ALBERT

Notes: There are good reasons for national differences in corporate governance, differences in the distributional outcomes desired and differences in motivational resources; material sticks and carrots are not the only ways of keeping top managers efficient, honest and dynamic. Yet, too often discussions of corporate governance assume the Anglo-Saxon model to be normal and others “deviant”– a notion to be challenged, but nevertheless the dominant assumption among the “reformers” of corporate governance in Japan and Germany. Most of the reforms in those two countries over the past decade have purported to be about making top managers more honest and efficient. In fact their purport has more often been to change distributional outcomes, favouring shareholders at the expense of employees.

Notes: We examine the relation between Australian CEO pay and accounting and share price performance indicators, as well as firm size, from 1987 to 1992 inclusive. Our results show no evidence of a linkage between CEO pay and performance. This finding is robust to the use of single year or pooled tests, as well as the specific identification of CEO changes. “Long window” analysis of the pay-performance relation yields similar results. Possible explanations include incomplete disclosure of CEO compensation, the influence of other claimholders (e.g., debtholders), the existence of alternative monitoring mechanisms and the extent to which CEO compensation is effectively deferred. However, subject to these possibilities, our results can be interpreted as consistent with allegations that Australian CEOs have had, by international standards, a relatively small proportion of total compensation “at risk”.

Notes: The publication in the UK of the Cadbury Report and its associated Code of Best Practice focused attention on the conduct and structure of boards in large companies. The Code suggested that greater financial accountability would be facilitated by increasing the number of non-executive directors, creating new sub-committees and ensuring that the power of the chair is limited. Surveys amongst FT100 companies show that their compliance with the Cadbury Code has been rapid and virtually complete (Bostock [1995], Cadbury [1995]); less attention has been paid to the compliance of small and medium-sized companies. The approach that is taken in this survey is to investigate the board structures chosen by these enterprises as they prepare for stock market listing. Companies are prepared for market with the advice of professional advisors who it is assumed have a reputational interest in the success of the issue; therefore, they advance corporate governance structures that satisfy potential investors’ expectations. Such companies are making their boards anew and should represent best-practice. This paper examines whether current practice in small and medium-sized companies conforms to the prescribed model for UK boards. It is concluded that the Cadbury Code is not the only model for emergent small to medium sized companies and that the market does not value its adoption in all cases.

Notes: In 1993 the Executive Board of the Mass Transit Railway Corporation (MTRC) in Hong Kong approved the implementation of a corporate wide manpower and succession planning process. Succession at executive director level was identified as a priority. It was recognised that it would be necessary to identify and assess skills appropriate to company ‘direction’ as distinct from ‘management’ in order to proceed with succession planning at director level and to identify director training and development needs.Two crucial questions emerged: was it possible to identify the core competencies that are required by executive directors? If so, could those competencies be measured and assessed objectively? The experiences of the MTRC in identifying director competencies and in designing, validating and implementing the assessment process during 1994 and 1995 suggests that they can. Their experience forms the basis of this paper.The relatively sparse literature on the identification of director-level competencies is discussed. The competencies identified by the MTRC are outlined. The development of assessment centres, which are widely used to assess core competencies in managerial and professional roles, is then explained. Finally, the experience of the MTRC in extending the use of assessment centres to appraise board-level governance rather than managerial competencies is described and conclusions drawn.

Notes: We analyse the relationship between firm value, as measured by Tobin's q, and newly released indices of effective corporate governance for a sample of 263 Canadian firms. The results indicate that corporate governance does matter in Canada. However, not all elements of measured governance are important, and the effects of governance do differ by ownership category. For the entire sample of firms we find no evidence that a total governance index affects firm performance. This is mainly because we find no evidence that board independence, the most heavily-weighted sub-index, has any positive effect on firm performance. Indeed, for family-owned firms we find that the effect is negative. In general, sub-indices measuring effective compensation, disclosure and shareholder rights practices enhance performance and this is true for most ownership types. We also find no evidence that governance practices are endogenous.

Notes: Agency theorists have put forth a number of internal control mechanisms that can reduce agency problems. These different mechanisms are substitutive and thus it is thought that both the board of directors and large external shareholders can influence CEO compensation. Stewardship theory challenges the presumption of self-interest of agency theory, holding that managers view themselves as stewards of their organisation. The first objective of this paper is to study the influence of the control of the board of directors and large external shareholders on CEO compensation. The second objective is to utilise both stewardship and agency theory to analyse the relationship between control mechanisms and compensation, and to see which theory is more applicable. This paper uses the LISREL model to study the influence that the control of the board of directors and external large shareholders has upon CEO compensation, with data drawn from samples of listed manufacturing companies between the years 1997 and 1999 in Taiwan. The following conclusions are reached: (1) the paper supports the viewpoint of stewardship theory whereby the CEO acts as a steward of his/her company when he/she also holds the position of chairman of the company. (2) The findings show that CEO compensation will be high when the board's control is relatively ineffective. (3) The shareholdings of the board of directors can reinforce the degree of control from the board.

Notes: Books reviewed: Ferdinand A. Gul and Judy S. L. Tsui, eds, The Governance of East Asian Corporations: Post Asian Financial Crisis, New York: Palgrave Macmillan, 2004, ISBN 1403944105 
Reviewed by Professor Christina L. Ahmadjian 
Hitotsubashi University

Notes: This paper presents a new, holistic approach to corporate governance, adding simultaneous value to shareholders, customers, employees and society. This new approach to directing and controlling companies integrates components of corporate governance that have historically been treated in isolation of each other in research, teaching and practice.

Notes: Based on British legislation, the duties of directors are stated in the New Zealand Companies Act 1993. However, “good” governance is not defined within the Act. Considering the relative importance attached by boards to a variety of governance tasks, this paper evaluates directors’ perceptions of the current contribution of fellow board members to different aspects of governance practice. This evaluation is discussed in relation to the influence of board tasks and functions on actions that may be regarded as being in the interests of the company as defined by the Act. The evaluation illustrates the strategic orientation of the board, highlighting the extent to which individual directors and the board as a whole can actually influence key outcomes and, thereby, their governance contribution. The paper reports responses to findings based on a study involving 3000 directors and presents suggestions for enhancing board processes as well as possible changes in expectations that could be encapsulated in legislation.

