Tài liệu International corporate governance marc goergen

Tài liệu International corporate governance marc goergen Tài liệu International corporate governance marc goergen Tài liệu International corporate governance marc goergen Tài liệu International corporate governance marc goergen Tài liệu International corporate governance marc goergen Tài liệu International corporate governance marc goergen Tài liệu International corporate governance marc goergen Tài liệu International corporate governance marc goergen

INTERNATIONAL CORPORATE GOVERNANCE INTERNATIONAL CORPORATE GOVERNANCE Marc Goergen ‘An excellent textbook which truly stands out It is better than any book on corporate governance that I have seen.’ Luc Renneboog, Tilburg University ‘Marc Goergen’s book on corporate governance is by far the best textbook that has been published on the topic He has done a wonderful job of covering the topic from a global perspective and I strongly recommend it to all scholars and students with an interest in corporate governance.’ Franklin Allen, Wharton School, University of Pennsylvania ‘An excellent and very comprehensive book It should become a standard reference on corporate governance.’ Colin Mayer, Saïd Business School, University of Oxford International Corporate Governance provides a thorough introduction to the state of the art of corporate governance research and practice It covers a wide range of topics, including corporate control, regulation, behavioural issues and the role of stakeholders in corporate governance The text not only reflects the multidisciplinary nature of corporate governance, it also adopts an international perspective by highlighting the major differences in corporate control and corporate governance practice across the world While rigorous, the text avoids needless jargon and uses language that is accessible to a wider audience It also makes a critical assessment of current regulation, practice and research findings Key features include: • Textboxes containing case studies illustrating the theoretical concepts covered in the chapters • Discussion questions at the end of each chapter • A section with key readings as well as further (more advanced) readings at the end of each chapter Teaching support material can be found online at www.pearsoned.co.uk/goergen including: Marc Goergen is Professor of Finance at Cardiff Business School and a Research Associate of the European Corporate Governance Institute He has published widely on corporate governance and corporate finance including in the Journal of Finance, Journal of Law, Economics and Organization, Journal of Financial Intermediation and the Journal of Corporate Finance • An instructor’s manual with teaching notes to the discussion questions and exercises A complete set of PowerPointđ slides for teaching www.pearson-books.com CVR_GOER1250_01_SE_CVR.indd Cover Image: â Getty Images An online test bank consisting of 100 multiple choice questions of varying degrees of difficulty testing student knowledge and comprehension Marc Goergen Marc Goergen • Exercises for the chapters introducing quantitative concepts of corporate governance International Corporate Governance is suitable for advanced undergraduates, Master’s students and MBA students It can be used as the main text for a course dedicated to corporate governance or as a text for any course with significant coverage of corporate governance issues INTERNATIONAL CORPORATE GOVERNANCE 02/12/2011 15:35 INTERNATIONAL CORPORATE GOVERNANCE INTERNATIONAL CORPORATE GOVERNANCE Marc Goergen Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: www.pearson.com/uk First published 2012 © Pearson Education Limited 2012 The right of Marc Goergen to be identified as author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act 1988 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6–10 Kirby Street, London EC1N 8TS Pearson Education is not responsible for the content of third-party Internet sites ISBN 978-0-273-75125-0 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Goergen, Marc, 1968International corporate governance / Marc Goergen p cm ISBN 978-0-273-75125-0 (pbk.) Corporate governance I Title HD2741.G634 2012 338.6 dc23 2011041569 10 15 14 13 12 11 Typeset in 9.5pt Stone Serif by 30 Printed and bound by Ashford Colour Press Ltd, Gosport Contents Preface Introduction Possible paths through this book Author’s acknowledgements Publisher’s acknowledgements xi xiii xix xx xxi Part I – Introduction to Corporate Governance 1 Defining corporate governance and key theoretical models 1.1 1.2 1.3 1.4 1.5 1.6 Introduction Defining corporate governance Corporate governance theory Agency problems The agency problems of debt and equity The classic agency problem versus expropriation of minority shareholders 1.7 Alternative forms of organisation and ownership 1.8 Defining ownership and control 1.9 Conclusions 1.10 Discussion questions 1.11 Exercises Notes on the chapter Reading list Corporate control across the world 2.1 