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Corporate Governance

Structures of Corporate Governance

IMT Nagpur – 2011-13 (Section B & D)

Corporate Governance
Structures of Corporate Governance

American

UK or Commonwealth Continental European

Asian

Keiretsu (Japanese)

Chaebols (South Korea)

Chinese

IMT Nagpur – 2011-13 (Section B & D)

American Rule Based Model
Sl. No.
1.

Features
As US Cos. are incorporated in individual State, so needs to follow the respective State Co. laws. Investor Protection, Auditing, Financial Disclosure as per Federal Laws (SEC, SOX, NYSE) Unitary Board, Predominance of Independent Outside Director Shareholders have little influence on Board Membership Role of Chairman & CEO are combined Rule Based - Governance is regulated by Legal Statute & Mandatory Rules which are inflexible Compliance is mandatory or otherwise heavy penalties and imprisonment. BOD + Audit + Remuneration + Nomination Committee External Shareholders & hence markets for corporate control is strong.

2. 3. 4. 5. 6. 7. 8.

9.

Shareholders approach
IMT Nagpur – 2011-13 (Section B & D)

UK/Commonwealth Principles Based Model
Sl. No.
1. 2. 3. 4. 5. 5. 6. 7. 8.

Features
UK Co. Law influenced – Australia, Canada, India, New Zealand, South Africa, Singapore & other Commonwealth Countries Co. Law Unitary Board, Predominance of Independent Outside Director Shareholders with 10% can call EGM for removal of Director. Role of Chairman & CEO are separated. Principles Based - Governance is regulated by Code of Best Practice, not the „Rule of Law‟. - Comply or Explain Compliance is voluntary and non compliance will result in delisting of shares from SE. BOD + Audit + Remuneration + Nomination Committee External Shareholders & hence markets for corporate control is strong. Shareholders approach IMT Nagpur – 2011-13 (Section B & D)

US/UK/Commonwealth Unitary Board
Shareholders

Board of Directors
Audit Committee

Remuneration Committee

Nomination Committee

CEO & Top Management

Managers & Employees
IMT Nagpur – 2011-13 (Section B & D)

Continental European Two Tier Model
Sl. No.
1. 2. 3.

Features
Two-Tier Board, - Supervisory + Management Board External Shareholders are less, Family, Holding Co., Banks, FI control more & hence markets for corporate control is weak. Stakeholders approach

IMT Nagpur – 2011-13 (Section B & D)

Two Tier Board (Continental Europe)
Shareholders

Supervisory Board

Management Board
Audit Committee

CEO & Top Management Managers & Employees
IMT Nagpur – 2011-13 (Section B & D)

Remuneration Committee

Continental European Two Tier Model
Criticisms of Two Tier Model: Management Board:
1) Dominated by Top Management and lacks the advice and wise counselling that can be provided by the Outside Independent Director in a unitary Board.

Supervisory Board:
1) Representative character of the supervisory board provides the potential for conflicts of interest.

IMT Nagpur – 2011-13 (Section B & D)

Italy
Key Characteristics Influencing Italy Corporate Governance:
Feature Predominant ownership Structure Board structure Important aspect Key characteristic Non-Financial / Holding Cos., Families Unitary Board of Auditors required http://www.fiatspa.com/enUS/governance/board/Pages/collegio.aspx

IMT Nagpur – 2011-13 (Section B & D)

Corporate Governance
Board of Auditors
Comprised of 3 individuals, all of whom shall be independent of the company‟s directors and employees.

Role of the Board of Auditors includes
1)reviewing the company‟s organisational structure, 2)its internal controls structure, 3)its accounting system, and 4)its administrative system. IMT Nagpur – 2011-13 (Section B & D)

Corporate Governance
http://www.eni.com/en_IT/governance/board-of-statutoryauditors/board-of-statutory-auditors.shtml

http://www.fiatspa.com/enUS/governance/board/Pages/cda.aspx

IMT Nagpur – 2011-13 (Section B & D)

Corporate Governance

Corporate...
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