Notes: After the emergence of the Cadbury Report in 1992, several countries in the EU, including Denmark, issued their own guidelines of corporate governance. However, whether such recommendations benefit shareholders is a controversial question. This article presents an empirical analysis of financial performance and the composition of semi-two-tier boards using a unique sample of Danish listed firms. It is shown that board size, proportion of insiders and positions held by board members in other firms do not significantly impact performance. Only the average age of the board has a significantly negative impact on performance. Thus, it is argued that board structure only plays crucial role when a firm is in financial trouble or faces a major threat – not under normal circumstances.

Notes: In recent years there has been some debate and uncertainty about the legality of private briefings of some market participants with the management of listed companies in the UK. The Myners (2001) and Higgs (2003) Reports have suggested an increasingly active role for institutional shareholders. However, the message from the Financial Services Authority in its role as the United Kingdom Listing Authority has been that private briefings may be unlawful. This article explores the meaning and scope of the legal rules on insider dealing and market abuse under the Financial Services and Markets Act 2000, the Criminal Justice Act 1993 and those parts of the Listing Rules that govern such briefings. The extent to which such rules apply to various types of meeting between corporate managers and other market participants, such as institutional investors, and the information provided in those meetings, will also be examined. The paper concludes that the mismatch between the apparent legal position and the policy objective of the Government of increasing institutional shareholders’ activism requires a resolution.

Notes: We analyse the corporate governance of professional football clubs operating in England's Premier and Football Leagues. Good corporate governance is essential if clubs are to be managed effectively and to survive in the difficult economic circumstances surrounding the football industry. The past couple of years have been especially testing, as Football League clubs have had to deal with the aftermath of the collapse of the ITV digital contract. Our analysis reveals that while there are some noticeable improvements in governance standards, many clubs would benefit from following best practice guidelines on information disclosure, the appointment of directors, board composition, induction and training of directors, risk management and consultation with stakeholders. Despite improvement in some areas over the past three years, standards of corporate governance in football clubs are significantly below those of listed companies as a whole and there is thus considerable need for improvement.Corporate governance in the UK is regulated by Company Law and by codes of corporate governance such as The Combined Code (CC) and The OECD Principles. Whereas compliance with company law is obligatory, compliance with best practice codes of corporate governance, such as the CC, is voluntary in the sense that companies listed on the London Stock Exchange must either comply with the code or else explain any instance of non-compliance in their Annual Report. The rationale for this self-regulatory process is that good corporate governance brings benefits to companies in terms of engendering the trust of investors and improving corporate performance. Firms will therefore find it in their own best interests to comply with the code unless there is a good reason not to do so which can be explained to shareholders in the company's statement of compliance. Since the CC was first introduced, the degree of compliance, as measured by the proportion of companies adopting best practice, has increased considerably, representing a welcome improvement in governance standards.In this paper we present results from our annual survey of FA Premier and Football League clubs, and our analysis of corporate governance statements published by listed clubs, to provide an assessment of the state of corporate governance of professional football clubs. On the basis of this analysis we make a number of recommendations for how the corporate governance of professional football clubs might be improved in the future.

Notes: In 2002, the German Corporate Governance Code was adopted. This paper examines the overall acceptance of the Code recommendations and identifies its critical standards that receive comparably less agreement among German listed companies. The study is based on the compliance declarations of 408 firms listed at the Frankfurt Stock Exchange. The findings indicate a significantly high level of Code conformity which can be expected to increase in the future. Comparative analyses reveal that company size is positively associated with the extent of Code compliance. Neuralgic norms concern the personal liability and compensation of the board members, the staffing of the boards, the structure of the supervisory board and accounting requirements.

Notes: This study aims at investigating the impact of the roles, structure and process of boards on performance of Turkish companies. Drawing on the data obtained from a sample of 386 mostly small and non-listed stock ownership companies, it was found that the separation of chairman and general manager positions has significant positive impact on firm performance. From the board roles of control, service and resource acquisition, firm performance was found to be positively related only to the level of adoption of resource acquisition role. It was also found that the effectiveness, information access and performance evaluation attributes of boards are positively and significantly associated with firm performance.

Notes: In this study we contribute to the literature by re-examining the effect of control and ownership of controlling shareholder on corporate valuation, and determining which particular mechanism for enhancing voting rights would achieve the negative entrenchment effect. We take Taiwan listed companies, where the ownership concentration structure is similar to that in East Asian countries, as our sample. We find the corporate value is higher when the largest shareholder owns more cash flow rights (ownership), supporting the positive incentive effect. The negative entrenchment effect becomes evident when the largest shareholder's cash flow rights are less than the median. Therefore, if the cash flow rights owned by the largest shareholder are greater than the median, the positive incentive effect will restrain the negative entrenchment effect. In family-controlled companies, the corporate value will conspicuously decrease if the largest shareholder enhances their voting rights through cross-shareholding, deeply participates in management or controls most board of directors.

Notes: In this paper we analyse the evolution of the direct and ultimate ownership structure of a large sample of UK non-financial listed firms over the last decade. Our data show that while outsider ownership is relatively stable over time, managerial ownership shows a sharp decreasing trend and it is significantly lower in the presence of a large outside controller. Nonetheless, while average shareholding by executives confirms the decreasing trend, the opposite holds for non-executive directors. In addition, while average board size is rather constant in time, the proportion of non-executives is steadily increasing in time. As far as ultimate ownership is concerned, our data show that the existence of complex ownership structures in the UK is far from being negligible. We document that more than 10 per cent of the firms are owned via a complex structure and the degree of divergence between cash flow and control rights for these firms is around 11 per cent at the 10 per cent cut-off. Our data also suggest that the presence of complex structures is decreasing in time at any cut-off level. In addition, we report a decreasing trend over time of “widely held” firms. Finally, we show preliminary evidence of a negative impact of the divergence between cash flow and control rights on firm value.

