BA CC4 – Good Governance and Social Responsibility

Activity No. 1
MODELS OF CORPORATE GOVERNANCE

Make a summary to differentiate the three models of corporate governance.

Domestic Marketing  Anglo-US Model Japanese Model German Model

Key Players  Board of Directors  Main Bank  Corporate
 Shareholders  Affiliated Company Shareholders
 Management or Keiretsu  German Banks
 Management
 Government
Share Ownership Pattern  Institutional Investors  Japanese Corporations  Germany Equity
of shares (61%) (21%) Market (41%)
 Individuals (21%)  Japanese Equity  Institutional Owners
 Institutions (53.3%) Market (43%) (27%)
 Foreigners (3%)  Pension Funds (3%)
 Individual Owners
(4%)
 Foreign Investors
(19%)
Composition of Board of  Insider (executive,  Almost Completely  Supervisory Board
Directors manager, employee, Insiders  Management Board
significant business  Executive Managers
relationship)  Central
 Outsider (has no direct Administrative Body
relationship with the
corporation)
Disclosure Requirements  Corporate Financial  Corporate Financial  Corporate Financial
Data (Quarterly) Data (Semi-annually) Date (Semi-annually)
 Breakdown of  Data on the  Data on the capital
Corporate Capital corporation’s capital structure
Structure structure  Limited information
 Substantial by  Background on each supervisory
information on each information on each board nominee
nominee to the Board nominee to the Board  Aggregate data
of Directors of Directors compensation to the
 Aggregate  Aggregate data Management Board
compensation paid to compensation, namely and Supervisory
all Executive officers the maximum amount Board
and individual of compensation  Any substantial
compensation data for payable to all shareholder holding
each of the five highest Executive Officers more than 5% of
paid executive officers and the Board of corporation’s total
 Shareholders holding Directors share capital
no more than 5% of  Information on  Information on
Corporation’s total proposed mergers and proposed mergers and
share capital restructuring restructuring
 Information on  Proposed amendments  Proposed amendments
proposed mergers and to the articles of to the articles of
restricting association association
 Proposed amendments  Names of individuals  Names of individuals
to the articles of and/or companies and/or companies
association proposed as auditors proposed as auditors
 Names of individual
and/or companies
proposed as auditors
Interaction among Players  The Anglo-US model  Interactions among
establishes a complex,
well-regulated system
for communication and
interaction between
shareholders and
corporations.  Japanese corporations
 A wide range of
regulatory and
independent
organizations play an
important role in
corporate governance.
Shareholders may
exercise their voting
rights without attending
the annual general  Shareholder activism
meeting in person.
 All registered
shareholders receive the
following by mail: the
agenda for the meeting
including background
information an all
proposals ("proxy
statement"), the
corporation’s annual
report and a voting
card.
 The German legal and
the key players in the public-policy
Japanese model framework is
generally links and designed to include
strengthen the interests of labour.
relationships. Corporations, banks
and shareholders in
prefer that a majority the corporate
of its shareholders be governance system.
long-term, preferably
 There also exist
affiliated, parties. In
contrast, outside several obstacles to
shareholders shareholder
represents a small participation,
constituency and are especially in terms of
largely excluded from banks’ powers as
the process. depositories and
voting agents.
is restricted by an
informal yet important  Corporations with
aspect of the Japanese bearer shares are
system: the vast required to announce
majority of Japanese their annual general
corporations holds meeting in an official
their annual meetings government bulletin.
on the same day each
year, making it  In Germany, most
difficult for shareholders purchase
institutional investors shares through a bank,
to coordinate voting and banks are
and impossible to permitted to vote the
attend more than one shares of German they
 Shareholders may vote meeting in person.  hold on deposit. The
by proxy, that is, they beneficial shareholder
complete the voting does not provide the
card and return it by bank with his/her
mail to the corporation. specific voting
By mailing the voting instructions; the bank
card back to the may vote the shares
corporation, the according to its own
shareholder authorizes interpretation.
the chairman of the
board of directors to act
as his proxy and cast
his votes as indicated
on the voting card.