he editor's annotated list of articles on corporate governance
or related subjects. We welcome additional submissions and suggestions.
[A] [B] [C] [D] [E] [F] [G] [H] [I] [J] [K] [L] [M]
[N] [O] [P] [Q] [R] [S] [T] [U] [V] [W] [X] [Y] [Z]
A
Albert, Rory Judd Department of Labor Reaffirms Fiduciary Rules, Pension Management, November 1994, pp. 36, 37. Bulletin 94-2 consolidates information from previous DOL statements on the duties of ERISA plan fiduciaries to vote proxies for shares of corporate stock held by their plans. Also, the DOL describes its view of legal standards imposed by ERISA on using written statements of investment policy, including proxy voting policy. DOL's intent is to reiterate and supplement the Avon letters addressing plan fiduciary obligations concerning proxy voting.
Vineeta Anand, Labor Learns Lesson Well, Pensions & Investments, April 3, 1995, p. 24, 27. Labor is sticking to traditional corporate governance issues to win support from institutional investors. Their focus is on removal of takeover defenses, confidential voting, hefty severance packages for management, a clean board structure.
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Bainbridge, Stephen M.sbainbri@law.uiuc.edu, Particapatory Management Within a Theory of the Firm, 1996, draft. Bainbridge argues that the law should take an enabling approach to participatory management. After a thorough review of the experience of participatory management, Bainbridge concludes that it "offers a solution to the information distortion caused by unnecessary bureaucratic layers" as well as "new mechanisms for preventing shirking by employees." Participation programs facilitate management's efforts to monitor production employees by creating incentives for self-monitoring, encouraging peer pressure and by co-opting group leaders.
Although Bainbridge believes that "corporate employees have an incentive to shirk so long as their compensation does not perfectly align their incentives with those of the firm's shareholders," this does not lead him to explore employee ownership (at least not in this article). He notes, in passing, that employee-owned firms tend to revert to the "capitalist model" over time and that the deleterious consequences of losing both one's employment and capital investment dictate a more efficient allocation of risk-bearing, which the capitalist model provides. Bainbridge does an excellent job of integrating the literature of participatory management with economic theories of the firm growing out of Ronald Coase's The Nature of the Firm. Yet, his choice to focus on participatory management, outside the context of employee ownership, ignores the potential of mixed models where widespread employee ownership is combined with outside investment and employee participation (see, for example: Employee Ownership and Corporate Performance: A Review of the Evidence). One can only speculate on the insights Bainbridge might offer in that direction.
Bathala, ChenchuramaiahT., Kenneth R. Moon and Ramesh P. Rao, Managerial Ownership, Debt Policy, and the Impact of Institutional Holdings: An Agency Perspective, Vol 23, Financial Management, 09-01-1994, pp 38. (download from Electric Library) Institutional investors serve as effective monitoring agents and help in mitigating agency costs. Higher managerial holding are associated with increased levels of R&D and growth.
Bebchuk, Lucian Arye and Christine Jolls, Managerial Value Diversion and Shareholder Wealth, Discussion Paper 179, The Center for Law, Economics and Business, Harvard Law School, 2/96. A common view in the law and economics literature is that restrictions on value diversion may actually reduce share value by forcing shareholders to assign to themselves a right that managers value more highly. The authors purport to show that value diversion often reduces ex ente share value even if the assumptions of the framework are true.
Becker, Brian E. bbecker@acsu.buffalo.edu, Mark A. Huselid huselid@rci.rutgers.edu, Peter S. Pickus and Mike F. Spratt, Crisis and Opportunity: The Two Faces of Human Resource Management in the 1990s and Beyond, draft May 17, 1996. High performance work systems (HPWS) are highly idiosyncratic, tailored to each firm's individual situtation. Inordinate focus on best practices is counterproductive. Crucial decision is how team incentives align with other human resource management (HRM) practices and how the system supports key business priorities. If HR managers are going to evolve into human capital managers they must have knowledge of the business, HRM, and management of change.
