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Corporate Governance
What does it deal with and why has it been put on the agenda recently?
Corporate scandals:
Responses to corporate scandals and questionable bonus
systems and option programmes:
•
The US: the Sarbanes-Oxley Act (July 2002)
•
Europe: the EU Commission launches Framework for a
Modernised Company Law and Corporate Governance in
Europe
Other reasons for intense interest in
Corporate Governance:
•
Changes in the structure of ownership – ”equity culture”
and growing importance of institutional investors
•
Equity Funds:buy majority stakes in companies and close
involvement of investors with the companies they finance
(high leverage and provision of valuable support and
governance)
•
The globalisation of Corporate Governance:
•
•
Convergence towards the Anglo-Saxon system?
Emerging market economies (former planned economies and
developing countries)
What does CG deal with in theory:
•
The corporate control problem
•
The standard view of CG deals with the ways in which suppliers
of finance to corporations assure themselves of getting a
return on their investments
•
Alternatives to the ”Shareholder value model”
• Cadbury report: Corporate governance is the system by
which companies are directed and controlled
• The managerial competition model
•
Discipline within the classic theory of finance: A debt contract
is an alternative to shareholder capital as a tool for reducing
the agency costs.
Europe:
•
Polarization between the Anglo-Saxon UK system (similar to the US
system) and the Continental French and German systems.
•
The continental system has some characteristic features of the
“stakeholder model”: interests of non-investing parties considered
•
France: managements and directors aim at “social interests”
•
Germany: a “governing coalition” (blockholder, employee
representatives and banks) in large firms, which depend on banks
as lenders
Pressure on the EU Commission to copy the
American system?
•
A Framework for a New Company Law in Europe
•
EU subsidarity principle applied: guidelines for the national
governments
•
EU Lisbon Strategy for the promotion of sustainable growth: “well
managed companies, with strong corporate governance records …
outperform their competitors. Europe needs more of them to
generate employment and higher long term sustainable growth”
•
Disciplinary role to the suppliers of finance but also the need to
achieve efficient protection of “third parties”
Course Outline:
Course web-side:
http://www.econ.ku.dk/okojang/CorpGov.htm
Section 1: The standard view in corporate governance
36.1-36.2 The Shareholder Value model of Corporate
Governance. Lazonick, O’Sullivan, Tirole sections 1 – 2.1
..
..
38. The legal approach to corporate governance. La Porta et.al
+ Student groups I
..
Section 2: Corporate Governance in and outside the EU
Section 3: A general framework for analyzing corporate
control
Section 4: Alternative views of corporate governance