Chapter 4 - Models of
Corporate Governance
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ANGLO-US
GENERAL DESCRIPTION
• Shared Ownership
• Equity Financing is Common
• Investors are Outsiders
• Institutional Investors - is a term for entities which pool
money to purchase securities, real property, and other
investment assets or originate loans. Institutional
investors include banks, insurance companies, pensions,
hedge funds, REITs, investment advisors, endowments,
and mutual funds
JAPANESE
GENERAL DESCRIPTION
• High Stock Level Ownership
• Affiliated banks and companies
• Long term links with Banks
• Keiretsu (A keiretsu is a set of companies with
interlocking business relationships and shareholdings. It
is a type of informal business group).
• Insiders are the major BODs & shareholders
• Foreign ownership is small
• Bank representatives are elected to Board (only during
financial distress)
GERMAN
GENERAL DESCRIPTION
• Banks representatives are elected Board
• Two-tiered Board Structures (Executive & Supervisory
Boards)
• Size of the Board set by Law (Industrial Democracy Act
and the Law on Employee Co-Determination)
• Voting rights restriction is legal
• Prefers Bank Financing (Small Market Capitalization)
• Conservative Investment Strategy
• Preserves relationships
• Percentage of foreign ownership is significant
• Globalization changes the way to do business
KEY PLAYER
ANGLO-US
Corporate
Governance Triangle Management,
Shareholders & BOD:
Agency Costs Separation of
Ownership & Control
JAPANESE
Open-Ended
Hexagon: Linked
Government, Bank,
Management &
Keiretsu ; Non-linked
Outside Shareholders
& Independent
Directors
GERMAN
Banks & Corporate
Shareholders (to a
lesser extent)
Aktiengesellschaft AG
- German Public
Limited Company;
Neither Banks nor
Corporations are key
institutional investors
SHARE OWNERSHIP PATTERN
ANGLO-US
Significant are
Institutional Owners
followed by
Individual Investors
JAPANESE
Financial Institutions
and Corporations
hold Equity Market;
Insurance Companies
and Banks hold
significantly of the
equity market;
Banks are key
Shareholders
GERMAN
Corporations,
followed by German
Banks are dominant
shareholders
REGULATORY FRAMEWORK
ANGLO-US
JAPANESE
Wide range of laws
Government
and regulatory codes Ministries are most
; US has the most
influential
regulatory
requirement; UK
based on
parliamentary acts
and rules
GERMAN
Strong Federal
(Federation) & State
Laws
DISCLOSURE REQUIREMENTS
ANGLO-US
Most Stringent and
Comprehensive
Disclosure
Requirements in the
US
JAPANESE
Relatively Stringent
GERMAN
Relatively Stringent.
Allowed to amass
considerable
reserves.
CORPORATE ACTIONS REQUIRING
SHAREHOLDER APPROVAL
ANGLO-US
Routine and NonRoutine Corporate
Actions ; UK has a
shareholder vote in
dividend proposal
unlike in the US;
permits
SHAREHOLDER
PROPOSALS
JAPANESE
Routine and NonRoutine Corporate
Actions
GERMAN
Routine and NonRoutine Corporate
Actions.
SHAREHOLDER
PROPOSALS are also
common
INTERACTIONS AMONG
KEY PLAYERS
ANGLO-US
Complex, wellregulated system for
communication and
interaction between
shareholders and
corporations; May
exercise voting rights
even absent;
Institutional investors
and financial
specialists monitor
performance and
corporate governance.
JAPANESE
Links & strengthens
relationships; outside
shareholders are
small constituency;
shareholders dissent
are discouraged;
annual stockholders'
meeting held same
day each year.
GERMAN
Focus on the interest
of key players;
majority of German
shares are issued in
bearer; shares are
purchased through
the bank and the
banks vote on behalf
of the one they hold
on deposit.