Bhagat, Sanjai bhagat@colorado.edu and Bernard Black bblack@lawmail.columbia.edu, Do Independent Directors Matter?, first draft 3/96, second draft 12/96. After studying a large sample the authors find no evidence that the proportion of independent directors affects firm performance. Firm's with independent directors grow more slowly but the causation seems to run the other way around. They found some modest evidence that inside directors (up to 40%) actually shows a small correlation with improved stock performance.
Bhide, Amar Deficient Governance, Harvard Business Review, November-December 1994, pp.129-139. Outlines securities regulations which protect investors but have the unintended consequence of limiting the ability of shareholders who should bear the ultimate responsibility for ratifying long-term strategies and for selecting and rewarding managers.
Black, Bernanrd bblack@lawmail.columbia.edu Shareholder Activism and Corporate Governance in the United States, Draft, 12/97. Survey's corporate governance activities by institutional investors and the empirical evidence and comes up a pessimist. They don't conduct proxy fights; they don't try to nominate board candidates. "Perhaps what little we seem to get, we should have expected." Black provides reviews a wealth of unpublished sources and provides needed insight to a struggling field.
Black, Bernanrd bblack@lawmail.columbia.edu and Reinier Kraakman A Self-Enforcing Model of Corporate Law, Harvard Law Review, June 1996. Review based on abstract from preprinted draft. The article describes contextual features of emerging economies that make importing statutes from developed countries inappropriate, including the prevalance of controlled companies and the weakness of other institutional, market, cultural, and legal constraints. The self-enforcing model, advocated by the authors and recently adopted into Russian law, structures corporate decisionmaking to allow large shareholders to protect themselves from insider opportunism with minimal resort to the courts. Provisions include mandatory cumulative voting and dual shareholder/board approval for self-interested transactions.
Blair, Margaret M.MBLAIR@BROOK.EDU and Lynn A. Stout, A Theory of Corporation Law as a Response to Contracting Problems in Team Production, Draft, September 26, 1997. The authors propose an alternative to "agency theory" which views shareholders as owners and directors as their agents. They believe, instead, that public corporations evolved primarily as a solution to the "team production" problem. Team members face the problems of shirking and rent-seeking which cannot easily be resolved by contracts, especially when team production processes are increasingly continuous and complex. Through a mediating hierarchy, members give up important property rights as well as inputs, such as financial capital and firm-specific human capital, to the fictional legal entity created by incorporation. "The mediating hierarchy approach suggests that directors should not be under direct control of any particular stakeholder group -- including shareholders."
"The primary job of the board directors is not to act as agents who ruthlessly pursue shareholders' interests at the expense of employees, creditors or other team members. Rather, the directors are trustees for the corporation itself-- mediating hierarchs whose job is to balance team members' competing interests in a fashion that keeps everyone happy enough so that the productive coalition stays together." The corporation is then best seen "not as a nexus of implicit and explicit contracts, but as a decisionmaking process to which many and varied individuals submit themselves by giving up control over their firm-specific investments to an independent third party in hopes of sharing in the economic rents that can flow from team production." "Directors should be viewed as disinterested trustees charged with faithfully representing the interests not just of shareholders, but of managers, rank-and-file employees, creditors, and other corporate team members as well."
Blair and Stout have successfully reframed "stakeholder" theory and have demonstrated its legitimacy through intriguing arguments in logic concerning how contracting problems in team production are best resolved and by citing case law. The board as an internal mechanism for dispute resolution is a compelling perspective on reality. However, failing to give primacy to one of the board's constituents (shareholders) raises unanswered questions concerning how the board itself is to be held accountable, especially given how weak the duty of loyalty and care are in providing legal protections to the other parties. While their paper provides a theory which unifies and provides legitimacy to the current rules of corporate law, only time will tell if it brings us closer to resolving important issues.
In their concluding remarks, the authors indicate the "new focus on shareholders' interests has adversely effected other corporate constituencies -- especially rank-and-file employees." "The shift in the balance of power in boardrooms toward shareholders is the result not of directors' sudden recognition that shareholders are 'owners' of the corporation, but from changing economic and political forces that have improved shareholders' relative bargaining power vis-a-vis other coalition members." How would the mediating hierarchy model facilitate a more equitable distribution of power or accountability?