Introduction 2.2 The evolution of control after the initial public offering 2.3 Corporate control in Western Europe and the USA 2.4 Corporate control in Asia 2.5 Corporate control in transitional economies 2.6 Conclusions 2.7 Discussion questions Notes on the chapter Reading list Control versus ownership rights 3.1 3.2 3.3 Introduction Combinations of ownership and control Combination A: dispersed ownership and weak control 11 13 16 19 20 21 21 22 23 25 25 26 28 34 38 39 39 39 40 41 41 42 43 vi C ONTENT s 3.4 Combination B: dispersed ownership and strong control 3.5 Combination C: concentrated ownership and weak control 3.6 Combination D: concentrated ownership and strong control 3.7 How to achieve dispersed ownership and strong control 3.8 The consequences of dispersed ownership and strong control 3.9 Conclusions 3.10 Discussion questions 3.11 Exercises Notes on the chapter Reading list 43 45 46 46 51 56 56 56 57 57 Part II – International Corporate Governance 59 Taxonomies of corporate governance systems 61 4.1 Introduction 4.2 The economic and political context giving rise to global capitalism 4.3 First attempts to classify corporate governance systems 4.4 Legal families 4.5 Political determinants of corporate governance 4.6 The varieties of capitalism literature 4.7 How the various taxonomies perform? 4.8 Conclusions 4.9 Discussion questions Notes on the chapter Reading list Incentivising managers and the disciplining of badly performing managers 5.1 5.2 5.3 Introduction Product market competition The incentivising and disciplining of managers in the insider system and the outsider system 5.4 The market for corporate control 5.5 Dividends and dividend policy 5.6 Boards of directors 5.7 Institutional investors 5.8 Shareholder activism 5.9 Managerial compensation 5.10 Managerial ownership 5.11 Large shareholder monitoring 5.12 Bank and creditor monitoring 5.13 Conclusions 5.14 Discussion questions Notes on the chapter Reading list 61 62 68 70 74 76 77 79 80 80 82 84 84 85 86 87 89 90 97 98 99 102 104 105 106 107 107 111 C O N T E N Ts Corporate governance, types of financial systems and economic growth 6.1 Introduction 6.2 The functions of financial markets and institutions 6.3 Bank-based versus market-based systems 6.4 The link between types of financial systems and economic growth 6.5 Other factors influencing economic growth 6.6 Conclusions 6.7 Discussion questions Notes on the chapter Reading list Corporate governance regulation in an international context 7.1 7.2 7.3 7.4 7.5 Introduction UK codes of corporate governance The UK approach versus the US approach The OECD Principles of Corporate Governance The harmonisation of corporate governance regulation across the European Union 7.6 Policies on positive discrimination 7.7 Conclusions 7.8 Discussion questions Notes on the chapter Reading list Part III – Corporate Governance and stakeholders vii 113 113 114 114 116 119 124 125 125 126 128 128 129 136 140 142 144 147 148 148 149 151 Corporate social responsibility and socially responsible investment 153 8.1 Introduction 8.2 Corporate social responsibility and financial performance 8.3 CSR indices 8.4 Socially responsible investment 8.5 Conclusions 8.6 Discussion questions Notes on the chapter Reading list Debtholders 9.1 9.2 9.3 9.4 Introduction Benefits and costs from relationship-based banking Addressing conflicts of interests created by bank ownership and bank board representation Expropriation of debtholders 153 154 157 158 159 160 160 161 162 162 163 166 167 viii CONTENT s 9.5 Conclusions 9.6 Discussion questions Notes on the chapter Reading list 169 170 170 171 10 Employee rights and voice across corporate governance systems 172 10.1 Introduction 10.2 The law and finance literature 10.3 The varieties of capitalism literature 10.4 Employee stock ownership 10.5 Employee board representation 10.6 Breaches of trust and employee expropriation 10.7 Conclusions 10.8 Discussion questions Notes on the chapter Reading list 172 174 175 177 179 186 186 187 188 190 11 The role of gatekeepers in corporate governance 191 11.1 Introduction 11.2 The role and duties of gatekeepers 11.3 The ideal attributes of a gatekeeper 11.4 Types of gatekeepers and limitations to their role 11.5 Is industry regulation a substitute for corporate governance? 11.6 Conclusions 11.7 Discussion questions Notes on the chapter Reading list 191 192 194 195 201 203 204 204 205 Part IV – Improving Corporate Governance 207 12 Corporate governance in emerging markets 209 12.1 Introduction 12.2 Are large equity markets combined with strong property rights the only way to achieve economic growth? 