Notes: This paper argues that the deeply rooted cause of poor corporate governance practices in China's state-owned banks is the discretion enjoyed by policy makers to re-optimise their policy choices when they deem necessary and the consequent moral hazard leading to opportunistic behaviours of bank managers. By examining the case of Bank of China Hong Kong (BoCHK), the paper suggests that international listing can provide an effective mechanism to mitigate the consequence of discretionary policies and managerial opportunism at home because the company is now disciplined and regulated by a more developed capital market outside the home jurisdiction. It shows that BoCHK's IPO preparation and first two years of listing on Hong Kong Stock Exchange (HKSE) have induced in-depth corporate restructuring and noticeable improvement in governance practices.

Notes: This paper is an attempt to identify what constitutes a good board of directors, and this is based on a comparison between academic literature, corporate governance rating systems and our field research into board practices. We observed that “traditional” academic research focused on a limited number of quantifiable board characteristics, while practitioners attach greater importance to “soft” elements, which are nearly absent in the literature and in the governance ratings. These findings highlight the need for a better understanding of all elements that determine board effectiveness. Furthermore, our results identify three areas of improvement for boards of directors.

Notes: Books reviewed:Don Young and Pat Scott, HAVING THEIR CAKE . . . How the City and Big Bosses are Consuming UK Business, London: Kogan Page, 2004, ISBN 0-7494-3861-4Luis Corriea Da Silva, Marc Goergen and Luc Renneboog, Dividend Policy and Corporate Governance, Oxford: Oxford University Press, 2004, ISBN 0-19-925930-5Colin Coulson-Thomas, The Knowledge Entrepreneur, London: Kogan Page, 2003, ISBN 0-7494-3946-7Surendra Munshi and Biju Paul Abraham, eds, Good Governance, Democratic Societies and Globalisation, New Delhi: Sage Publications, 2004, ISBN 0-7619-9848-9

Notes: This study suggests that firms in highly competitive industries should have fewer outside board members, whereas companies operating in less competitive industries should have more outside directors. Specifically, we argue that board independence is less relevant or even redundant in highly competitive industries, where the firm is already “monitored” by a competitive product market. Using publicly traded Swedish firms for empirical testing, this study finds that board independence reduces firm performance in industries with highly competitive product markets. On the other hand, board independence enhances firm performance among companies facing less competitive product markets.

Notes: Developing an effective corporate governance system is key to Russia's future. Russia is now at a crossroads as it decides to either continue pursuing the Anglo-American form of governance with its emphasis on external market controls, or turn to a more Western European model with its emphasis on internal controls, or some combination of the two. To make these challenges more tangible and bring them into sharper focus, we discuss some of the governance challenges facing four bellwether Russian firms – Gazprom, Sberbank, Wimm-Bill-Dann and Mobile TeleSystems. We conclude with a discussion of the key institutional forces that will heavily influence the path taken by Russia in the future, along with predictions for the future.

Notes: Books reviewed:Paul W. MacAvoy and Ira M. Millstein, The Recurrent Crisis in Corporate Governance, Basingstoke and New York: Palgrave 2003 Macmillan, ISBN 1-4039-1666-7Christine A. Mallin, Corporate Governance, Oxford: Oxford University Press, 2004, ISBN 0-19-926131-8Ian Fraser and William Henry, The Future of Corporate Governance: insights from the UK, Institute of Chartered Accountants of Scotland, 2003

Notes: This paper analyses the market reaction to announcements made by Spanish firms of compliance with the code of best practice. It also attempts to determine how the characteristics of different firms may account for the excess returns observed. The results suggest that the market reacts positively to announcements of compliance with the code of best practice that imply a major restructuring of the board of directors, whereas no wealth effects are observed for announcements that relate to isolated recommendations in the code. These wealth effects are greater for lower levered firms, and also greater the higher the percentage of executive directors.

Notes: This paper examines the development of the regulation of corporate governance in the UK. It seeks to identify why the boundaries of law and self-regulation exist and whether the regulation of corporate governance should now be viewed as a process of collibration rather than a “homeostatic” process of setting unattainable standards. This paper suggests that regulatory developments in the area of corporate governance have taken a substantial new direction; that the boundaries of regulation are no longer determined by the choice between market-based or state-based regulation, but determined by a process of collibration.

Notes: This paper explores current debates and trends in regulation and examines their relevance to the evolution of UK corporate governance codes of practice. In particular, the paper explores frameworks drawn from the regulation of financial services, accounting and audit, and discusses whether there are lessons to be learnt from them for the regulation of UK corporate governance. Because of trends in regulation, and in the light of empirical evidence and recent events, especially post-Enron, an appropriate structure for the regulation of UK corporate governance might be based on that of financial services.

Notes: Chinese listed companies adopt a two-tier board structure, a Board of Directors (BoD) and a Supervisory Board. They are also required to provide in their annual reports a supervisory board report (SBR). However, Congquin, a listed company, failed to issue a SBR in its 1998 annual report. This study specifically investigates the usefulness of the SBR by examining the stock market reaction to Congquin's SBR omission. The study also examines the Supervisory Board's reporting process and users’ perceived usefulness of the SBR through interviews with directors, supervisory board members and senior executives of 16 listed companies. Discussions were also held with financial analysts, regulatory officials and academics. Our event study suggests that the absence of the SBR in Congquin's 1998 annual report caused a negative market reaction suggesting that investors had considered the SBR and the Supervisory Board important and were discouraged by the problems manifested by the absence of the SBR. Our interviews reveal that the usefulness of the SBR depends on the role that the Supervisory Board plays in corporate governance. If the Supervisory Board is an honoured guest, a friendly advisor, or a censored watchdog, it is unlikely that the SBR will convey much useful information. By contrast, if the Supervisory Board acts as an independent watchdog, then the SBR would be useful. Given the fact that the Supervisory Board in most of the companies that participated in the interviews fell into the first three categories, there remains a strong need to improve the usefulness of the SBR and strengthen the functioning of the Supervisory Board.