In 1984 Richard Freeman and James Medoff found that unions enhance productivity; they enlarge the corporate pie but then they grab a larger slice which actually results in lower profits for shareholders (What Do Unions Do?). The globalized economy is unlikely to yield a larger slice to labor in the form of wages, even though their firm-specific investments, rather than that of capital, are increasingly responsible for the pie enlarging. The battle over the size of each party's slice is increasingly being determined by shareholders, probably because it is so much easier to mobilize.
Given increased global competition and the adoption of performance measures such as EVA, money will flow to where it can best make a profit. There is strong evidence that companies with a fairly high proportion of employee ownership and participation are more productive. Use of a mediating hierarchy model emphasizes that many of the most important interactions inside the firm are horizontal, with management often acting as referee. Adoption of the model could lead to:
- Reducing the proportion of the pie paid to top executives.
- More widespread adoption of equity sharing and participation schemes.
- Increased shareholder activism by unions.
- A reexamination by many institutional investors of guidelines concerning dilution...raising the threshold if such dilution is expected to be more than offset by productivity gains.
Blair, Margaret M.MBLAIR@BROOK.EDU, Rethinking Assumptions Behind Corporate Governance, Challenge, Volume 38,11-01-1995, pp 12, Copyright M.E. Sharpe Inc. (download from Electric Library) Blair argues that managers view employee wages as a cost to be reduced, yet, "the return on firm-specific human capital is part of what society as a whole should want to see maximized." Employees are much more likely to participate in cost cutting and innovation if they are confident they will share in the wealth created. Corporate governance discussions need to recognize the importance of employees to wealth creation. Their firm specific investments should be recognized "through formal compensation schemes organizational forms, or other arrangements that place significant amounts of the company's equity under the control of the at-risk stake-holders and that assign control responsibilities comensurate with their equity stake to this group."
Blair, Margaret M.MBLAIR@BROOK.EDU, Interviewed by Gary Burtless,Why Wages Aren't Growing, Challenge, Volume 38,11-01-1995, pp 4, Copyright M.E. Sharpe Inc. (download from Electric Library) Blair looks at the stagnation of wages since 1973 and the distribution of income.
Blair, Margaret M.MBLAIR@BROOK.EDU, CEO Pay: Why Such a Contentious Issue?, Brookings Review, Volume 12,01-01-1994, pp 22, (download from Electric Library) Whereas in the past, improved returns for shareholders were typically associated with growing incomes at all levels, "jackpot compensation awards to executives are coming just as the earnings potential and job security of the average working persons seem weaker than any time in the past 40 years."
Blair, Margaret M.MBLAIR@BROOK.EDU, Survey of Empirical Evidence on the Effects of "Relationship Investing" On Corporate Performance, a report prepared for the Subcouncil on Capital Allocation, Competitiveness Policy Council, December 22, 1994. Blair reviews the empirical research. Of the antitakeover devices identified by legal and financial scholars, only supermajority amendments, elimination of cumulative voting rights and poison pills have actually been shown to lower value of the adopting company's shares. Large block investments by insiders or outsiders can help increase the value of a company.
Blasi, Joseph blasi@gandalf.rutgers.edu and Andrei Shleifer, Corporate Governance in Russia: An Initial Look, presented at a joint conference sponsored by the World Bank and the Central European University Privatization Project, on December 15-16, 1994 in Washington, D.C. Reports on three surveys conducted between 1992 and 1995 on privatization efforts and fluid developments in the area of corporate governance.
Blasi, Joseph Raphael blasi@gandalf.rutgers.edu and Douglas Lynn Kruse, The New Owners: The Mass Emergence of Employee Ownership in Public Companies and What It Means to American Business HarperBusiness, 1991. The evidence points to the fact that employee ownership itself does not improve productivity or profitability except when combined with employee involvement. By the year 2000, workers in companies more than 10 percent employee-held will dwarf the entire membership of the trade union movement. Blasi and Kruse expect these workers will press management to let employee ownership make a difference through employee empowerment.