12.3 Inherited wealth 12.4 The role of the government 12.5 The design of corporate governance in formerly state-owned enterprises 12.6 Conclusions 12.7 Discussion questions Notes on the chapter Reading list 209 210 214 216 222 224 225 225 227 C O N T E N Ts 13 Contractual corporate governance 13.1 Introduction 13.2 Cross-border mergers and acquisitions 13.3 (Re)incorporations 13.4 Cross-listings 13.5 Conclusions 13.6 Discussion questions Notes on the chapter Reading list 14 Corporate governance in initial public offerings 14.1 Introduction 14.2 Asymmetric information, pricing anomalies and the separation of ownership and control in IPOs 14.3 Problems of asymmetric information and ways to mitigate them 14.4 The power of the CEO 14.5 Spinning of IPOs 14.6 The role of venture capitalists in IPOs 14.7 Conclusions 14.8 Discussion questions Notes on the chapter Reading list 15 Behavioural biases and corporate governance 15.1 Introduction 15.2 Bounded rationality 15.3 Heuristic simplification 15.4 Emotions 15.5 Social interactions 15.6 Self-deception 15.7 Risk taking and decision making according to gender and age 15.8 How can these behavioural issues be addressed? 15.9 Reflexive loyalty 15.10 Conclusions 15.11 Discussion questions 15.12 Exercises Notes on the chapter Reading list ix 228 228 230 231 233 235 236 236 237 239 239 240 244 246 248 250 253 254 254 256 258 258 259 260 263 263 264 267 268 268 272 273 274 274 275 www.downloadslide.net www.downloadslide.net Index Page numbers in italics denote a figure/table Abbey National 18 Abercrombie & Fitch 138 abnormal returns 168, 179, 285 accounting standards 54, 115, 117, 118, 125, 213 Adidas 16 age and risk taking and decision making 267–8 agency problem 9–11, 20, 167, 295–6 of debt and equity 11–13, 12, 167, 202, 285 empire building 9, 11 and managerial entrenchment 11, 294 and mutual organisations 16 perquisites 9–11, 295 Type I 269, 273, 295 Type II 269, 273, 295 versus expropriation of minority shareholders by controlling shareholders 13–16, 20 AGMs 283 Agnelli family 46, 47 Agrawal, Anup 104 Ahrendts, Angela 10 Akerlof, George 119, 244 Alexander, Gordon 55 Allen, Franklin 211, 212, 214 Amable, Bruno 176 American Depository Receipts (ADRs) 65–6, 233, 285 American Express Amit, Raphael 105 Anderson, Ronald 105 Andres, Christian 105, 137 anti-takeover devices see takeover defences antidirector rights index 71, 72–3, 78, 90, 285 Aoki, Masahiko 177 arbitrage pricing theory (APT) 258 arm’s length approach 91, 285 Arthur Anderson 139, 193 Asian financial crisis 282 asset sell-off 140, 168, 285 Association of British Insurers (ABI) 17 asymmetric information 8, 9, 163, 239, 240–4, 244–6, 285 AUDI AG 46 auditors 139 as gatekeepers 191, 195, 199 regulation of 193 Austria 16, 30, 54, 176, 179, 187 Banerjee, Saugata 104 Bank Holding Company Act (1956) 69, 285 Bank, Steve 79 bank-based economies/system 68–9, 80, 162–3, 285 comparison with market-based systems 114–16, 124, 197 and economic growth 116–19, 125 banks/banking 32–3, 69, 162–3, 282–3 benefits and costs from relationship-based 163–6, 164, 166, 169 commercial 62, 68, 197, 287 and board of directors representation 164, 166, 169 impact of on firm performance 105, 164, 169 monitoring of firm’s management 163–4, 169, 197, 280 and proxy votes 32, 33, 46, 48, 69, 163 universal 68, 162, 163, 299 see also independent banks Barca, Fabrizio 28 Barclay, Michael 54 base-rate underweighting 262, 263, 291 BBS AG 45, 551 Bebchuk, Lucian 69, 80, 101 Becher, David 201–2 Becht, Marco 28, 98 behavioural biases 258–74, 281–2 addressing of 268 bounded rationality 259–60, 272, 286 emotions 263, 272, 281 heuristic simplification 260–3, 272, 281 overconfidence 264–5, 268, 272, 281, 295 reflexive loyalty 268–72, 270–1, 273, 281–2, 296 risk taking and decision making according to gender and age 267–8 self-deception 264–7, 272 social interactions 263–4, 272, 281 www.downloadslide.net 302 Index Belgium 30, 34, 79, 146, 220 benefits of control 51, 54, 61–2, 74, 85, 137, 142–3, 147, 234, 246, 286 Berle, Adolf 8, 26, 39, 62, 243 Berlin, Mitchell 166 Bertrand, Marianne 144 Bezos, Jeff 10 biased self-attribution 264, 295 Big Bang 66, 286 Blasi, Joseph 179 block premiums, per country 54, 54–5 blocking minority 28, 28–9, 30, 31, 34, 288 board of directors 3, 6, 7, 90–7, 268, 286 bank representation 164, 166, 169 and Cadbury Report 129–30, 136 disciplining of managers by 105, 106 and duality 95, 129, 135–6, 289 employee representation 179–86, 180–3, 187, 280 factors determining changes 97 female membership 144–6, 145 firing of executive directors in wake of bad performance 96–7 and Higgs Report 134 link between structure of and financial performance 95–6, 268 and OECD Principles of Corporate Governance 141–2 and reflexive loyalty 268–9, 272, 273 bonding costs 9, 296 bonding hypothesis 233, 235, 236, 281, 286 book-building offer 240–1 bootstrapping effect 230, 231, 235–6, 281, 286 Botero, Juan 174 Boubakri, Narjess 217 bounded rationality 259–60, 272, 286 Bradford & Bingley 18 Brammer, Stephen 146 Brennan, Michael 241–2 Bretton Woods agreement 62, 63, 286 Bris, Arturo 230–1 Brown, Cedric 130–2 BSkyB 17 BT Group Plc 43, 44 Buchholz, Rogene 155 Buddhism 158 building societies 16, 18 demutualisation of 18, 289 Cadbury Report (1992) 6, 95, 129–30, 136, 286–7 Cameron, Johnny 201 Canada 54, 90, 99, 128, 214 capital asset pricing model (CAPM) 258 capitalism economic and political context giving rise to global 62–8 types of 176 see also varieties of capitalism (VOC) literature capture 193, 194, 195, 196, 287 Carlin, Wendy 117 Carter, Craig 153 Cary, William 232 cash flow rights 19 CEOs pay 99, 100 power of and IPOs 246–8, 253–4, 281 chaebol 37, 287 Chahine, Salim 247, 252 Chakrabarti, Rajesh 38 Chandler, Alfred 68 change-in-information effect, and competition 85–6 Cheffins, Brian 79 Chenaut, Ken China 67 competition in 211–12 corporate control 37 development of socialist market economy 67 economic growth 211 and government ownership 216–17 SOEs 37, 67, 216–17 Chirinko, Bob 105 Christianity 158 Citigroup 10 civic engagement 120, 287 civil law 70–1, 287 Claessens, Stijn 34 classified board see staggered board Co-determination (Germany) 5, 63, 287 Coates, John 146, 267 Coca Cola Company 43, 44 Coffee, John 3, 192, 193 Combined Code 133, 134–5, 283, 287 commercial banks 62, 68, 287 as gatekeepers 197 Committee on the Financial Aspects of Corporate Governance 129 common law 70, 287 communism, fall of 66–7 Companies Act (UK) (1985) 102 (2006) 5–6 www.downloadslide.net In d e x 303 competition effects of on managerial performance and effort 85–6 complementarities 77, 77, 175, 176, 279, 287 complete contracts 7–8, 239, 287 concentrated ownership advantages 42 and strong control 46, 56 and weak control 45–6, 56 Confederation of British Industry (CBI) 130 confirmatory bias 264, 267, 287 conflicts of interests 6, 8, 41, 43, 56, 61, 84–5, 115, 128, 142, 147, 258 between management and shareholders 25, 26, 34, 70 between owners and customers 18, 19, 287–8 and debtholders 166–7, 162, 163, 169, 280 and gatekeepers 191, 193, 194–8, 203 and IPOs 239, 240, 248, 252, 281 and mutual organisations 18 and principal-agent theory conformity effect 263, 288 conglomerates 212 contracts complete 7–8, 239, 287 former SOEs and managerial 224 contractual corporate governance 228–36, 288 cross-border mergers and acquisitions 230–1, 235–6, 281 cross-listings 233–5, 236, 281, 289 reincorporations 231–3, 236, 281, 296 control 26, 288 benefits of 51, 54, 61–2, 74, 85, 137, 142–3, 147, 234, 246, 286 definition 19, 28 evolution of after initial public offering 26–8, 27 first-tier 28, 29, 290 versus ownership rights 41–57 see also corporate control; ownership and control; strong control; weak control control chains 46 conversation 264 convertible securities 251, 288 coordinated market economy (CME) 76, 175, 176, 177, 288 Cornelli, Francesca 251 corporate control in East Asia 34–8, 35 in transitional economies 38, 38 in Western Europe and United States 28–34, 39 corporate governance definition 4–7, 20, 174 first attempts to classify systems of 68–70 theory of 7–9, 116–17 corporate governance devices, definition 84–5, 288 Corporate Governance of Listed Companies (France) 137 corporate social responsibility (CSR) 153–8, 159–60, 280, 288 definition 153–4, 159 and firm performance 154–7, 159 indices 157–8 cost-avoidance hypothesis 232, 288–9 credible signals 229, 289 credit rating agencies as gatekeepers 191, 193, 196–7, 200 and subprime mortgage crisis 196–7 Credit Suisse First Boston 248–50 creditor protection 71, 78 and size of capital markets 71, 72–3 creditor rights index 71, 289 Crespí-Cladera, Rafel 101 Cromme, Gerhard 92, 93, 94 crony capitalism 210, 224, 281, 282 cross-border mergers and acquisitions 230–1, 235–6, 281 cross-holdings 37, 38, 69, 289 cross-listings 233–5, 236, 281, 289 culture and corporate governance 78–9 curse of knowledge 264, 289 Cziraki, Peter 98, 99 Dahya, Jay 129, 130 Damasio, Antonio 263 Dassler, Adolf and Rudolf 16 debt role in emerging markets 224 debt and equity, agency problem of 11–13, 12, 167, 202, 285 debtholders 162–70, 280 addressing conflicts of interests created by bank ownership and board representation 166–7, 169, 280 benefits and costs from relationship-based banking 163–6, 169 expropriation from 167–9, 169, 280 Deeg, Richard 165 Deminor 197 demutualisation 18, 289 deregulation 18, 64, 65, 202, 289 Dharwadkar, Ravi 222, 223, 224 www.downloadslide.net 304 index Diamond, Douglas 69 directors’ and officers’ liability (D&O) 198, 200 discrimination policies, positive 144–7, 145 dispersed ownership advantages 42 disadvantages 42–3 and strong control 43, 45, 46–51, 54, 56 and weak control 43, 44, 56 disposition effect 261, 294 Dittmann, Ingolf 166 dividends/dividend policy, disciplinary role of 89–90, 106 Djankov, Simeon 34 Dodd–Frank Act (2010) 137, 139–40, 194 Doidge, Craig 234 double voting rights 51, 53 Drucker, Peter 177 D’Souza, Juliet 217 et al 217 dual-class shares 50–1, 138, 289 duality 95, 129, 289 at Marks and Spencer 135–6 Dutch Corporate Governance Code 137 Dyck, Alexander 54 East Asia, corporate control in 34–8, 35 Easterbrook, Frank 89 Eastern Europe, corporate control 38, 38 economic growth and bank-based systems 116–19, 125 and employee rights 174, 175, 280 and financial markets 113–14 and growth effect 118 and inherited wealth 214–16, 215–16, 