Corporate theory, and the relative balance of power between directors and shareholders, is back on the agenda in relation to U.S. corporate law and law reform. While some scholars have argued for greater shareholder participation in a range of aspects of law, critics of this approach have suggested that such a reform agenda reflects an outmoded, if not illusory, shareholder-centered model of the corporation, and that the board's role is, in fact, to mediate between competing interests of different groups. This rise of comparativism in corporate governance has also presented a wider range of possibilities regarding the role of shareholders. And organizational comparativism, whereby investor-owned firms are viewed not in isolation, but as part of a broader matrix of associations, recognizes a smorgasbord of flexible governance structures, in which the role of participants may differ significantly. The article provides a backdrop to current debate on shareholder participation rights, by identifying and tracing a number of visions of the role of shareholder, which can be discerned at various times in corporate law and across various jurisdictions. These different visions of the shareholder, which reflect competing theories of the corporation itself, have important consequences for two major issues in contemporary corporate governance - first the appropriate level of shareholder participation in governance, and secondly the status of shareholder interests in the board's decision-making process. The article examines a range of different images of the shareholder, their theoretical underpinnings, and their doctrinal implications. Particular images of the shareholder examined in the article include:- the shareholder as owner/principal; as beneficiary; as bystander; as participant in a political entity; as investor; as corporate watchdog; and as managerial partner. The article discusses a number of contemporary legal developments against the backdrop of these evolving images of the shareholders, and argues that the adoption of any one-dimensional model of the past, such as "the shareholder as owner", is inadequate today and can result in a disjunction between law and reality.
{"title":"Visions and Revisions of the Shareholder","authors":"Jennifer G. Hill","doi":"10.2139/SSRN.233137","DOIUrl":"https://doi.org/10.2139/SSRN.233137","url":null,"abstract":"Corporate theory, and the relative balance of power between directors and shareholders, is back on the agenda in relation to U.S. corporate law and law reform. While some scholars have argued for greater shareholder participation in a range of aspects of law, critics of this approach have suggested that such a reform agenda reflects an outmoded, if not illusory, shareholder-centered model of the corporation, and that the board's role is, in fact, to mediate between competing interests of different groups. This rise of comparativism in corporate governance has also presented a wider range of possibilities regarding the role of shareholders. And organizational comparativism, whereby investor-owned firms are viewed not in isolation, but as part of a broader matrix of associations, recognizes a smorgasbord of flexible governance structures, in which the role of participants may differ significantly. The article provides a backdrop to current debate on shareholder participation rights, by identifying and tracing a number of visions of the role of shareholder, which can be discerned at various times in corporate law and across various jurisdictions. These different visions of the shareholder, which reflect competing theories of the corporation itself, have important consequences for two major issues in contemporary corporate governance - first the appropriate level of shareholder participation in governance, and secondly the status of shareholder interests in the board's decision-making process. The article examines a range of different images of the shareholder, their theoretical underpinnings, and their doctrinal implications. Particular images of the shareholder examined in the article include:- the shareholder as owner/principal; as beneficiary; as bystander; as participant in a political entity; as investor; as corporate watchdog; and as managerial partner. The article discusses a number of contemporary legal developments against the backdrop of these evolving images of the shareholders, and argues that the adoption of any one-dimensional model of the past, such as \"the shareholder as owner\", is inadequate today and can result in a disjunction between law and reality.","PeriodicalId":415084,"journal":{"name":"Corporate Law: Finance & Corporate Governance Law eJournal","volume":"19 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2000-07-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125477882","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Bernard Black, Reinier H. Kraakman, Anna Tarassova
In Russia and elsewhere, proponents of rapid, mass privatization of state-owned enterprises (ourselves among them) hoped that the profit incentives unleashed by privatization would soon revive faltering, centrally planned economies. The revival didn't happen. We offer here some partial explanations. First, rapid mass privatization is likely to lead to massive self-dealing by managers and controlling shareholders unless (implausibly in the initial transition from central planning to markets) a country has a good infrastructure for controlling self-dealing. Russia accelerated the self-dealing process by selling control of its largest enterprises cheaply to crooks, who transferred their skimming talents to the enterprises they acquired, and used their wealth to further corrupt the government and block reforms that might constrain their actions. Second, profit incentives to restructure privatized businesses and create new ones can be swamped by the burden on business imposed by a combination of (among other things) a punitive tax system, official corruption, organized crime, and an unfriendly bureaucracy. Third, while self-dealing will still occur (though perhaps to a lesser extent) if state enterprises aren't privatized, since self-dealing accompanies privatization, it politically discredits privatization as a reform strategy and can undercut longer-term reforms. A principal lesson: developing the institutions to control self-dealing is central to successful privatization of large firms.