Notes: In recent years, the debate about the efficiency of corporate governance mechanisms has focused on the activity of the corporate boards of directors. This paper analyses the effect of the size of the board, its composition and internal functioning on firm value in a sample of 450 non-financial companies from ten countries in Western Europe and North America. The econometric method combines uniequational regression analysis with simultaneous equations in order to control for the possibility of board size and composition endogeneity. The results show a negative relationship between firm value and the size of the board of directors. This relation holds when we control for alternative definitions of firm size and for board composition, the board's internal functioning, country effect and industry effect. We find no significant relationship between the composition of the board and the value of the firm. These results are consistent with previous relevant papers and show that companies with oversized boards of directors have poorer performance both in countries where internal mechanisms of governance dominate and in countries where external mechanisms are predominant.

Notes: Book Reviwes in The Article:Hilmer, Frederick G.; Strictly Boardroom – the report of an Independent Working Party into Cornorate Governance; Information Australia, Melbourne and The Sydney Institute, Sydney, AustraliaHumphrey, Christopher, Peter Moizer and Stuart Turley; The Audit Expectations Gap in the United Kingdom; The Auditing Research Foundation of the Institute of Chartered Accountants in England and Wales; LondonBosch, Henry; Bosch on Business, Information Australia, Melbourne, Australia, 1992.

Notes: Books reviewed: J.A. McCahery, T. Raaijmakers and E.P.M. Vermeulen, The Governance of Close Corporations and Partnerships, Oxford: Oxford University Press, 2004, ISBN 0 19 926435 X 
Reviewed by Dr Stephen Copp 
Bournemouth Law School Laixiang Sun, ed., Ownership and Governance of Enterprises. Recent Innovative Developments, New York: Palgrave Macmillan, 2003, ISBN 1-4039-1633-0 
Reviewed by Dr Silvia Gómez 
University of Oviedo, Spain Claire Marston, A Survey of European Investor Relations, Edinburgh: The Institute of Chartered Accountants of Scotland, 2004, ISBN 1 904574 08 4 
Reviewed by John Holland 
Glasgow University

Notes: In the context of agency theory (Jensen and Meckling, 1976. Journal of Financial Economics, 3, 305–360), how insider stock ownership relates to firm performance is explored in this paper. The relevant performance measure used is total factor productivity. Insiders are classified into executives, board members and blockholders so as to facilitate a detailed study. Five-year (1996–2000) panel data of 333 Taiwanese listed electronics firms are examined. It is observed that total insider ownership remains steady while the executive-to-insider holding ratio increases significantly. In terms of the effect on total factor productivity, neither the total insider ownership nor the board-to-insider holding ratio shows any influence on productivity. However, productivity first decreases then increases with the executive-to-insider holding ratio, forming a U-shaped relationship. The results indicate that stock ownership of top officers in high-tech firms should be encouraged to enhance productivity.

Notes: The current Company Law Review by the Department of Trade and Industry and the Myners Report on Institutional Investment both identified the annual general meeting (AGM) of public companies as one of the instruments of corporate governance that seems to fail its purpose. Based on responses to the DTI's consultation document Company General Meetings and Shareholder Communication the paper explores arguments for and against AGMs and investigates proposals for the reform of AGMs.

Notes: This exploratory study addresses an important knowledge gap identified by Pettigrew, 1992, concerning board dynamics by reporting basic descriptive information on board of director meetings and information flows to board members. The study specifically examines the information amount, format, and source relative to the number of board meetings, the number of board members, and the time directors spend in preparation for board meetings.

Notes: Corporate governance is developing rapidly in many countries across the world. In this paper we analyse the existing state of corporate governance in a country in the Middle East: Bahrain. We employ a survey methodology, with a questionnaire being sent to all of the companies listed on the Bahrain Stock Exchange Market. An analysis of the responses reveals that Bahraini companies have in place some of the features of corporate governance best practice with boards dominated by non–executive directors, for example, and the separation of the roles of Chair and CEO. However, it is not clear how effective the nomination/appointments process is and directors tend to be fairly entrenched. In terms of risk management and control, the majority of Bahraini companies have an internal audit department and risk management control. Overall, it seems that Bahraini companies have a number of key corporate governance structural features in place, but that there remains further progress to be made.

Notes: Corporate governance practices in family businesses (FB) remain a research domain with many unsolved questions. Nonetheless, researchers agree that corporate governance practices are important for family–backed companies. Different family ownership structures and different family generations influence the governance structures installed. So far, no research has been conducted on corporate governance characteristics among Flemish family companies. This study explores the relationships between ownership structure, board and management practices to find out where Flemish family businesses differ from non–family businesses (NFB). Additionally, this research investigates to what extent differences can be found within the group of family businesses based on family ownership and family generation.

Notes: This paper studies the relationship between some characteristics of the corporate board and the firm’s capital structure in Chinese listed firms. The findings provide some preliminary empirical evidence and seem to suggest that managers tend to pursue lower financial leverage when they face stronger corporate governance from the board. However, the empirical results of the relationships are statistically significant only in the case of the board composition and the CEO tenure. The results are statistically insignificant in the case of the board size and fixed CEO compensation. This may in general suggest that, up to the time period of our investigation, the corporate board structures and processes in Chinese listed firms might not as yet be fully working in the manner, or as well, as might have been so far assumed on the basis of Western theoretical finance literature.

Notes: Corporate governance crisis and reform is essentially cyclical. Waves of corporate governance reform and increased regulation occur during periods of recession, corporate collapse and re-examination of the viability of regulatory systems. During long periods of expansion, active interest in the conformance aspects of governance diminishes, as companies and shareholders become again more concerned with the generation of wealth, rather than in ensuring governance mechanisms are working appropriately for the retention of wealth, and its use for agreed purposes. This cyclical historical saga revolves around the enduring agency and stewardship dilemmas of governance. Complacency concerning corporate governance during confident times compounds ensuing crises. Such dilemmas are universal in market systems, though internationally with different systems of corporate governance the unwinding of this saga has occurred at different times, for different reasons, and with different consequences. Corporate governance is about wealth generation and risk management, and these duties require continuous and simultaneous performance. Avoiding mandatory restrictive over-regulation requires active market regulation, particularly at times of expansion. The drive to make corporate governance both improve corporate performance and enhance corporate accountability will continue.

Notes: This article examines a case of fraud – the Maxwell case – to assess the implications for corporate governance in Britain. The analysis of the case shows how Robert Maxwell was able to avoid the established network of regulations and controls. The authors then make a number of recommendations which suggest how this kind of fraud may be prevented in the future.

