Block 2: Corporate

1
Review Session

• Block 2 Corporate
• Governance

1
2
Block 2 Corporate Governance

• Corporate Governance and the Role of Directors
• Corporate Governance and Top Management
• One-Tier and Two-Tier Governance Systems

2
3
Definition Corporate Governance
Share holder
Corporate Governance Relationship among board of
directors, top management, and shareholders in
determining direction and performance of
corporation
Board
Management
3
4
Structure of Corporate Governance
Shareholders Assembly
Elects
Board of Directors Inside Directors Outside
Directors
Appoints
Top Management (CEO, COO and Ex. VPs)
4
5
Tasks of the Board

• Setting corporate strategy,
• overall direction, mission
• and vision
• Hiring and firing the CEO
• and top management
• Controlling, monitoring, or
• supervising top management
• Reviewing and approving the
• use of resources
• Caring for shareholder
• interests

Tasks of Board of Directors
5
6
The Board and StrategicManagement

• Monitor Developments inside and outside the
  corporation
• Evaluate and influence Review proposals, advise,
  provide suggestions and alternatives
• Initiate and determine Define corporations
  mission and specify strategic options

6
7
Members of the Board

• Inside directors
• Management directors
• Officers or executives employed by corporation
• Outside directors
• Non-management directors
• May be executives of other firms, but not
  employed by boards corporation

7
8
Directors with a Material Interest

• Outsider overly simplistic term -- Some
  outsiders
• are not truly objective and could be considered
• Insiders ? material interest
• Examples
• Affiliated Directors (e.g. from the firms bank)
• Retired Directors (e.g. previous CEO)
• Family Directors (e.g. shareowners)

8
9
Membership Criteria

• Willing to challenge management
• (95 )
• Special expertise (67 )
• Availability for advice and meetings
• (57 )
• Expertise on global issues (41 )
• Understands key technologies (39 )
• External contacts valuable to the firm
• ( 33)
• Detailed knowledge of industry (31 )
• High visibility in field (31 )
• Accomplished in representing
• firm to stakeholders (18 )

Board Membership- Selection Criteria
9
10
Boards in Other Countries
Two-tier Board) (Germany, China, Indonesia)
One-tier Board (USA/UK)
Supervisory Board
Inside Directors
Outside Directors
Management Board
) also called dual board
10