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Ethics
- 2. • MISBAH SYED23 • HUZAIFA WALI 41 • MUSAIB MEHRAJ 13 • FARHAN SHAH 25 • SAYANAT ARSHE 5
- 3. CORPORATE GOVERNANCE “Corporate Governanceis the system by which companies are directed and controlled.” ………. Cadbury (1992) “Corporate Governance is about promoting corporate fairness, transparency and accountability” ……J. Wolfensohn
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- 11. 1 • Changing OwnershipStructure 2 • Importance of Social Responsibility 3 • Growing Number of Scams 4 • Indifference on the part of Shareholders 5 • Globalization 6 • Takeovers and Mergers 7 • SEBI
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- 13. Agency theory isthe branch of financial economics that looks at conflicts of interest between people with different interests in the same assets. This most importantly means the conflicts between: • shareholders and managers of companies • shareholders and bond holders. The theory explains the relationship between principals, such as a shareholders, and agents, such as a company's managers. In this relationship the principal delegates (or hires) an agent to perform work. The theory attempts to deal with two specific problems: • how to align the goals of the principal so that they are not in conflict (agency problem), and • that the principal and agent reconcile different tolerances for risk.
- 14. What is agencytheory Agency theory is the branch of financial economics that looks at conflicts of interest between people with different interests in the same assets. This most importantly means the conflicts between: • shareholders and managers of companies • shareholders and bond holders.
- 15. The theory explainsthe relationship between principals, such as a shareholders, and agents, such as a company's managers. In this relationship the principal delegates (or hires) an agent to perform work. The theory attempts to deal with two specific problems: • how to align the goals of the principal so that they are not in conflict (agency problem), and • that the principal and agent reconcile different tolerances for risk
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- 17. Need for models •The essence of the model is to evaluate the “crafted” principles applied to the “LOGIC” of governance: versight, uidance, nformation, ulture earning
- 18. Three models ofcorporate governance from developed capital markets Anglo-US Model Japanese Model German Model
- 19. • This modelis also called an ‘Anglo-Saxon model’ and is used as basis of corporate governance in U.S.A, U.K, Canada, Australia, and some common wealth countries. • The shareholders appoint directors who in turn appoint the managers to manage the business. Thus there is separation of ownership and control. ANGLO-US MODEL
- 20. • The boardusually consist of executive directors and few independent directors. The board often has limited ownership stakes in the company. Moreover, a single individual holds both the position of CEO and chairman of the board. • This system (model) relies on effective communication between shareholders, board and management with all important decisions taken after getting approval of shareholders (by voting).
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- 22. JAPANESE MODEL • Thismodel is also called as the business network model, usually shareholders are banks/financial institutions, large family shareholders, corporate with cross- shareholding. • There is supervisory board which is made up of board of directors and a president, who are jointly appointed by shareholder and banks/financial institutions. • This is rejection of the Japanese ‘keiretsu’- a form of cultural relationship among family controlled corporate and groups of complex interlocking business relationship, where cross shareholding is common most of the directors are heads of different divisions of the company. Outside director or independent directors are rarely found of the board.
- 23. GERMAN MODEL • Thisis also called as 2 tier board model as there are 2 boards viz. The supervisory board and the management board. It is used in countries like Germany, Holland, France, etc. • Usually a large majority of shareholders are banks and financial institutions. The shareholder can appoint only 50% of members to constitute the supervisory board. The rest is appointed by employees and labor unions.
- 24. Austrian Corporation s governs Some elements alsoapply Netherlands German Corporation s ScandinaviaFrance Belgium
- 25. BOARD COMPOSITIONS Two-tiered Board ManagementBoard “VORSTAND” Supervisory Board “Aufsichtsrat” Employees/labour Union & Shareholders Responsible for daily management of the company Responsible for appointing the management board Responsible for appointing members to the supervisory board
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