224 links between type of financial system and 116–19, 125 other factors influencing 119–24 and R&D 118 and share effect 117–18 and stock markets 209, 210–14, 213 and trust 119–21, 122–3, 125 Edwards, Jeremy 165 efficient market hypothesis 241, 258–9, 289 electoral systems 74–5, 75, 174, 210 Elsas, Ralf 163, 164–5 Elston, Julie Ann 101, 105 emerging markets 209–25, 281 and crony capitalism 210, 224, 281 design of corporate governance in former SOEs 222–4, 225 and inherited wealth 214–16, 215–16, 224 role of debt 224 role of government 216–22, 218–19, 221–2, 224 emotions 263, 272, 281 empire building 9, 11, 289 Employee Retirement Income Security Act (ERISA) (1974) 139 employees 172–88, 280 board representation 179–86, 180–3, 187, 280 and coordinated market economies 175, 176, 177, 187 economic growth and rights of 174, 175, 280 expropriation of and breaches of trust 186 and law and finance literature 173, 174–5, 176, 186, 280 lay-offs versus dividend cuts 173 and liberal market economies 175, 177, 187 stock ownership 177–9, 178, 187, 280 and varieties of capitalism literature 175–7, 186–7, 280 endogenous 102, 104, 279–80 Enron 139, 193 Equal Status Act (2000) 144 equity carve-outs 168, 289 EU harmonisation of corporate governance regulation across 142–3, 147 Takeover Directive (2004) 6, 142, 143 European Corporate Governance Institute (ECGI) 28, 30 European Corporate Governance Network (ECGTN) 28 exclusionary screens 157, 159, 289 executive directors 3–4, 286 firing of in wake of bad performance 96–7 executive pay 99–102, 106 and change in firm size 100–1 and deregulation 202 effect of regulation on 202–3 and Greenbury Report 132–3, 291 influence of ownership and control on 101 level and composition of CEO 99, 100 exogenous 95, 102, 268, 290 expropriation from debtholders 167–9, 169, 280 of the minority shareholders 13–16, 14, 20, 43, 225, 290 extraterritoriality principle 230, 286 Faccio, Mara 220, 222 Faleye Olumbunmi 179 false consensus effect 264, 290 familism/family control 1, 11, 28, 33, 36, 36, 37, 39, 105, 120, 214, 290 Fanto, James 198 Fauver, Larry 184 www.downloadslide.net i n d e x 305 Ferri, Giovanni 196 Ferris, Stephen 232 Fidrmuc, Jana 97 financial analysts, as gatekeepers 196, 199 financial crisis (2008) 194 financial markets and economic growth 113–14 functions of 114 Financial Services Authority (FSA) 200–1 financial systems link between types of and economic growth 116–19, 125 see also bank-based system; bank-centred system financialisation 64, 290 Finkelstein, Sydney 246, 252 Finnish Corporate Governance Code 146 firm performance impact of banks on 105, 164, 169 impact of board structure on 95–6, 268 impact of corporate social responsibility on 154–7, 159, 280 impact of politicians’ death on 220, 221–2, 222 and pay sensitivity 99–100 and political connections 220 firm size, and managerial compensation 100–1 firm value effect of US cross-listing 234 impact of managerial ownership on 102–3, 103 and shareholder monitoring 104–5 first-tier control 28, 29, 290 Fischer, Klaus 165 Fisman, Raymond 220 Fitzro, Felix 184 flexicurity policies 176 Ford Motor Company 51, 52–3 France 30, 31, 34, 51, 54, 68, 69, 76, 91, 99, 128, 173 Franks, Julian 69, 78, 80, 85, 87, 104, 211–12, 241–2 free cash flow problem 11, 156, 290 free float 27, 27, 28, 290 free-rider problem 42–3, 163, 290 Fried, Jesse 101 fringe benefits see perquisites Frye, Melissa 201–2 Fuerst, Michael 184 Fukuyama, Francis 120, 124, 214 fundamental attribution error 264, 290–1 gambler’s fallacy 262, 263, 291 game theory 119 gatekeepers 191–204, 280, 283 attributes of different types of 199–200 definition 192 failures in recent corporate scandals 193 ideal attributes of 194–5 liability 192–3 regulation and corporate governance 201–3 roles and duties 192–4, 203 types of and limitations to their role 195–8 GDP growth 63 gender and board membership 144-6, 145 policies on discrimination 144–6 and risk taking and decision making 267–8 Gender Equality Act (2002) 144 German Corporate Governance Code (Cromme Code) 137 Germany/German firms as bank-based system 163, 164, 165–6 board of directors 92–4 Co-determination Law (1976) 5, 63, 287 corporate control 30, 32 dividends 90 dual-class shares 51 evolution of control in IPOs 27–8, 27 hostile takeovers 89 impact of banks on performance 105 and Neuer Markt 165 Gertner, Robert 96 Gispert, Carles 101 glasnost 66, 291 Glass–Steagall Act (1933) 62, 68, 69, 291 Glitnir 15 globalisation 64, 68, 153, 291 Goergen, Marc 4, 79, 90, 142, 234, 244, 247, 252 Goldberg, Lawrence 101 golden parachute 140, 291 Goldman Sachs 18 Goldschmidt, Chanan 78 Gomes, Armando 246 Gompers, Paul 252 Goodwin, Sir Fred 200, 265–7 Google Inc 245 Gorbachev, Mikhail 66 Governance Metrics International (GMI) 197 government grabbing hand of 220, 222, 291 helping hand of 220, 222, 292 role of in emerging markets 216–22, 218–19, 221–2, 224 www.downloadslide.net 306 index Graff, Michael 78, 90 Gramm–Leach–Bliley Act (1999) 68, 291 grandstanding hypothesis 