{"title":"Russian Privatization and Corporate Governance: What Went Wrong?","authors":"Bernard Black, Reinier H. Kraakman, Anna Tarassova","doi":"10.2139/ssrn.181348","DOIUrl":"https://doi.org/10.2139/ssrn.181348","url":null,"abstract":"In Russia and elsewhere, proponents of rapid, mass privatization of state-owned enterprises (ourselves among them) hoped that the profit incentives unleashed by privatization would soon revive faltering, centrally planned economies. The revival didn't happen. We offer here some partial explanations. First, rapid mass privatization is likely to lead to massive self-dealing by managers and controlling shareholders unless (implausibly in the initial transition from central planning to markets) a country has a good infrastructure for controlling self-dealing. Russia accelerated the self-dealing process by selling control of its largest enterprises cheaply to crooks, who transferred their skimming talents to the enterprises they acquired, and used their wealth to further corrupt the government and block reforms that might constrain their actions. Second, profit incentives to restructure privatized businesses and create new ones can be swamped by the burden on business imposed by a combination of (among other things) a punitive tax system, official corruption, organized crime, and an unfriendly bureaucracy. Third, while self-dealing will still occur (though perhaps to a lesser extent) if state enterprises aren't privatized, since self-dealing accompanies privatization, it politically discredits privatization as a reform strategy and can undercut longer-term reforms. A principal lesson: developing the institutions to control self-dealing is central to successful privatization of large firms.","PeriodicalId":415084,"journal":{"name":"Corporate Law: Finance & Corporate Governance Law eJournal","volume":"123 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2000-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114519373","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Britain has a distinguished pedigree as an exporter of legal concepts and innovations but its influence has diminished in recent years. The pattern with respect to company law has been representative of these broader trends. Still, the possibility exists that the United Kingdom (UK) will become a reference point for other jurisdictions in the corporate governance area. This essay considers whether this is likely to occur. Two sets of initiatives are analysed. First, there is a discussion of the work done by three corporate governance panels which issued reports during the 1990s, these being the Cadbury, Greenbury and Hampel Committees. An innovative feature of the work done by these committees was the use of a "Code of Best Practice" approach. Each committee issued a succinct Code, key elements of which the London Stock Exchange subsequently adopted as part of its listing rules. The "Code of Best Practice" approach is proving to be highly influential outside the UK. In a substantial number of countries, committees studying corporate governance issues have issued best practice codes. Often, stock market officials and securities regulators have followed up by amending rules governing publicly traded companies. Second, proposals designed to advance the cause of "stakeholders" affected by corporate activity are considered. Britain's Department of Trade and Industy is currently undertaking a fundamental review of company law and its work is being co-ordinated by a Steering Group. In a consultation document released in 1999, the Steering Group considered the "pluralist" approach to the company. Under this approach, companies are supposed to serve the interests of a number of groups rather than treat the priorities of shareholders as being overriding. The Steering Group discussed various changes that could be made to align the law with the pluralist conception of the company. These proposals seem unlikely to have a major impact outside the UK. Since stakeholder issues have already been widely debated in continental Europe and in North America, the Steering Group's work is insufficiently novel or innovative to attract much attention.