Blasi, Joseph Raphael blasi@gandalf.rutgers.edu, Michael Conte, Douglas Lynn Kruse, and Hsiu-Yu Lin, Public Company Employee Ownership and Economic Performance, There is no automatic linkage between employee ownership and firm performance, while the significant differences that do appear are favorable to employee ownership.
Briggs, Thomas W. Shareholder Activism and Insurgency Under the New Proxy Rules, The Business Lawyer, Volume 50, November 1994, pp. 99-149. Reviews the October 22, 1992 SEC proxy rule changes. Concludes that activists will call for expansion of the ten-or-fewer proxy exemption to include an unlimited number of sophisticated investors and for reform of the rules under 13(d) concerning disclosure of groups.
Buchholtz, A. K., & Ribbens, B. A. (1994, June). Role of Chief Executive Officers in Takeover Resistance: Effects of CEO Incentives and Individual Characteristics, Academy of Management Journal, Vol. 37, No. 3, P. 554-579. Examines the influence of CEO incentives and individual characteristics on the likelihood that target firms will resist takeover attempts. The greater the level of CEO stock ownership, the lower the likelihood of takeover resistance; however, neither the existence nor the magnitude of a CEO's "golden parachute" payment affected takeover resistance.
Buckley, F.H. fbuckley@vms1.gmu.edu, The Canadian Keiretsu, George Mason University School of Law, 5/4/96. Buckley traces the "two nations" which "emerged from America's first civil war: a Whig republic, modern and egalitarian; and a Tory dominion, traditional and hierarchical." The US and Canada were divided on tactics. Buckley points out that only 14% of the TSE's 300 are widely-held, as compared to 63% of the Fortune 500. "In more than 60% of the Canadian firms, and only 18% of the American firms, a 50% control block of voting shares is held by a single shareholder or group of shareholders." Cross ownership is much more prevalent. "Of the 100 most profitable Canadian companies, nearly 45% held more than 10% of the voting shares of another firm on the list."
He attributes the Canadian keiretsu to the private intelligence networks centered around banks. Mark Roe pointed to the differences between the US where the 3 largest banks have assets equal to 7% of GNP, whereas in Germany and Japan these figures were 36% and 39% respectively. In Canada the 3 largest banks have assets equal to 55% of GDP, 80% within the top 5 banks. Although Canadian banks are prohibited from holding more than 10% of the voting stock of Canadian corporations, they had the great threat advantage of assuming control of assets in default since assets were not stayed, as under Chapter 11 in the US. Banks did not grow by attracting clients from other banks but by growing with their clients...thus having an indirect stake in them. Professor Buckley's paper contains much food for thought for those concerned with "relational investing" or for those who would imagine the US with relaxed restrictions on the financial community or less pro-debtor bankruptcy laws.
Business and Society Review, Should Investors Look Beyond the Bottom Line? (Fall 1994), pp. 6-10. Comments of several scholars on the decision by CalPERS to make treatment of employees a criterion for making investment decisions.
C
The California Governance Group, Reaching Accord at the Boardroom Table, Stanford Business School Magazine, September 1993, pp. 2 and 3. Sets forth eleven principles of corporate governance.
Cantillo, Miguel, The Rise and Fall of Bank Control in the United States: 1890-1920, October 1995. Complements Roe by sketching the evolution of railroad and industrial firms. The link of ownership and control was changed by massive restructuring in the 1890s and 1900s. Newly reorganized firms were controlled by banks such as J.P. Morgan, which took board positions to ensure adequate financial returns. The final stage began in the 1910s with public policy reaction to bank control and led to almost complete disappearance of active institutional investors from boards of directors. Cantillo estimates this political reaction resulted in the destruction of about 6% of the equity value of bank-controlled firms.
Carberry, Edward J., Corporate Governance in Employee-Ownership Companies, National Center for Employee Ownership, 1996. Carberry has written a brief but excellent guide to voting rights, board representation and other areas of employee involvement in corporate governance. His minimal use of legal jargon and frequent examples make this complex area of law more easily understood. The booklet is important not only for ESOP trustees and employee owners but also for institutional investors and shareholder activists attempting to work more closely with employee owners.