Notes: Book Reviwes in The Article:Demb, Ada & Franz-Friedrich Neubauer, (1992) The Corporate Board: Confronting the Paradox', Oxford University Press, New York.Institute of Chartered Accountants of Scotland, (1992) Corporate Governance: Directors' Responsibilities for Financial Statements.Davies, Adrian, (1991) Strategic Leadership: Making corporate plans work, Woodhead- Faulkener.Levhe, Dennis (with William Hoffer), (1992) Inside Out, Arrow Books, London.Tang, Yung Wei, Lynne Chow and Barry J. Cooper, (1992) Accounting and Finance in China – a review of current practice, Longman (Far East), Hong Kong.Badaracco, Joseph L., Jr., (1991), The Knowledge Link – how firms compete through strategic alliances, Harvard Business School Press, Cambridge, Mass.Bower, Tom, (1992) Maxwell – the outsider, Mandarin, London (revised).Bruck, Connie, (1988) The Predators' Ball, Simon and Schuster, New York.Greenslade, Roy, (1992) Maxwell's Fall, Simon and Schuster, London.Institute of Directors, (1991) Guidelines for Directors, fifth edition, The Director Publications Ltd., Mountbarrow House, Elizabeth Street, London SW1 9RB, England (FAX 71235 5627).

Notes: One of the persistent problems facing corporate governance is the increasing shift toward knowledge-intensive organisations. This article focuses on the fiduciary responsibility of corporate governance for creating, developing, and leveraging the intellectual capital existing and embedded in the people, structures, and processes of the firm. Research and practice, traditionally concerned with governance responsibility for financial and physical capitals, has not much focused on the relations between governance and intellectual capital. Here, the authors’ intellectual capital paradigm is overlayered on a recent taxonomy of systems and features of corporate governance. The result is an explication of the role and characteristics of corporate governance in relation to the intellectual capital of the firm.

Notes: This paper develops and provides evidence for two statements: a) In Argentina, there has been a marked shift in ownership and control from big family-owned domestic companies towards foreign groups and investment funds, and b) While coping with governance issues, Argentina has been following the common law countries tradition, fostering a capital-market-based financial system and swapping its corporate governance practices outright. To ground these statements on facts, I survey corporate governance issues in this country before 1991, the underlying legal framework, the new rules of the game in capital structure and ownership as from 1991, largely due to a wave of privatisations, restructuring, mergers and acquisitions that took place through the last decade.

Notes: This is an empirical study analysing the corporate finance and governance structure in Malaysia before and after the financial crisis of 1997, utilising the agency cost approach. The contribution of this paper is to link the corporate governance mechanism with the role of banks and corporate ownership structure peculiar to Malaysia, taking into account the institutional framework and historical background of the Malaysian financial system, such as government protection for the banking sector and the social dispersion of corporate ownership related to the Malay First policy.Based on data for 375 non–financial KLSE (Kuala Lumpur Stock Exchange) listed companies during fiscal years 1995–99, our analysis is organised into three parts. Characteristics of corporate finance in Malaysia in the 1990s using aggregated time–series data are outlined, followed by an examination of the determinants of capital structure via cross–sectional regressions in terms of dependency on banks and ethnic ownership structure, controlling ownership concentration, availability of internal funds, corporate size, industry effects, etc. We then estimate simple investment functions with panel data in order to examine the effects of debt financing on corporate investments before the crisis.Empirical results show the following. Firstly, the commitment of banks to finance corporate debt as well as lending obviously increased debt ratios. Secondly, increasing ownership by native Malays, both the direct and indirect holding of corporate shares, played no significant role in disciplining corporate management. However, ownership concentration mitigated conflict between managers and owners. Foreign ownership also contributed to a reduction in the agency cost of equity financing in financial liberalisation. Finally, high dependency on debt led to excessive corporate investment before the crisis. These results imply that the concentration of risks on the banking sector and social policy advocating the dispersion of corporate ownership weakened the corporate governance mechanism, thereby exacerbating the distress of Malaysia's corporate sector during the financial crisis.

Notes: The dynamic state of corporate governance in an emerging market is discussed through an in-depth case study of Korea’s Samsung Electronics Corporation (SEC). This paper covers the influence upon SEC’s corporate governance of recent regulatory changes and the efforts of the People’s Solidarity for Participatory Democracy’s (PSPD), a young but influential minority shareholder activist group. It will show that corporate leaders from Korea are slowly gaining an understanding of the importance of corporate governance, but that for a variety of reasons they still remain reluctant participants, unable and unwilling to change effectively.

Notes: Faced with major shifts in public opinion and societal change on an international scale, together with the strategic requirements of newly emergent forms of business structure, new technologies, globalisation and new forms of competition, modern companies are facing a crisis in their boardrooms. Traditional forms of governance architecture are being challenged and boards are under pressure to develop a broader mindset and new skills to deal with the uncertainty of higher-level issues such as direction-giving and implementation of strategy.The paper proposes a framework developed from research which examines the selection, evaluation and performance of boards of directors in New Zealand. From this research a need for strategic vision and leadership has clearly emerged as a key requirement in director capability, but in practice there is an acknowledged variation among individual directors in terms of their competence in this regard. Implications for further research suggest the need to explore the strategic role of the modern board in value creation, the extent to which directors perceive a link between strategy and corporate governance and their level of participation in this process.

Notes: The Combined Code looked to companies and institutional investors “to enter into a dialogue ... based on a mutual understanding of objectives.” This paper summarises findings from a survey looking into attitudes of each of these groups towards governance reform. It finds significant differences of opinion between them. The paper notes that there are few differences of opinion amongst the various different sized investors, suggesting that size, of itself, is not an important determinant of investor opinion. Larger companies are found to be more sympathetic towards the reforms of the past decade, whilst smaller companies appear to place less emphasis on governance structure as a determinant of success and seem to have less favourable experience of institutional investors.