作为法律概念和创新的输出国，英国有着杰出的血统，但近年来其影响力有所减弱。公司法方面的模式代表了这些更广泛的趋势。尽管如此，英国仍有可能成为公司治理领域其他司法管辖区的参考点。本文将探讨这种情况是否可能发生。本文分析了两组举措。首先，讨论了三个公司治理小组所做的工作，这些小组在上世纪90年代发布了报告，分别是吉百利委员会、格林伯里委员会和汉佩尔委员会。这些委员会所做工作的一个创新特点是采用了“最佳做法守则”方法。每个委员会都发布了一份简洁的守则，其中的关键要素随后被伦敦证券交易所采纳为其上市规则的一部分。事实证明，“最佳实践准则”的做法在英国以外具有很强的影响力。在许多国家，研究公司治理问题的委员会颁布了最佳做法守则。通常情况下，股市官员和证券监管机构会跟进修改有关上市公司的规定。其次，考虑旨在促进受公司活动影响的“利益相关者”事业的建议。英国贸易和工业部(Department of Trade and industry)目前正在对公司法进行根本性审查，其工作由一个指导小组协调。在1999年发布的一份咨询文件中，指导小组考虑了公司的“多元化”方法。在这种方法下，公司应该服务于多个集团的利益，而不是把股东的优先考虑置于压倒一切的地位。指导小组讨论了可以作出的各种改变，以使法律与公司的多元化概念保持一致。这些提议似乎不太可能在英国以外产生重大影响。由于利益相关者问题已经在欧洲大陆和北美进行了广泛辩论，因此指导小组的工作不够新颖或创新，无法引起太多关注。
{"title":"Corporate Governance Reform: Britain as an Exporter","authors":"B. Cheffins","doi":"10.2139/ssrn.215950","DOIUrl":"https://doi.org/10.2139/ssrn.215950","url":null,"abstract":"Britain has a distinguished pedigree as an exporter of legal concepts and innovations but its influence has diminished in recent years. The pattern with respect to company law has been representative of these broader trends. Still, the possibility exists that the United Kingdom (UK) will become a reference point for other jurisdictions in the corporate governance area. This essay considers whether this is likely to occur. Two sets of initiatives are analysed. First, there is a discussion of the work done by three corporate governance panels which issued reports during the 1990s, these being the Cadbury, Greenbury and Hampel Committees. An innovative feature of the work done by these committees was the use of a \"Code of Best Practice\" approach. Each committee issued a succinct Code, key elements of which the London Stock Exchange subsequently adopted as part of its listing rules. The \"Code of Best Practice\" approach is proving to be highly influential outside the UK. In a substantial number of countries, committees studying corporate governance issues have issued best practice codes. Often, stock market officials and securities regulators have followed up by amending rules governing publicly traded companies. Second, proposals designed to advance the cause of \"stakeholders\" affected by corporate activity are considered. Britain's Department of Trade and Industy is currently undertaking a fundamental review of company law and its work is being co-ordinated by a Steering Group. In a consultation document released in 1999, the Steering Group considered the \"pluralist\" approach to the company. Under this approach, companies are supposed to serve the interests of a number of groups rather than treat the priorities of shareholders as being overriding. The Steering Group discussed various changes that could be made to align the law with the pluralist conception of the company. These proposals seem unlikely to have a major impact outside the UK. Since stakeholder issues have already been widely debated in continental Europe and in North America, the Steering Group's work is insufficiently novel or innovative to attract much attention.","PeriodicalId":415084,"journal":{"name":"Corporate Law: Finance & Corporate Governance Law eJournal","volume":"24 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2000-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132396135","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper analyzes the Italian rules concerning the decision to adopt defensive tactics in the face of a hostile bid. The regulation presents an enabling aspect in that it does not set ex ante the level of resistance that firms can implement. Rather, it merely sets a pro-resistance default rule. Firms can thus opt out of this regime and model a resistance policy that suits their needs. At the same time, Italian law recognizes that agency costs may plague the decision concerning whether or not to adopt defensive tactics. The law, therefore, introduces a procedural mandatory requirement of shareholders' approval for all decisions that may obstruct a hostile takeover. This mandatory requirement applies, however, only after the launch of a hostile bid. This temporal limitation appears consistent with the need to protect managerial discretion and flexibility in the corporation's ordinary course of business. I posit that this regime strikes an overall efficient equilibrium in the trade-off between the costs and benefits generated by resistance. The paper also analyzes the possible shortcomings of a rule that requires shareholders' vote, that is, the possibility that under certain circumstances incumbent managers and blockholders abuse defensive tactics for entrenchment purposes. Finally, a tentative "public choice" history of the evolution of defensive tactics regulation in Italy is attempted. The picture that emerges appears to confirm the prediction that unitary systems tend to produce more efficient takeover regulation than federal systems.