Claessens, Stijn MAILTO:cclaessens@worldbank.org, Simeon Djankov MAILTO:sdjankov@worldbank.org and Gerhard Pohl Ownership and Corporate Governance: Evidence from the Czech Republic. For a cross-section of 706 firms over the 1992-95 period, the authors find that the more concentrated ownership is, the higher the market valuation of a firm and the higher its profitability. Large ownership by investment funds sponsored by banks and strategic investors appears to be particularly important in improving corporate governance and turning around firms. Banks on balance provide a positive role in corporate governance when they also have an (indirect) equity stake in a firm.
Coffee, John C. Jr. jcoffee@law.columbia.edu The SEC and the Institutional Investor. Cardozo Law Review, January 1994 (Vol 15, No 4), pp. 837-907. Coffee argues that deregulation would neither give rise to domination of corporations by institutional investors nor would it emancipate shareholders from the tyranny of self-perpetuation corporate managers. The basic force that explains shareholder passivity is rational apathy. After presenting a long list of reasons why monitoring is an unlikely course for institutional investors Coffee concludes that "deregulation alone is not the answer, and positive incentives ma be necessary of greater monitoring is desired." "Competitive forces have induced them to acquire skills in noise trading, hedging, and portfolio management, but not the management consulting skills that an ideal monitor would possess." Central to the problem is reliance on external fund managers whose fees structures and reputation are deeply imbedded in the current legal framework. Coffee's sound recommendations include limiting the concept of the "voting group" under section 13(d) to groups seeking a change in control of the corporation, limiting the applicability of section 16(b) concerning short swing profits and Rule 144 provisions regarding "controlling persons" through safe harbor provisions, and allowing access to the corporationÜs proxy statement under section 14(a) if the proponent has a minimum showing of shareholder support. Additionally, he suggests raising the one hundred beneficial owner limit of hedge funds and allowing individuals to meet a more limited test of wealth or sophistication such as the "accredited investor" standard.
Colman, John M, Good Governance is Good Business, Directors & Boards, Spring 1994, pp. 20-21 In the 1980s, Campbell Soup Co.'s financial performance ranked in the bottom quartile of its industry. The selection of a proven CEO from the outside drove the company to embrace building shareowner wealth over the long term. Key principles of Campbell's governance are now listed in an evolving page in the company's proxy statement. These include: 1. All directors are independent except for one current Campbell executive (the CEO). 2. Every director stands for election every year. 3. All shares have equal voting rights. In addition to these principles, Campbell leads in linking pay to measured financial results. A very high portion of executive compensation is at risk - tied directly to company performance. Campbell's board meets virtually all criteria on the wish lists of the leading institutional investors.
Cyert, Richard, Sok-Hyon Kang, Praveen Kumar, and Anish Shah, Corporate Governance, Ownership Structure, and CEO Compensation, October 1997. Using 1992-3 data, the authors examine a sample of 1,671 firms. They found that CEO compensation is about 2.6% less where median stock ownership by the compensation committee is twice that of an otherwise similar firm. A CEO can expect about 5% less compensation if the largest shareholder's ownership is twice that of an otherwise similar firm. Compensation is about 13% higher when the CEO is also the chairman. Compensation is also positively correlated to a greater portion of outside directors. (For abstract and contact information, see http://papers.ssrn.com/paper.qry?ABSTRACT_ID=28734)
D
Davis, Gerald F. gdavis@research.gsb.columbia.edu and Tracy A. Thompson tracyat@u.washington.edu, A Social Movement Perspective on Corporate Control, Administrative Science Quarterly, 39 (1994): 141-173. Argues that social movements intentionally limited the role of institutional investors, with unintended consequences. Four factors influence the success of group resource mobilization: political opportunity structure, interests, social infrastructure and mobilization.
