Ethics, Corporate Governance and Company Social Responsibility
OCED state-owned enterprises and Privatized companies
In the past few decades, emerging economies have launched ambitious plans to privatize their state owned enterprises (SOEs). The volume of privatization in emerging economies has increased from $8 billion in 1990 to about $65 billion in 1997 (Dharwadkar, George, & Brandes, 2000). In privatization, ownership is transferred from the state to new private and public owners, which may include management, employees, local individuals, institutions, and foreign investors, with the state also retaining a certain percentage of ownership after privatization. The new diversified ownership structure after privatization makes corporate governance an important issue in emerging economies (Rajagopalan and Zhang, 2008).
On the one hand, the new ownership structure creates the traditional principal agency problem whereby self-interested executives aim to maximize their private interests rather than the owners' interests. To address this problem, it is necessary to design effective incentive mechanisms to align management interests with owners' interests and/or to design effective control mechanisms to regulate management behaviors. On the other hand, the new ownership structure can also create principal -- principal agency problems that are unique to emerging markets. In these unique agency contexts, large or majority shareholders often control the firm and expropriate minority shareholders' interests in the firm (Dharwadkar et al., 2000). As a result, it is also important to design governance mechanisms and safeguards to protect minority shareholders' interests from expropriation by majority shareholders (Rajagopalan and Zhang, 2008).
Corporate Governance as practiced in various OCED countries
One can see within the OECD countries, there are many different approaches to governance. The national administrative system in different countries is different with regards to shareholder return, stakeholder contentment, and corporate social responsibility. Many analysts have been busy analyzing the options to create harmony among various approaches of corporate governance with same objectives. Some of key models under discussion are listed below (Windsor, 2009).
The Anglo-American method emphasizes the accountability of directors as well as the agency problems of monitoring and controlling executives by investors. The U.S. And U.K. are stranger economies with comparatively subtle publicly-listed company ownership. The common law method does not strictly command pro-t maximization; the business judgment rule, legal examples approving corporate charity, and in approximately half of the states so-called district statutes afford broader carefulness for the boards. A distinctive feature of the Anglo-American method is a single-tier board. The Italian corporate governance law enacted in 2003 accommodates companies' selection of in the three choices of the traditional Italian system, the German two-tier structure, and finally the Anglo-American single board structure (Ghezzi and Malberti, 2008).
The supervisory board employs the management board and thereafter is given access to specific information. The German approach, an example of a civil law system, emphasizes double company responsibilities to two types of stakeholders (i.e., investors as well as employees). The labor involvement is different with different ownership styles and number of labor. By a law passed in 1972, each organization with five or more stable voting staff has to have a works council. The EU has shaped a European-level registration (Societas Europea or SE) that constitutes a single board (on the Anglo American pattern) but connecting the issue of works councils. Where this Societas Europea SE is formed in Germany, German law applies. However, international mergers caused some problems in this regard as well (Windsor, 2009).
There is some legal evidence for the German governance (Government Commission, 2002) might be directed in connection to employee relations. A shareholder value index for the 40 major listed German firms had been constructed by Hopner (2001). Internal factors like decreased monitoring by corporate networks and banks and higher compensation of executives, are often found to have been in interaction with the exposure of external market. In this way more emphasis is laid on the shareholder value. The study also found that the varying conditions can cause various complications for the every layer of management and employees. This drives the industrial relations as per the market conditions (Windsor, 2009).
The Japanese approach is a mixture of all approaches with single tier board and largely company unions, and lifetime job security. Banks usually have more importance as compared to investors. The firms are owned by network of families. Japan Corporate Governance Forum, 2001 resulted in a very different evolution to the flexible decision making and while keeping the certain aspects of Japanese company (Buchanan and Deakin, 2007). Another study found that in Japan an investment portfolio of well governed companies (those using an index of several features thought to be associated with profitability and market value) underperforms very much as an investment portfolio of poorly-governed companies (Aman and Nguyen, 2008). The experiential...
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