{"title":"The Decision to Adopt Defensive Tactics in Italy: A Legal and Economic Analysis","authors":"A. Portolano","doi":"10.2139/ssrn.206308","DOIUrl":"https://doi.org/10.2139/ssrn.206308","url":null,"abstract":"This paper analyzes the Italian rules concerning the decision to adopt defensive tactics in the face of a hostile bid. The regulation presents an enabling aspect in that it does not set ex ante the level of resistance that firms can implement. Rather, it merely sets a pro-resistance default rule. Firms can thus opt out of this regime and model a resistance policy that suits their needs. At the same time, Italian law recognizes that agency costs may plague the decision concerning whether or not to adopt defensive tactics. The law, therefore, introduces a procedural mandatory requirement of shareholders' approval for all decisions that may obstruct a hostile takeover. This mandatory requirement applies, however, only after the launch of a hostile bid. This temporal limitation appears consistent with the need to protect managerial discretion and flexibility in the corporation's ordinary course of business. I posit that this regime strikes an overall efficient equilibrium in the trade-off between the costs and benefits generated by resistance. The paper also analyzes the possible shortcomings of a rule that requires shareholders' vote, that is, the possibility that under certain circumstances incumbent managers and blockholders abuse defensive tactics for entrenchment purposes. Finally, a tentative \"public choice\" history of the evolution of defensive tactics regulation in Italy is attempted. The picture that emerges appears to confirm the prediction that unitary systems tend to produce more efficient takeover regulation than federal systems.","PeriodicalId":415084,"journal":{"name":"Corporate Law: Finance & Corporate Governance Law eJournal","volume":"97 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2000-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123127351","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Economics students need to be taught that opportunity costs are important for optimal decision making but that sunk costs are not. Why should this be? Presumably these students have been making optimal decisions all their lives, and the concepts should be easy for them. We show that caring about sunk costs can help agents achieve efficient investments in a simple team production environment. Furthermore, the solution we propose is uniquely efficient if the environment is sufficiently complex. Hence, in addition to explaining contract form and ownership (Williamson, 1975; Hart, 1995), studies of the holdup problem may also provide insights into observed behavior in day-today bilateral bargaining problems. Copyright 2003, Oxford University Press.
{"title":"Caring About Sunk Costs: A Behavioral Solution to Hold-Up Problems with Small Stakes","authors":"H. Carmichael, W. Macleod","doi":"10.2139/ssrn.200776","DOIUrl":"https://doi.org/10.2139/ssrn.200776","url":null,"abstract":"Economics students need to be taught that opportunity costs are important for optimal decision making but that sunk costs are not. Why should this be? Presumably these students have been making optimal decisions all their lives, and the concepts should be easy for them. We show that caring about sunk costs can help agents achieve efficient investments in a simple team production environment. Furthermore, the solution we propose is uniquely efficient if the environment is sufficiently complex. Hence, in addition to explaining contract form and ownership (Williamson, 1975; Hart, 1995), studies of the holdup problem may also provide insights into observed behavior in day-today bilateral bargaining problems. Copyright 2003, Oxford University Press.","PeriodicalId":415084,"journal":{"name":"Corporate Law: Finance & Corporate Governance Law eJournal","volume":"402 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1999-12-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126677937","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study the implications of CEO equity ownership for incentives and control in a sample of 1,011 newly public firms. Before an initial public offering, equity investments by venture capitalists reduce CEO ownership by about half, from an average of 35 percent to 19 percent. Venture capitalists narrow this difference by granting options, reducing secondary sales, and lowering the dilution by primary shares, but a gap in post-IPO CEO equity ownership remains. The effect of this lower ownership on incentives depends upon the measure employed - the dollar sensitivity of CEO pay to firm value is lower in venture firms, but the elasticity is about the same. In addition, we present evidence that lower ownership, combined with concentrated outside holdings, leads to a reduction in the agency costs of managerial control. We conclude that the patterns of ownership in part represent a tradeoff by venture capitalists between the benefits of incentives and the agency costs of control.