Del Guercio, Diane,dianedg@oregon.uoregon.edu The Distorting Effect of the Prudent Man Law on Institutional Equity Investments, examines the effect of prudent man laws on the behavior of institutional investors. Due to the nature of common law, the 1990 revision to the Restatement of Trusts which incorporates modern portfolio theory may take several years to become generally accepted. Bank managers, because of the constraints of the prudent man rule, tend to tilt their portfolios toward the high-quality, prudent sector of the equity market, while mutual fund managers do not. The result may be that a rule aimed at beneficiary protection "induces these managers to be inefficiently diversified."
Del Guercio, Diane,dianedg@oregon.uoregon.edu and Jennifer Hawkins, The Motivation and Impact of Pension Fund Activism, 8/97. Examines the impact of pension fund activism by the largest and most active funds (CREF, CalPERS, CalSTRS, SWIB and NYC) during the period 1987-93. Their overall conclusion is that fund behavior is consistent with maximization of fund value and that funds do have a significant impact on target firms. Companies receiving proposals from public pension funds experienced higher senior management turnover, governance events such as shareholder suits, and responsive corporate policies such as asset sales, restructurings and layoffs.
The heaviest indexers (CalPERS, CalSTRS, and NYC) feel publicity is not only useful as a tool with target firms but has beneficial spillover effects on other firms. Activist funds, such as SWIB and CREF, are more focused on the specific firm; spillover might limit their ability to buy at low prices and use the strategy again. Among the fund sponsors, CalPERS is the one most associated with subsequent changes, such as turnover, control attempts and management response in target firms. It also appears that poorly performing firms that do not respond to shareholders, such as CalPERS, by making significant changes are more likely to become takeover targets.
Targets of proposals on board-related issues exhibit positive and significant abnormal returns of 19% in the period between the announcement and outcome dates. However, long run returns (3 years) are no greater for target firms as compared with control firms. We could expect wealth-maximizing funds to trade on their information by increasing their stake in a firm prior to targeting or by reducing investments after targeting if the firm is unresponsive. SWIB follows such a strategy but the indexed funds do not. SWIB also divests 29% of targets within one quarter and 65% within one year of last targeting (which may take several years). Although SWIB's targets were associated with "significantly positive abnormal returns at the outcome date," they were less successful in facilitating more corporate events, such as turnover in upper mangement, than was CalPERS. The authors theorize that corporate managers may be less responsive to SWIB because corporate managers know they will go away.
Denham, Robert CEO of Salomon Inc and Michael Porter mporter@hbs.edu of Harvard Business School, Co-Chairman, Lifting All Boats, Report of the Capital Allocation Subcouncil to the Competitiveness Policy Council, Washington, DC, 1995, Telephone: (202) 632-1307. An excellent review of corporate governance changes impacting competitiveness which include: (1) a decline in average holding period of stock, (2) a regulatory framework which induces money managers to fragment holdings and shun an active role in corporate governance, and (3) the increasing importance of specialized input from "human capital" in the creation of wealth. The report recommends several significant changes in the regulatory framework to: (1) reduce the legal barriers to collective shareholder monitoring, (2) reduce impediments to larger holdings in companies by individual institutional investors, (3) reduce the unnecessary cost of shareholder litigation, and (4) encourage long-term employee and management ownership.
Dobrzynski, Judith H., How to Handle a CEO, Business Week, February 21, 1994, pp. 64-65. Zenith Electronics Corp. directors have stripped Chief Executive Jerry K. Pearlman of free rein. Directors created an oversight system, including a program that tracks 20 performance measures including production and market share by product line, sales in dollars and by unit, pretax profits, employment, such liquidity measures as cash balances and bank borrowings versus available credit, and productivity relative to past performance.
Dobrzynski, Judith H. An Inside Look at CalPERS Boardroom Report Card, Business Week, October 17, 1994, page 196. Discusses CalPERS survey of corporations which asked how corporate governance practices measure against those issued by General Motors in 1993. The major criticism...ratings reflect the completeness of the reply and the board's involvement rather than the status of boardroom practices.
