Professional Documents
Culture Documents
Corporate Governance in The Twenty-First Century
Corporate Governance in The Twenty-First Century
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SUNBEAM
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CHAINSAW AL
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CORPORATE GOVERNANCE
Shareholders
Environment
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CORPORATE GOVERNANCE IMPACTS PERFORMANCE
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AGENTS AND PRINCIPALS
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EXAMPLES OF CODES OF GOVERNANCE
1. In 2003, a Combined Code made further additions to the code, but these basic principles remain
2. Just one of several codes in existence in the United States
3. The Sarbanes-Oxley Act requires that the lead audit partner be rotated every 5 years; changing audit firm after 10 years of continual relationship or if former audit
partner is employed by the company 7
INSTITUTIONAL ACTIVISM ON THE RISE
CalPERS
known for their institutional activism
TIAA-CREF
Corporate Governance Team
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ROLES AND ACTIONS OF BOARD OF DIRECTORS
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STAGGERED BOARDS
turn over
at once
the entire
Board does
not
are
staggered so
Board
elections
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BOARD INVOLVEMENT
Phantom Active
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INCENTIVE ALIGNMENT
Example:
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HOW WOULD YOU DO THAT? – DENDRITE INTERNATIONAL
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EXECUTIVE STOCK OWNERSHIP IN 2004
Executives 142 57 58
Source: Adapted from Fredrick W. Cook & Co., Inc., “Stock Ownership Policies: Prevalence and design of Executive and Director
Ownership Policies Among the Top 250 Companies,” www.fecook.com/surveys.html (accessed Nov 29, 2005), Sep 2004 14
INCENTIVE COMPENSATION
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HIGHEST PAID CEOs
Source: Company annual reports and ExecComp Service of Thomson Financial, www.aflcio.org/Corporate-Watch/CEO-Pay-and-the-99 16
EXECUTIVE PAY TRENDS
Share holders
Elect
Corporate control: Example:
The right to choose Board • Corporate raiders such
the members of the as T. Boone Pickens,
board of directors CarI Icahn, Ted Turner
Hires/fires
of a company and and Michael Milken
to control all major • Oracle engaged in 18-
decisions made Top management
month battle to gain
by a company control of PeopleSoft
Directs
Corporation
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POOR CORPORATE GOVERNANCE, A WORLD-WIDE PROBLEM
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CORPORATE GOVERNANCE: U.S VS. JAPAN
U.S Japan
Owner-manager
Adversarial Co-operative
relationship
Ownership
Control function Monitoring function
concentration
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