252, 291 Graves, Samuel 156 Great Depression 62 Greenbaum, Stuart 163–4 Greenbury Report (1995) 129, 132–3, 291 Grossman, Sanford 18, 42, 51 growth effect 117, 118 Gucci family 17 Guidance on Board Effectiveness 272 Gul, Ferdinand 37, 217 Hadlock, Charles 203 Hall, Peter 76 Hallock, Kevin 144 halo effect 260, 291 Hambrick, Donald 265 Hampel Report (1998) 129, 133, 292 Hansmann, Henry 229 Harford, Jarrard 101 Hart, Oliver 18, 42, 51 Haste, Andy 10 Hayward, Matthew 265 hedge funds 98 Hellmanm, Thomas 250, 251 Herbert, Joe 146, 267 herding see conformity effect Hermalin, Benjamin 85, 86, 97 Hermes UK Focus Fund 98 heuristic simplification 260–3, 272, 281 analysing problems in isolation 261 changing beliefs slowly 262–3 focusing on similarities 262 focusing on subsets of information 260 Hicks, John 68, 80 Higgs Report (2003) 134, 272 Hillman, Amy 157 Himmelberg, Charles 104 Holderness, Clifford 54 Hong Kong Stock Exchange 37 hostile takeovers 11, 18, 42, 69, 87–8, 89, 106, 115, 186 hot-issue markets 241, 292 house money effect 261, 292 Houston, Joel 203 hubris 264–5, 273, 292 Icelandic banks, collapse of 15–16 income effect, and competition 85 incorporations 231–3, 236, 296 India 38, 212, 214 Indonesia 37, 213, 220 infighting 16, 17, 20, 51, 290 inflation rates 64 information collection theory 116, 117, 118 inherited wealth 214–16, 215–16, 224 initial public offerings see IPOs insider systems 69, 80, 85, 86–7, 142, 292 institutional investors 97–8, 106 interlocked directorships 96, 292 International Bank for Reconstruction and Development (IBRD) 62, 286 International Monetary Fund (IMF) 29, 62, 286 INVESCO 43 investment banks 62, 192, 195–6, 240, 245, 248–9, 254, 292–3 investor protection 71, 72–3, 78 IPOs (initial public offerings) 26–7, 239–54, 281, 292 and asymmetric information 239, 240–6, 253, 281 evolution of control after 26–8, 27 power of the CEO 246–8, 253–4, 281 pricing anomalies 240–4, 253, 259 reasons for corporate governance being key issue 239–40, 253 and separation of ownership and control 240–4, 253, 281 spinning 248–50, 254 underperformance of 243, 243 and underpricing 241, 242, 243, 248, 252, 293 and venture capitalists 240, 245, 250–3, 254, 281 Irani 10 Ireland, Paddy Islam 158 Israel 214 ISS 168 Jain, Bharat et al 243 James, Christopher 203 Japan/Japansese firms 5, 34, 36–7, 54, 68, 78, 90, 96, 97, 117, 163, 164, 176, 211, 282 Jensen, Michael 7, 9, 11, 12, 177, 243 Jeong-Bon Kim 37 Johannesson, Jon Asgeir 15 John Lewis Partnership 18 Johnson, Simon 220 Joskow, Paul 202, 203 Kaplan, Steven 96, 97 Kaupthing 15–16 Keefer, Philip 121, 124 www.downloadslide.net In d e x 307 Keim, Gerald 157 keiretsu 37, 97, 293 Keynesianism 63, 293 Khanna, Tarun 212 Khorana, Ajay 100 Kinder, Lydenberg and Domini (KLD) index 156, 157 Klein, April 98, 167 Kleinfeld, Klaus 92 Knack, Stephen 120–1, 124 Knoeber, Charles 104 Kole, Stacey 104 Korea, corporate control 34, 37 Kraakman, Reinier 192, 229 Krahnen, Jan Pieter 164–5 Kullich, Clara 144 La Porta, Rafel 70–1, 72–3, 76, 77, 78–9, 90, 119, 124, 137, 174, 210 Landsbanki 16 Lang, Harry 34 law and finance literature 173, 210–11, 279 and employees 173, 174–5, 176, 186, 280 taxonomies of corporate governance system 62, 70, 76, 80, 173 lawyers, as gatekeepers 196, 199 legal families 70–1, 77–8, 78–9, 80, 119 Leland, Hayne 245 leveraged buy-outs (LBOs) 96, 167, 293 wealth transfers from bondholders to shareholders in 168 Li, Kai 101 liberal market economies (LMEs) 75, 76, 79, 175, 176, 177, 187, 293 Licht, Amir 78 Lipton, Martin 96 lock-in agreements 245–6, 281, 293 Lopez-de-Silanes, Florencio 70 L’Oréal, board of directors 91 Lorsch, Jay 96 loss aversion 261, 262, 293 loss of self control 263, 293 Lowry, Michelle 252 loyalty, reflexive 268–72, 270–1, 273, 281–2, 296 LVMH SA 51, 53 M&G 89 M-form structures 223 McConnell, John 103 McGuire, Jean 155, 156 McLintock, Michael 89 majoritarian electoral systems 74, 293 Malaysia 37, 214, 220 male stock-exchange traders, effect of testosterone 146, 267–8 Malone, Thomas 268 management board 2, 90–1 management buy-outs (MBOs) 187, 293–4 managerial compensation see executive pay managerial contracts, and former SOEs 224 managerial entrenchment 11, 294 managerial ownership, impact of on firm value 102–4, 103, 106 managers, incentivising and disciplining 84–107, 279 bank and creditor monitoring 105, 106 bank-based versus market-based systems 114–16 board of directors 90–5, 106 dividends and dividend policy 89–90, 106 and institutional investors 97–8, 106 large shareholding monitoring 104–5 managerial compensation 99–102, 101, 106 managerial ownership 102–4, 103, 106 market for corporate control 87–9, 106 shareholder activism 98–9, 106 mandatory bid rule 143 Manne, Henry 87 Mannesmann AG hostile takeover of by Vodafone AirTouch Plc 88 Marcos, Imelda 210 market for corporate control 87–9, 106 market-based economies/systems 68–9, 294 and economic growth 116–19, 125 versus bank-based systems 114–16, 124, 197 Marks & Spencer 135–6, 154, 155 Martynova, Marina 