{"title":"Executive Ownership and Control in Newly Public Firms: The Role of Venture Capitalists","authors":"Malcolm P. Baker, Paul A. Gompers","doi":"10.2139/ssrn.165173","DOIUrl":"https://doi.org/10.2139/ssrn.165173","url":null,"abstract":"We study the implications of CEO equity ownership for incentives and control in a sample of 1,011 newly public firms. Before an initial public offering, equity investments by venture capitalists reduce CEO ownership by about half, from an average of 35 percent to 19 percent. Venture capitalists narrow this difference by granting options, reducing secondary sales, and lowering the dilution by primary shares, but a gap in post-IPO CEO equity ownership remains. The effect of this lower ownership on incentives depends upon the measure employed - the dollar sensitivity of CEO pay to firm value is lower in venture firms, but the elasticity is about the same. In addition, we present evidence that lower ownership, combined with concentrated outside holdings, leads to a reduction in the agency costs of managerial control. We conclude that the patterns of ownership in part represent a tradeoff by venture capitalists between the benefits of incentives and the agency costs of control.","PeriodicalId":415084,"journal":{"name":"Corporate Law: Finance & Corporate Governance Law eJournal","volume":"50 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1999-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126637919","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Critics of the Japanese financial system have long held that Japanese keiretsu and the Main Bank system have helped Japanese corporations reduce their cost of capital and therefore gain a cost comparative advantage over their western counterparts. These institutional practices, claim critics, have limited the access of foreign firms to the Japanese product and financial markets. In this paper we bring some evidence in support of these critics' claim, but only for the period 1972-1985. From the mid-1980s onwards, the evidence shows that Japanese financial liberalization has not only reduced the financial influence of these institutions, but has had a varied impact on Japanese corporate flow-of-funds patterns and on Japanese corporate size. The first section of this paper introduces the Keiretsu, the Main Bank system, and the impact of financial liberalization; the second section presents the data and data analysis, and the third section ends with the summary and conclusions.
{"title":"The Effect of Japanese Financial Liberalization on Keiretsu, the Main Bank System, and Japanese Corporate Financing: Evidence for 1972-1992","authors":"Arav S. Ouandlous, G. Philippatos","doi":"10.2139/ssrn.250374","DOIUrl":"https://doi.org/10.2139/ssrn.250374","url":null,"abstract":"Critics of the Japanese financial system have long held that Japanese keiretsu and the Main Bank system have helped Japanese corporations reduce their cost of capital and therefore gain a cost comparative advantage over their western counterparts. These institutional practices, claim critics, have limited the access of foreign firms to the Japanese product and financial markets. In this paper we bring some evidence in support of these critics' claim, but only for the period 1972-1985. From the mid-1980s onwards, the evidence shows that Japanese financial liberalization has not only reduced the financial influence of these institutions, but has had a varied impact on Japanese corporate flow-of-funds patterns and on Japanese corporate size. The first section of this paper introduces the Keiretsu, the Main Bank system, and the impact of financial liberalization; the second section presents the data and data analysis, and the third section ends with the summary and conclusions.","PeriodicalId":415084,"journal":{"name":"Corporate Law: Finance & Corporate Governance Law eJournal","volume":"430 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1999-10-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133159142","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The Code of Best Practice is a product of the Committee on Corporate Governance, which was founded as a non-government body in March 1999. The Committee was composed of fourteen members from the fields of business, finance, accounting and law, along with an advisory group of thirteen experts. The Code consists of five sections and recommendations: Preamble, Shareholders, the Board of Directors, Audit Systems, Stakeholders, and Management Monitoring by the Market. The Code is primarily intended for listed companies. Non-listed firms, however, are also encouraged to follow the Code voluntarily. The Code has been prepared on the assumption that circumstances surrounding each corporation are different from others and are also continuously changing. Many of the principles and recommendations included in the Code have therefore been rendered quite general and flexible. The Code is scheduled to be reviewed and revised regularly to accommodate changing circumstances.
