1: Corporate Governance
Both Ford and GM completely abide by NYSE corporate governance standards, as they are domestic US companies. Ford and GM are required to strictly follow NYSE corporate governance standards. Toyota is permitted to follow certain corporate governance practices complying with Japanese laws and regulations, the NYSE has ruled that Toyota is exempt from certain NYSE corporate governance requirements. A significant difference in Toyota’s corporate governance structure is that the company currently does not have any directors that can be deemed as independent directors. Another major difference is that unlike domestic US companies Toyota is not required to have shareholder approval of equity compensation plans, therefore Toyota may choose to adopt an equity compensation plan under which stock acquisition rights are granted on specially favorable terms to the recipient without disclosing this information. It should also be noted that information regarding director compensation does not have to be disclosed by Toyota to the public.All three competitors meet NYSE corporate governance standards, although Toyota is exempt from several major requirements.
General Motors board of directors is made up of 11 members. Many of these members are retired executives and chairmen from other US corporations such as Eastman Kodiak Company, Pfizer Co., and Compaq. One board member is also the president of North Carolina University. GM hopes that together these board members will bring ideas and successful tactics from their industry to the GM Corporation. GM also has five different committees of the board of directors these are: Audit Committee, Directors and Corporate Governance Committee, Executive Compensation Committee, Investment Funds Committee, and Public Policy Committee. All of these committees have chairs and members whom are also on the board of directors
Ford’s board of directors is made up of 12 members. These members are made up of 8 executives from other international corporations such as HSBC, Nokia, and Goldman Sachs. The other 4 members are long time employees of the Ford Motor Company, 3 of which are from the Ford family. Fords Corporate governance structure also includes 9 separate committees. These committees range from auditing committees to code of ethics committees. Fords Corporate governance structure seems to be failing, on March 1st, 2007 its CEO Alan Mulally was given a 20% salary increase. Mr. Mulally has been CEO for just 6 months, the Ford company recorded a 12.7 billion dollar annual loss last year. It has also been disclosed that Mr. Mulally’s family members have been given the right to use the company aircraft for personal travel and security reasons, angering shareholders.
Toyota’s board is made up of 60 directors, none of whom are independent directors. Toyota’s lack of independent directors can be seen as an advantage because all competitive advantages in its production process are kept within the company. By American standards Toyota has an extremely large board, which lacks the importance of independent directors. However, we must remember that American standards aren’t always the best to use, especially for foreign based companies. Toyota’s corporate governance structure is clearly different than GM and Ford’s, but seems to be very effective as the company has been taking market share from GM and Ford for the last decade.
In addition to its board, Toyota has a wide variety of conferences and committees for deliberations and the monitoring of management and corporate activities including an audit committee whom is made up by four corporate auditors which are outside of the company and 3 internal corporate auditors. Toyota has adopted a corporate governance strategy which holds one person responsible for every key business process. Toyota is famed for its corporate system of checks and balances that allows problems to surface immediately and...
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