230, 231 May Day deregulation 65, 66, 294 Mayer, Colin 68, 69, 78, 80, 85, 87, 117 Means, Gardiner 8, 26, 39, 62, 243 Meckling, William 7, 9, 12, 177, 243 Medco Health Solutions Inc 48 Megginson, William 38 mental accounting 261, 294 mergers and acquisitions, cross-border 230–1, 235–6, 281 Milgram, Stanley 269, 270–1 Milnor, John 247 minority shareholders, expropriation of 13–16, 14, 20, 43, 225, 290 Minton, Bernadette 97 mispricings 258–9 Mitsubishi 37 Mitton, Todd 220 www.downloadslide.net 308 Index monitoring 9, 295–6 Moore, John 18 moral hazard 7, 8, 246, 294 Morck, Randall 102, 214, 268, 269, 272, 283 Mueller, Dennis 214 Murdoch, James 17 Murdoch, Rupert 17 Murphy, Kevin 252 mutual organisations 16, 18 Myners Report (2001) 97, 133–4 narrow framing effect 261, 294 National Association of Pension Funds (NAPF) 17 negative externalities 211, 294 negative spillover effect 230, 231, 235, 295 neoliberalism 64, 294 nepotism 16, 17, 20, 51 net present value (NPV) 11, 294 New Deal 62, 294 Nigeria 216 Nixon, Richard 63 non-executive directors 3, 282, 286 non-voting shares 50 Northern Rock 18, 283 Norway 54, 90, 176, 179 gender discrimination policies 144, 146 Notebaert, Richard 10 oceanic games 247, 297 OECD Principles of Corporate Governance 140–2, 147 offer at a fixed price 240, 292 offer price 240, 292 one-share one-vote rule 19, 51, 56, 297 one-tier boards 90, 91, 294–5 ordinary shares (common stock) 50, 295 Otokwala, Gomiluk 216 outsider systems 69, 80, 106, 295 incentivising and disciplining managers in 84, 86–104 overconfidence 264–5, 268, 273, 281, 295 ownership alternative forms of 16–19 definition 19, 295 ownership and control combinations 42–3 and former SOEs 223 and managerial compensation 101 separation of see separation of ownership and control ownership pyramids 14, 19, 38, 41, 46, 47, 69, 223, 295 ownership rights, versus control 41–57 Pagano, Marco 74, 76, 79, 174, 210 Palepu, Krishna 212 Parmalat 193 Parsley, David 220, 222 Partnoy, Frank 197 path dependence 69–70, 80, 175, 295 Pax Fund 159 pay, executive see executive pay perestroika 66, 295 perquisites 9–11, 295 Perrier and benzene 154 Peters Report (1997) 137 Philippines 34, 36, 210, 220 political connections 217, 218–19, 220–2, 224 politicians death of and effect on firm value 220, 221–2, 222 politics/political orientation and corporate governance 74–5, 79, 80, 210 positive spillover effect 230, 231, 235, 281, 295 preference shares/stock 50–1, 295 pricing anomalies and IPOs 240–4, 253, 259 Primark and child labour 154–5 principal-agent model 7–9, 13, 20, 25, 86, 258, 269, 295–6 see also agency problem principle of shareholder primacy 6, 296 prisoner’s dilemma 119 private benefits of control see benefits of control private equity acquisitions 186, 296 privatisation 217 in UK 65 product market competition 85–6 property rights 18–19, 70, 210–14, 279, 298–9 proportional electoral systems 74, 75, 174, 210, 296 proxy votes 32, 33, 46, 48, 69, 163, 296 Public Accounting Oversight Board (PCAOB) 193 Puma 16 Putnam, Robert 120, 124 Pyle, David 245 Qiu, Annie 37 Quakers 159 Quattrone, Frank P 248–50 R&D, and growth 118 Rajan, Raghuram 164 www.downloadslide.net i n d e x 309 Reagan, Ronald 64, 65 Reagonomics 65, 296 real seat principle 232, 296 Reeb, David 105 Reese, William 233 reflexive loyalty 268–72, 270–1, 273, 281–2, 296 regulation, corporate governance 128–48, 201–3 harmonisation of across EU 142–3, 147 OECD Principles of Corporate Governance 140–2, 147 positive discrimination policies 144–7, 145, 147 UK approach versus the US approach 136–40, 147 UK codes of corporate governance 129–36, 147, 280 regulatory competition 232–3, 236 reincorporations 231–3, 236, 281, 296 related-party transactions 14, 15–16, 20, 51296 relationship-based system 114–15, 163–6 renegotiation theory 116, 117, 118 Renneboog, Luc 4, 27, 104, 159, 230, 231, 244 representiveness heuristic 262, 296–7 residual claimants 4, 297 residual loss 9, 296 reverse LBO 167, 293 risk taking, according to gender and age 267–8 risk-adjustment effect, and competition 85 Ritter, Jay 248 Roe, Mark 68–9, 74, 76, 80, 174, 210 Roll, Richard 264 Romano, Roberta 232 Rossi, Stefano 78, 230 Rothschild, Lord 17 Royal Bank of Scotland (RBS) 200–1, 265–7 Rozeff, Michael 89 RSA 10 salaries see executive pay Sarbanes-Oxley Act (SOX) (2002) 139, 193–4, 195, 196, 203, 272 Schwartz, Shalom 78 Schwert, William 87 seasonal affective disorder (SAD) 263, 272, 297 Securities Exchange Commission (SEC) 198 securities-exchange regulators, as gatekeepers 198, 200–1 security benefits of control 51, 286 self-deception 264–7, 272 separation of ownership and control 8–9, 13, 20, 25–8, 26, 39, 279 and IPOs 240–4, 253, 281 Servaes, Henri 103 Shanghai stock exchange 37, 67 Shapley, Lloyd 247 Shapley value 247, 297 share effect 117–18 shareholder activism 98–9, 106 shareholder monitoring, and firm value 104–5 shareholder primacy, principle of 6, 296 shareholder-exploitation hypothesis 232 shareholders 3–6, 5, 141–2, 297 expropriation of