Notes: Research suggests that more diversity in board membership could improve overall performance. This paper considers the business case for increased numbers of female directors, and the lack of female representation on UK FTSE 100 company boards in 1999 and 2000. It also offers a comparison to US data. In 1999, almost two-thirds of FTSE 100 companies had at least one female director, but numbers had dropped by July 2000 from 64 per cent to 58 per cent, paralleling the levelling-off at top level reported in North America. More firms having female directors are to be found amongst those with the highest turnover, profit and number of employees in the FTSE 100, again paralleling the findings from the US.

Notes: Book reviewed:Sir Adrian Cadbury, Family Firms and their Governance: Creating Tomorrow’s Company from Today’s

Notes: Based on a survey of charity boards in England and Wales this paper examines what influence board inputs, structures and processes have on board effectiveness. The findings provide mixed support for the normative literature on board effectiveness. Using stepwise logistic regression the research suggests that board inputs and three process variables are important in explaining board effectiveness, namely: board members have the time, skills and experience to do the job; clear board roles and responsibilities; the board and management share a common vision of how to achieve their goals; and the board and management periodically review how they work together.

Notes: The paper discusses the issue of power relations and sharing as the basis for instituting a corporate governance procedure. It argues that the peculiar and unstructured nature of the developing economies makes the running of many existing limited liability companies remarkably different from the governance processes of modern Plc and multinational corporations which are controlled (at least in principle) by the owners through shareholder democracy enshrined in the Annual General Meetings. The need for an understanding of the concepts, processes and problems of corporate governance both from the perspective of those who direct, those concerned with returns and accountability, and those concerned with corporate regulation encouraged the author to provide a menu of hypotheses of corporate governance and its relevance to Nigerian corporate bodies. The paper then zeroes in to discuss corporate governance in the banking industry as well as the problems and consequences of the quality of such a governance. In section four of the paper, a crystal eye-ball and prognostic view was taken of corporate governance in the Nigerian banks in the twenty first century. The paper concludes by providing the recipes that would ensure good corporate governance in the private sector, particularly in Nigerian banks, in the short and long-run.

Notes: Shareholder value is assumed to be the ruling idea in Anglo-American corporate governance. This paper first reviews the historical origins of the idea of shareholder value in the UK and the particular theoretical assumptions about the company which underpin it. It assesses the reasons why it was subjected to so little subsequent political challenge, and contrasts this with US experience. This historical and theoretical context is then used to explore the current debate on stakeholding in the UK, whether the UK system of corporate governance needs reform, and if so in which direction. Four main positions on stakeholding are identified – property rights, enlightened managerialism, active shareholders, and corporate pluralism. The paper concludes with an assessment of the political and legal pressures for reform of the UK model of corporate governance and the prospects for any significant change.

Notes: All directors are faced with real, or imagined, conflicts of interest or competing demands for time and resources, between shareholders and stakeholders. This has always been the case, but the contemporary emphasis on stakeholders has brought this to a head. Although astute organisations and directors maintain a suitable balance between the various demands placed upon them, and there are systematic ways to do this, there are a few voices opposed to stakeholding in any shape or form. In order to suggest that stakeholding is the viable and sustainable way for companies to proceed, the article considers and criticises one anti-stakeholder, together with other antagonists, before bringing in endorsements from different quarters, and introducing three categories of stakeholding of which the normative holds most promise. Practical approaches to discriminating among the claims of various stakeholders are indicated.

Notes: This article reports the findings into patterns of governance on nonprofit boards in Australia. The research surveys 118 boards, upon which serve a total of 1405 directors.The findings indicate that nonprofit boards can mimic some aspects of a shareholder approach to governance. But nonprofit boards, in the main, indicate priorities and activities of a stakeholder approach to governance. The features of ‘isomorphism’ that arise largely stem from legislative requirements in corporate governance. Generally, nonprofit directors are influenced by agenda and motivations that can be differentiated from the influences upon director activity in the corporate sector.The study indicates that nonprofit boards prize knowledge and loyalty to the sector when considering board composition. The survey suggests nonprofits “compensate” for the demands placed upon them about fiduciary duty and due diligence responsibilities with the diverse intellectual expertise of non-executive directors. Nonprofit boards possess greater diversity than boards in the corporate sector; they include more women as directors than corporate boards and they include a greater proportion of directors from minority groups. While strategic issues feature significantly as a task of the nonprofit board, they distinguish themselves from their corporate counterparts by engaging in operational management.The findings indicate that, in the main, directors on nonprofit boards deliberate and operate in ways distinctive from their corporate counterparts. Such findings offer a contribution to the reform of Corporations Law in other countries and the likely consequence on boards outside the corporate sector.

Notes: Book reviewed:Sykes, Allen, Capitalism for Tomorrow – reuniting ownership and control

Notes: This paper analyses and describes the possible role and responsibility of workers (via their representatives) in the process of strategic decision-making at corporate level, especially in the Netherlands where the Works Council (Ondernemingsraad) has achieved a certain degree of maturity in the last decade. It is a reaction to the lack of attention to workers’ participation in the actual debate on Corporate Governance. From our point of view workers also have to be seen as equal ‘stakeholders’ and partners in decision-making. In several Dutch companies forms of partnership in corporate governance are starting to develop. But also in other countries (like Germany) and at European level Works Councils are starting to discuss strategic topics with the Board of Directors. After describing the position and role of the most important boards and stakeholders at corporate level (the Board of Directors, the Supervisory Board, the shareholders, the trade unions and the works councils), the paper presents a stakeholder model in which also the workers participate and exercise influence on strategic decision-making. Finally it gives practical suggestions for the improvement of the position of workers’ participation in corporate governance. These suggestions and recommandations are mainly based on experiences in Dutch companies.

Notes: This article draws upon research conducted in a UK manufacturing company where a group of directors and senior managers (managerial elites) interacting with each other were observed and captured on audio and video tape recordings. From detailed analysis of their talk-based interpersonal routines, the nature of their linguistic skills and how factors such as knowledge, know-how and experience were deployed to influence boardroom process was explored. They also simultaneously sought to preserve the protocols of human interaction. The objective here is to reproduce a small set of typical interactive routines between this group of managerial elites to illustrate aspects of this analysis. In particular, we illustrate their use of two basic micro-linguistic resources; the display of feelings and emotions, and; the routine selection of lexemes which activate arenas of expertise and knowledge. The laminated effect of successive interactive exchanges of the sort reproduced in this paper allowed for a range of board tasks to be executed alongside the concurrent assembly of an effective (or not) competent performance in the boardroom. Taken together this paper and our prior one provides a basis for developing a systematic and rigourous approach for the study of the behavioural dynamics of corporate governance.

