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    Models of Corporate Governance

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    aditi kundu
    The document outlines four main models of corporate governance: the Japanese, Anglo-American/Anglo-Saxon, German, and Indian models. It also summarizes three theories of corporate governance: agency theory, which focuses on the potential conflict between owners and managers; stewardship theory, which posits that managers will act as responsible stewards of the company; and stakeholders theory, which argues that managers should balance the interests of all stakeholders, not just shareholders.

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    Models of Corporate Governance

    Uploaded by

    aditi kundu
    23 views3 pages
    The document outlines four main models of corporate governance: the Japanese, Anglo-American/Anglo-Saxon, German, and Indian models. It also summarizes three theories of corporate governance: agency theory, which focuses on the potential conflict between owners and managers; stewardship theory, which posits that managers will act as responsible stewards of the company; and stakeholders theory, which argues that managers should balance the interests of all stakeholders, not just shareholders.

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    MODELS OF CORPORATE GOVERNANCE

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    The document outlines four main models of corporate governance: the Japanese, Anglo-American/Anglo-Saxon, German, and Indian models. It also summarizes three theories of corporate governance: agency theory, which focuses on the potential conflict between owners and managers; stewardship theory, which posits that managers will act as responsible stewards of the company; and stakeholders theory, which argues that managers should balance the interests of all stakeholders, not just shareholders.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    23 views3 pages

    Models of Corporate Governance

    Uploaded by

    aditi kundu
    The document outlines four main models of corporate governance: the Japanese, Anglo-American/Anglo-Saxon, German, and Indian models. It also summarizes three theories of corporate governance: agency theory, which focuses on the potential conflict between owners and managers; stewardship theory, which posits that managers will act as responsible stewards of the company; and stakeholders theory, which argues that managers should balance the interests of all stakeholders, not just shareholders.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    of 3

    MODELS OF CORPORATE GOVERNANCE

     Japanese
     Anglo-American/Anglo-Saxon
     German
     Indian

    Anglo-American Model
     AKA Anglo-Saxon model
     Prevalent in USA, UK, Canada, Australia, common wealth nations
     Premised on segregation of management and ownership
     Shareholders appoint directors, the directors in turn appoint management to
    manage/supervise the business
     Segregation important especially in large corporate organisations with large
    board structures
     Optimum board structure
     Board must comprise a mix of executive and non-executive directors (ID)
     Some directors will look into management of the company, and some will
    cater to independent judgement
     Board must have limited ownership stakes in the company
     Effective Communication between shareholders, board and management
     All important decisions taken with the approval of the shareholders (by
    voting)

    German Model
     Prevelant in Germany, Holland, France, etc.
     Emphasis on 2-tier board structure
     2 tiers- Supervisory board and management board
     Management has its own tier
     The supervisory tier is the tier of ownership- and rights of the management
    flows out from this tier itself, Owners have right to delegate to the managers

    Japanese Model
     Also called business network model
     Emphasis on collective decision making
     Large-scale shareholders exist- banks, financial institutions, large families,
    basically, there is cross shareholding
     Supervisory board- board of directors + president
     And the members of the supervisory board are jointly appointed by all the
    shareholders
     Premised on power of loan givers- one who gives you loan also has the right
    to decide
    Indian Model
     Mix of Anglo-American and German model
     We do not follow Japanese model
     India- different corporate structures like public co, private co, PSUs (statutory co, govt
    co, banks, other financial institutions). They have different shareholding pattern, who
    hold different degree of decision making
     AG/EGM, Board meetings- rights of the directors flow out from the shareholders,
    they hold the power to appoint directors in general meeting (German model)
     India aims at maintaining segregation of directors and owners- mainly ensures
    through independent directors, disclosure requirements (Anglo-American model)

    THEORIES OF CORPORATE GOVERNANCE


     Agency Theory
     Stewardship Theory
     Stakeholders Theory

    Agency Theory
    The owner of the Company hires the agent, that is, the manager or director, to manage the
    affairs of the Company in the best interest of the Company and the owner. The problem
    arises when the person so appointed works for self-interest and to secure his basic salary
    and does not work to increase the profit and life of the Company. When the agent is
    appointed, there is delegation of power, and there is separation of power and control from
    the hands of the owner. The agent is responsible for the decisions taken and the working of
    the Company.

    PRINCIPLE ⇒HIRES ⇒ AGENT ⇒ WORK IN SELF INTEREST.

    Stewardship Theory
    This theory was introduced by Donaldson and Davis (1989). Stewards in the Company
    basically means the directors or the manager of the Company. According to this theory, as a
    steward, when managers are given the power to work in the interest of the Company, they
    work responsibly for the organisational success and balanced growth of all the stakeholders
    —the work in the interest of the shareholders to maximise their wealth.

    SHAREHOLDERS ⇒ EMPOWER THE TRUST ⇒ STEWARD STEWARD⇒ ORGANISATIONAL


    SUCCESS⇒ SHAREHOLDERS

    Stakeholders Theory
    According to this theory, the manager should take steps in the interest to secure good
    governance to improve the relationship and interaction between the various stakeholders
    involved, such as Investors, workers, board of directors’ shareholders, general public,
    regulatory bodies, Business Partners, Employees, etc. This theory implies that the director is
    responsible and accountable to a wide range of stakeholders involved in the Company. This
    theory primarily focuses on balancing the interest of all stakeholders whilst making any
    managerial decision and that nobody’s interest is kept above the other’s and is not given
    supremacy and the decision are taken in the long run interest of the Company.

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