minority shareholders by controlling 13–16, 14, 20, 43, 225, 290 and OECD Principles of Corporate Governance 141–2 Shenzhen stock exchange 37, 67 Shiller, Robert 212 Shleifer, Andrei 4, 70, 105, 115, 174, 186, 220 Siemens 92 supervisory board composition 184, 185 Silicon Valley 282 Simon, Hubert 259 sin industries 157, 289 Singapore 34, 37, 54, 99, 214 Singh, Alf 212, 213 Singh, Val 144 Single European Act (1992) 68, 297 single-tier boards see one-tier boards Smith, Adam Smith Report (2003) 134 social democracies 74, 76, 297 social interactions 263–4, 272, 281 social issue participation (SIP) 157, 298 socially responsible investment (SRI) 153, 158–60 154, 298 SOEs see state-owned enterprises Soskice, David 76 Soviet Union 66 SOX see Sarbanes–Oxley Act Spamann, Holger 78 spillover effect see negative spillover effect; positive spillover effect spin-off 168, 298 spinning IPOs 248–50, 254 stage financing 251, 298 stagflation 63, 298 staggered board (classified board) 96, 137, 138, 298 stakeholder management (SM) 157, 298 Standard & Poor 97 www.downloadslide.net 310 Index Starbucks Corporation 10 Starks, Laura 231 state-owned enterprises (SOEs) 37, 65, 298 design of corporate governance in former 222–4, 225 stock corporations 3, 298 stock markets crashes: (1929) 62; (2001/2) 259 as drivers of economic growth 209, 212–14, 213 as gatekeepers 198, 201 strong control and concentrated ownership 46, 56 and dispersed ownership 43, 45, 46–51, 54, 56 Stulz, René 79 subprime mortgage crisis 18, 193, 195, 196–7, 282 Summers, Lawrence 115, 186 [or Laurence p.186] supermajority 28, 288 supervisory boards 90, 92, 118, 144, 146, 176, 177, 179, 299 supply-side economics 65, 298 Sweden 30, 51, 79 Taiwan 34, 37, 54, 90, 214, 220 takeover defences 96, 137–8, 139, 141, 229, 233, 298 takeover legislation impact of on country’s corporate governance system 142–3, 143 taxonomies 61–82 Tchenguiz, Robert 16 Terjesen, Siri 144 testosterone effects of on male stock-exchange traders 146, 267–8 Thailand 34, 36, 220 Thain, John 10 Thatcher, Margaret 64–5 Theissen, Erik 137 Tobin’s q 102, 103, 234 trade unions 62, 90, 158, 173, 184, 280 UK 65, 65 transfer pricing 13–14, 20, 51, 290 transitional economies, corporate control in 38, 38 trust breaches of and expropriation of employees 186 and economic growth 119–21, 122–3, 125 tunnelling 13–14, 20, 51, 290 Turnbull Report (1999) 133 two-tier boards 90, 91, 92–4, 299 Tyco International Type I agency problem 269, 273, 299 Type II agency problem 269, 273, 299 UK beneficial ownership of shares 66–7 board of directors 91 City Code on Takeovers and Mergers 6, 49, 139, 142 comparison of corporate regulation with US 136–40 and corporate control 30, 31, 33, 39 Corporate Governance Code 129–36, 135, 147, 198, 280 evolution of control in IPOs 27–8, 27 importance of local stock exchanges 212 ownership dispersal 211–12 privatisations 65 trade unions 65 ultimate control 28, 29, 299 United States comparison of corporate regulation with UK 136–40, 147 corporate control in 28–34, 39 distribution of largest shareholders 31, 32 universal banks 68, 162, 163, 299 usury 158 Vance, Stanley 155 varieties of capitalism (VOC) literature 173, 279, 299 and employees 175–7 taxonomies of corporate government system 61, 76–7, 77, 79, 80 venture capitalists 240, 245, 250–3, 254, 281, 299 vested shares 251, 299 Villalonga, Belen 105 Vishny, Robert 4, 70, 105, 174, 220 vocational training 177 Vodafone AirTouch Plc hostile takeover of Mannesmann AG 88 Volkswagen 45–6, 92, 93, 94 Volpin, Paolo 74, 76, 79, 174, 210, 230 voting caps 45–6, 299 voting coalitions/pool 48–9, 299 Waddock, Sandra 156 Walker Review 134 www.downloadslide.net In d e x 311 weak control and concentrated ownership 45–6, 56 and dispersed ownership 43, 44, 56 Wei, Kelsey 231 Weisbach, Michael 97, 233 Western Europe corporate control in 28–34 distribution of control across types of large shareholders 32, 34 distribution of largest shareholders 31, 32 Whitley, Richard 176 Williamson, Oliver Williamson, Rohan 79 Winter, Ralph 232 Wissam, Abdallah 234 Woolley, Anita 268 World Bank 62, 209, 286 Worldcom 193 Worthington, Sarah Wruck, Karen 103 Yadav, Pradeep 38 Yermack, David 10–11, 96 Yosha, Oved 251 Yoshimori, Masaru zaibatsus 37 Zak, Paul 120–1 Zenner, Marc 100 Zingales, Luigi 54 Zur, Emanuel 98, 167 Zwiebel, Jeffrey 54 www.downloadslide.net www.downloadslide.net www.downloadslide.net ... in corporate governance Part V Conclusions Corporate governance and stakeholders Part II International Corporate Governance* Part II International Corporate Governance* Part III Corporate Governance. .. Introduction to Corporate Governance MM Part II – International Corporate Governance MM Part III – Corporate Governance and Stakeholders I N T R O Du C T I O N MM Part IV – Improving Corporate Governance. .. Congress Cataloging-in-Publication Data Goergen, Marc, 196 8International corporate governance / Marc Goergen p cm ISBN 978-0-273-75125-0 (pbk.) Corporate governance I Title HD2741.G634 2012 338.6