Notes: This paper is about changes in ‘corporate directing’, observed from interviews spanning the last ten years with Chairmen, Chief Executives, executive and non-executive directors in nine large UK organizations. Not only has the economic, political and social context changed, the ‘what’, ‘how’ and ‘why’ of boards has also changed. This paper seeks to illustrate some of these changes, both inside and outside the board room, where the role of fund managers has also changed. It concludes that the Chairman and Chief Executive relationship provides a powerful axis around which board room culture (r)evolves and corporate governing takes place.

Notes: Using data on 200 large U.S. corporations in 1996, this study develops and tests a model in which the Compensation of Outside Directors is significantly related to Director Effort, External Monitoring, Internal Referents and Firm Performance, after controlling for Firm Size and Inside Ownership. There is some support for each set of hypotheses relating to the different independent variables in the model.

Notes: A taxonomy of corporate governance structures based on equity and debt financial interest is offered as an alternative to the conventional emphasis on ownership concentration. Hypotheses on the association between the proposed governance structures and the strategic variable of diversification are formulated and tested on a sample of 73 large Swedish corporations. The theory explains significantly a tiny bit of the variance in diversification, something the conventional theory limited to ownership structure considerations was unable to do.

Notes: The author has made significant theoretical contributions to the literature of corporate governance, with works such as Corporate Governance, The Emperor’s Nightingale and Power and Accountability, and major practical interventions through his representational investing through his vehicle the Lens Fund and, more recently, Hermes Fund. He is a distinguished member of this journal’s Editorial Advisory Board. In this paper he responds to the recent UK Department of Trade and Industry consultation document on the future of company law in Britain. We believe that this contribution highlights some important aspects of the corporate governance debate, as well as arguing to some interesting possibilities for the UK. Although the paper stands on its own, references to ‘The Strategic Framework’ have been left in for scholars wishing to explore the arguments further.

Notes: This study investigates the influence of growth potential on corporate governance mechanisms. Results suggest that firms with high growth potential make greater use of managerial equity ownership and long term incentives and have higher proportions of insiders on their boards of directors. The findings are congruent with the argument that firms with high growth potential make use of more flexible, future-oriented mechanisms of corporate governance.

Notes: This paper presents findings from an in-depth empirical study of the role of boards and their relations with senior managers in four organisations from the public and non-profit sectors. The findings are interpreted using a conceptual framework which sees the outputs of boards as shaped by board inputs, processes and contextual factors, in particular wider institutional pressures. The results indicate that the strategic contribution of boards varies widely and depends on a complex interplay of factors: the system of regulation, sectoral traditions and norms of governance, the way board members are chosen, board members skill and experience, organisational size and status, and the way boards are organised and run. The wider institutional pressures that shape these factors can result in boards facing tensions and trade-offs that can result in their contribution to stragegy being squeezed by other board roles.

Notes: In Australia, as in many Western industrialised countries, women accessing corporate board positions are still the exception to the rule. This paper reports research exploring men's and women's views on the factors crucial in attaining a board position. While both groups identified the importance of a strong track record, a good understanding of business principles and business contacts in gaining board positions, we found that women also highlighted the importance of high visibility and family contacts to account for their nomination to boards. It seems that women's competence has to be widely acknowledged in the public domain or through family connections before boards, or their nominating committees, will be prepared to “risk” having a woman on the board.

Notes: Empirical literature on corporate governance often assumes independence among different control mechanisms. However, different studies in the Anglo-Saxon context find that control mechanisms are interrelated. The Spanish corporate governance system, unlike the Anglo-Saxon one, is characterised by the dominance of internal controls, mainly the stock ownership concentration and the board of directors. In this internal control context, we specifically analyse the possible substitution of the supervisory potential of the board outsiders by the incentive effects derived from managerial stock ownership and the supervisory role of large shareholders. Our main results show a negative relationship between the proportion of outside directors and managerial and large blockholders’ ownership stake. These findings support the substitution among internal controls and suggest that Spanish firms form an efficient conglomerate of managerial controls, in which deficiencies in a single mechanism can be compensated by the action of an alternative one.

Notes: The catastrophe caused by the failure of Enron could not compare with the damage this company would have caused if it had succeeded. The relentless emphasis on the importance of shareholder value in recent times has created the conditions for the disconnection of corporations such as Enron from their essential moral underpinnings, encouraging them to concentrate exclusively on financial performance, and to neglect not just the wider stakeholder interests of customers and employees, but the essential interests of the economies and communities in which they operate. The problem with established economic theories of corporate governance is that they misconceive the irreducible core of corporate governance, at the same time as underestimating the complexity of the phenomenon.

Notes: The paper discusses to what extent Parmalat's failure can be considered a particularly Italian case. The main characteristics of Parmalat's corporate governance structure are compared and contrasted with those prevailing among Italian listed companies as well as with the highest corporate governance standards in Italy. Empirical evidence seems to confirm the lack of a monitoring structure in making corporate insiders accountable in the presence of a corporate governance system characterised by a controlling shareholder. The role of the ownership and control structure (with special regard to the controlling shareholder's role) and of the board of statutory auditors have Italian traits and might suggest that the Parmalat case is a particularly Italian scandal. However, Italian corporate governance standards were not completely at fault in the Parmalat case. Parmalat's corporate governance structure failed to comply with some of the key existing Italian corporate governance standards of best practice, such as the presence of independent directors and the composition of the internal control committee. Besides, the role of the external auditor as well as the internal control committee as non-effective monitors seem to put Parmalat into the global argument case, not very different, mutatis mutandis, from other corporate scandals.