{"title":"Code of Best Practice for Corporate Governance","authors":"Corporate Governance Committee","doi":"10.2139/ssrn.192170","DOIUrl":"https://doi.org/10.2139/ssrn.192170","url":null,"abstract":"The Code of Best Practice is a product of the Committee on Corporate Governance, which was founded as a non-government body in March 1999. The Committee was composed of fourteen members from the fields of business, finance, accounting and law, along with an advisory group of thirteen experts. The Code consists of five sections and recommendations: Preamble, Shareholders, the Board of Directors, Audit Systems, Stakeholders, and Management Monitoring by the Market. The Code is primarily intended for listed companies. Non-listed firms, however, are also encouraged to follow the Code voluntarily. The Code has been prepared on the assumption that circumstances surrounding each corporation are different from others and are also continuously changing. Many of the principles and recommendations included in the Code have therefore been rendered quite general and flexible. The Code is scheduled to be reviewed and revised regularly to accommodate changing circumstances.","PeriodicalId":415084,"journal":{"name":"Corporate Law: Finance & Corporate Governance Law eJournal","volume":"12 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1999-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115106639","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We analyze the simultaneous relationship between managerial ownership, board structure, and firm value, using a sample of all UK non-financial listed companies. We test the hypothesis that managers in the UK should become entrenched at a higher level of ownership compared to their US counterparts because of institutional differences across the two markets. We find a strong U-shaped relationship between the level of managerial ownership and the probability that the roles of chairman and CEO are split, that a non-executive director is appointed as chairman, and the proportion of non-executive directors on the board. However, we report a generally weak relationship between firm value and managerial ownership, board structure and the combination of managerial ownership and board structure. Our results cast doubt on the effectiveness of these internal corporate governance mechanisms.
{"title":"Managerial Ownership, Board Structure and Firm Value: The UK Evidence","authors":"M. Faccio, M. Lasfer","doi":"10.2139/ssrn.179008","DOIUrl":"https://doi.org/10.2139/ssrn.179008","url":null,"abstract":"We analyze the simultaneous relationship between managerial ownership, board structure, and firm value, using a sample of all UK non-financial listed companies. We test the hypothesis that managers in the UK should become entrenched at a higher level of ownership compared to their US counterparts because of institutional differences across the two markets. We find a strong U-shaped relationship between the level of managerial ownership and the probability that the roles of chairman and CEO are split, that a non-executive director is appointed as chairman, and the proportion of non-executive directors on the board. However, we report a generally weak relationship between firm value and managerial ownership, board structure and the combination of managerial ownership and board structure. Our results cast doubt on the effectiveness of these internal corporate governance mechanisms.","PeriodicalId":415084,"journal":{"name":"Corporate Law: Finance & Corporate Governance Law eJournal","volume":"33 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1999-08-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123813697","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 1999-08-01DOI: 10.1787/9789264123571-8-en
Daniel Kaufmann, Aart C. Kraay, Pablo Zoido
Six new aggregate measures capturing various dimensions of governance provide new evidence of a strong causal relationship from better governance to better development outcomes. In a cross-section of more than 150 countries, Kaufmann, Kraay, and Zoido-Lobaton provide new empirical evidence of a strong causal relationship from better governance to better development outcomes. They base their analysis on a new database containing more than 300 governance indicators compiled from a variety of sources. They provide a detailed description of each of these indicators and sources. Using an unobserved components methodology (described in the companion paper by Kaufmann, Kraay, and Zoido-Lobaton, Aggregating Governance Indicators, Policy Research Working Paper 2195), they then construct six aggregate indicators corresponding to six basic governance concepts: voice and accountability, political instability and violence, government effectiveness, regulatory burden, rule of law, and graft. As measured by these indicators, governance matters for development outcomes. This paper - a joint product of Macroeconomics and Growth, Development Research Group; and Governance, Regulation, and Finance, World Bank Institute - is part of a larger effort in the Bank to study the causes and consequences of governance for development. The authors may be contacted at dkaufmann@worldbank.org, akraay@worldbank.org, or pzoidolobaton@worldbank.org.
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