Dow, Greg gdow@sfu.ca and Louis Putterman Why Capital (Usually) Hires Labor: An Assessment of Proposed Explanations, September 1996. The authors look at the central issue of "residual control." This interesting review of the literature develops a comprehensive analytical framework for assessing various hypotheses. The authors review five major explanations for why labor managed firms are rare in relation to capital managed firms: work incentives, wealth constraints and credit rationing, risk aversion and insurance difficulties, asset specificity and investment incentives, and collective choice problems. As the authors point out, the question posed "belongs among the most basic ones that could be addressed by the discipline of economics." It has "substantial policy import, as for instance in evaluating proposals for co-determination along European lines, or for tax and subsidy policies that bear on employee stock ownership plans, worker buy-outs, profit-sharing, and so on." Our hope is that others pick up where the authors leave off and uses the typology developed as the groundwork for hypotheses testing.
Drukarczyk, Jochen jochen.drukarczyk@wiwi.uni-regensburg.de and Hartmut Schmidt, Lenders as a Force of Corporate Governance -- Theory and Evidence, presented at the Max Planck Institute Conference on Comparative Corporate Governance, May 1997. An analysis of U.S., French and German bankruptcy law reveals a strong owner orientation in France, a less marked owner orientation in the U.S. and a creditor orientation in Germany. Owner oriented bankruptcy regimes provide incentives for owners to renegotiate contracts within bankruptcy proceedings. In contrast, a creditor oriented regime assures post-petition lender control and the enforcement of priority and collateral agreements.
E
The Economist, January 29, 1994, Corporate Governance Survey, pp. 3-18. This series of articles surveys the types of markets and monitors by country; the rise of institutional owners and regulations which limit their ability to act; recent developments in Germany, Japan, UK and US; changing role of boards; and increased activism by institutional investors such as CalPERS. Cites Campbell Soup as a model. Board members are independent and are paid in company shares. Senior managers are required to hold shares worth three times their annual salary. The firm has no poison pills or anti-takeover devices. It talks often with institutional investors and actively votes the proxies of shares held by its pension fund in other firms.
Ellett, Martha Whose Company Is It, Anyway?, Economist, 11/25/1995, pp 59. (download from Electric Library) Second Cadbury committee to be headed by Sir Ronald Hampel will look at full disclosure of executive pay, roles of executive and non-executive directors, and lack of interest in corporate governance issues by institutional shareholders.
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James A. Fanto jfanto.brooklaw@pcm.brooklaw.edu The Absence of Cross-Cultural Communication: SEC Mandatory and Foreign Corporate Governance C, Brooklyn Law School, 1996. This paper argues for an amendment to SEC's mandatory disclosure system; requiring that foreign companies make open-ended disclosures to provide US investors with both culturally significant corporate governance information and a relevant conceptual framework. Fanto argues convincingly that current weak requirements only reinforce the impression that corporate governance is the same in other countries as it is in the US. He reviews the complex historical reasons such as jurisdictional concerns and special interest pressures which have led to the current disclosure requirements which do not encourage foreign issuers to explain corporate governance practices in a way which is meaningful to US investors. The paper contains a gold mine of citations concerning corporate governance in general and the evolution of SEC disclosure requirements for foreign companies entering US markets in particular.
Ferry, Richard M. Winds of Change Blow Through Boardrooms--Just Not Gale-Force, Los Angeles Times, 11/26/1995, Business page 2. (download from Electric Library) Boards are now evaluating their CEOs, outside directors are taking over how the board is run and most corporations are now compensating outside directors partially or entirely with stock or stock options.
Franks, Julian MAILTO:jfranks@lbs.lon.ac.uk and Colin Mayer, Ownership, Control and the Performance of German Corporations, presented at the Max Planck Institute Conference on Comparative Corporate Governance, May 1997. Finds a significant relation between poorly performing companies and turnover of the executive boards of companies, but not with the turnover of the supervisory board. Finds little evidence that large shareholders exert more control in poorly performing companies than shareholders of dispersed companies.
Fukao, Mitsuhiro Financial Integration, Corporate Governance and the Performance of Multinational Companies, The Brookings Institute, Wachington, D.C., 1995. Outlines corporate governance structures in France, Germany, Japan, United Kingdom and the United States.
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