Notes: Post 1992 Cadbury Committee report developments in UK corporate governance provisions are reviewed. The role of institutional investors, and the financial sector as a whole, in corporate governance is considered. Practices in “Continental Europe”, the UK and the US are contrasted, along with the roles of banks, strategic investors (“insiders”), institutional investors (“outsiders”) and capital markets. To be effective, capital markets must be efficient and competitive and auditing must be reliable. Current EU and US reform proposals are compared and prospects for convergence in corporate governance procedures assessed.

Notes: Books reviewed:Pat Sucher and Katarzyna Kosmala MacLullich, A Comparative Analysis of Auditor Independence in Economies in Transition, ICAS Research Report, Edinburgh: The Institute of Chartered Accountants of Scotland, 2004, ISBN 1 904574 07 6 
Reviewed by Professor David Citron 
Cass Business SchoolMartin Hilb, New Corporate Governance: Successful Board Management Tools, Berlin: Springer, 2005, ISBN 3-540-21399-6 
Reviewed by Bob Garratt 
Board Performance Ltd, London 
Visiting Professor, Cass Business SchoolHoward Gospel and Andrew Pendleton, Corporate Governance and Labour Management: an international comparison, Oxford: Oxford University Press, 2005, ISBN 0199263671 
Reviewed by Charles B. Shrader 
Iowa State UniversityThomas Clarke, Theories of Corporate Governance – the philosophical foundations of corporate governance, New York: Routledge, 2004, ISBN 0-415-32308-8 (hb), 0-415-32307-X (pb) 
Reviewed by Dr Bob TrickerRichard Calland and Guy Dehn, eds, Whistleblowing Around the World. Law, Culture and Practice, London: ODAC/PCaW 2004, ISBN 1919798560 
Reviewed by Gerald Vinten 
Paris Graduate Management SchoolAnna Grandori, ed, Corporate Governance and Firm Organization: Microfoundations and Firm Organization, Oxford: Oxford University Press, 2004, ISBN 0-19-926976-9 
Reviewed by Dr Andy Zelleke 
The Wharton School, University of Pennsylvania

Notes: Corporate Governance has become a widely discussed topic in Japan among academics and practitioners. But companies, protected under a tight system of cross-shareholding, seem slow to adopt new models accepted outside Japan. This article discusses the changes in the composition of shareholding, which together with legal changes are leading to greater awareness among Japanese companies of corporate governance as well as greater shareholder activism.

Notes: A small but significant stream of research has emerged on how changes in corporate governance impact labour management, particularly in countries with stakeholder-oriented corporate governance. This paper briefly reviews existing empirical and theoretical literature on the links between corporate governance and labour management. Then it compares recent trends in Germany and Japan in terms of how changes in corporate governance affect the distribution of value-added, employment adjustment, pay systems and employee participation. Germany and Japan have proven able to adapt and modify their stakeholder model of employment and employee participation to changing circumstances. However, the size of the core model is getting smaller.

Notes: In this exploratory comparative study of Toyota/GM and Canon/Xerox, the author purports to explain why the 10-year performance of Toyota and Canon, despite their traditional Japanese primacy on job security, large board size and absence of non-executive directors, is superior to that of their US rivals. The author compares the key stakeholder and the board structure as well as corporate values, culture and strategy of the sample firms and concludes that higher performance is possible without resorting to US-style corporate governance, and proposes that corporate values, culture and strategy are equally vital ingredients of corporate success.

Notes: A continuing obstacle to the success of most corporate governance initiatives is the unwillingness of the majority of institutional portfolio managers to co-operate with governance activists even to the extent of merely voting in cases where clear benefits would flow to all shareholders from a positive result. Portfolio managers have given many excuses for their lack of participation in such efforts, but upon examination, most turn out to be facile rationalisations. Institutional investors’ negative attitudes towards governance may be attributed to scepticism on the part of some individuals, but there also seem to be structural factors at work. Some are integral to corporate governance itself: the difficulty of quantifying governance information, and the longer time horizon necessary for the realisation of most governance initiatives. Others are, however, a function of the structure of the investment industry: the different backgrounds and aptitudes of most corporate governance specialists from most investment managers, reliance upon third-party consultants, a different orientation towards investment, short-termism, differing career paths and perceptions, fear of bureaucratic intervention and competition for performance compensation. It is proposed that some internal readjustment of investment management companies, coupled with a clearer commitment by senior executives at those companies to exploit governance initiatives, would be beneficial both to the cause of better corporate governance and to portfolio returns.

Notes: This study examines the relationship between the voluntary disclosure of information about corporate governance practices and the intention to raise external finance. This relationship is examined by using corporate governance disclosures in the annual reports of Australian companies in 1994. Data from this year are used because in subsequent years Australian Stock Exchange regulations influenced listed companies to make disclosures about their corporate governance practices. Regression analysis indicates that the voluntary disclosure of corporate governance information is positively associated with the intention to raise equity capital, but not with the intention to raise debt capital.

Notes: We examine the impact of ownership concentration on firm performance using panel data for firms listed on the Budapest Stock Exchange, where ownership tends to be highly concentrated and frequently involves multiple blocks. Fixed-effects estimates imply that the size of the largest block increases profitability and efficiency strongly and monotonically, but the effects of total blockholdings are much smaller and statistically insignificant. Controlling for the size of the largest block, point estimates of the marginal effects of additional blocks are negative. The results suggest that the marginal costs of concentration may outweigh the benefits when the increased concentration involves “too many cooks”.

Notes: The board of directors plays an important role in solving the agency problem between shareholders and management. This paper investigates the relationships between ownership and board structure with the diversification strategy of large Japanese firms. The results show that corporate nominee directors are associated with lower levels of product diversification of their investee firms. This suggests that nominee directors in large Japanese corporations see themselves representing specific interests and therefore investors should pay attention to board composition in order to assess the level of protection they can expect to receive. Even without any apparent agency problem with management, there remains a potential “principal-principal” problem.

Notes: Transition economies face a fundamental dilemma. They need to develop financial markets, and yet they lack the ingredients it takes to do so. Recipes for legal governance mechanisms that have worked elsewhere, including reactive law enforcement by courts and proactive law enforcement by regulators, may not help in the short to medium term. Using evidence from stock market development in China and Russia, this paper suggests that at least in the short term, administrative governance may be a viable alternative to legal governance in emerging stock markets.