the articles of association; and
• Names of individuals and/or companies proposed as
auditors.

15. Corporate Actions Requiring
Shareholder Approval
Routine corporate action:
• Election of directors
• Appointment of auditors.
Non routine corporate action:
• Establishment or amendment of stock option plans
•Mergers and takeovers.
•Restructurings.
•Amendment of the articles of incorporation

16. Interaction among players
•Shareholders may exercise their voting rights without attending
the annual general meeting in Person
•All registered shareholders receive the following by mail:
• the agenda for the meeting .
• corporation’s annual report and
• voting card.
•Shareholders may vote by proxy, that is, they complete the voting
card and return it by mail to the corporation.

17. Interaction among players
A wide range of institutional investors and financial specialists
monitor a corporation's performance and corporate governance.
These include:
 A variety of specialized investment funds.
 Venture-capital funds, or funds that invest in new or "start-up"
corporations.
 Rating agencies
 Auditors;
 and funds that target investment in bankrupt or problem
corporations