ALBERT

Notes: This paper presents empirical and theoretical analysis of the enactment of New Public Management (NPM) within the UK police service. It draws on empirical material gathered in a two-year study that explores the ways in which individual policing professionals have responded to, and received, the NPM discourse. Theoretically informed by a discursive approach to organizational analysis, the paper focuses on the new subject positions promoted within NPM that serve to challenge traditional understandings of policing organization and identities. The paper examines the implications of this for policies that promote community orientated policing (COP) and increased inter-agency partnership. The paper argues that the promotion of a more progressive form of policing, based on community orientation and equality principles, may struggle to gain legitimacy within the current performance regime that legitimizes a competitive masculine subjectivity, with its emphasis on crime fighting.

Notes: Greater fiscal transparency is seen by its advocates as a means of improving economic governance arrangements in ways which, by promoting fiscal stability, will in turn improve the functioning of the government sector and facilitate improvements in the economic environment for the private sector. ‘Fiscal transparency’ is much acclaimed by policy-makers, not only in the UK Treasury but also by the IMF and OECD. Fiscal transparency can have substance or can just be voguish incantation. This article explores the meaning of fiscal transparency, by examining its structure and evaluating criteria for assessing the degree of fiscal transparency attached to particular sets of circumstances. It explores the link between transparency and accountability, developing the distinction between event and process transparency. Consideration is given to the trade-off between the value of sunlight (to employ an analogy) and the danger of over-exposure. The performance of the United Kingdom against emerging international best practice is examined, with regard to both public expenditure and taxation. By international standards, UK fiscal transparency is high. Nevertheless, there is a major gap between UK rhetoric and practice, indicating a  divergence between nominal and effective transparency. This is evidenced by: frequent changes in public expenditure definitions; the non-publication of important analyses; the location of certain liabilities ‘off-balance sheet’; and a lack of candour about tax policy.

Notes: How are government policy commitments converted into legislation and what happens in the conversion? The role of civil servants in preparing legislation is far more important than is generally assumed. By looking at the work of four recent bill  teams in Britain – teams of civil servants given the task of developing Acts of Parliament – their crucial roles in initiating policies, placing them on the political agenda (even helping secure their place in a party manifesto), developing them, making sure they pass through parliament and enacting them once they have reached the statute books are assessed. The article explores the composition and working methods of bill teams. These teams work with considerable autonomy in developing legislation, but it cannot be assumed that they operate outside ministerial control. Teams see themselves as reflecting the priorities of the government in general and their ministers in particular. Yet ministers typically know relatively little about the law they are bringing in until they receive the submissions and briefings from their officials. Perhaps the biggest danger for democracy is not a civil service putting forward proposals which a minister feels forced to accept, but rather that ministers do not notice or fully appreciate what is being proposed in their name despite having the political authority to change it and a civil service which bends over backwards to consult and accommodate them.

Notes: This article will explore the proposition that cabinet government is dead by examining the different ways in which cabinet government is conceptualized and by suggesting that the lack of precision in the debates has undermined much of the criticism. It will seek to draw the strands of research together in a way that can emphasize how cabinet government has evolved while remaining at the core of government. The article will draw evidence from three countries, Australia, Canada and Britain, in each of which, despite the common heritage, cabinet has evolved in different ways.

Notes: Since the 1990s there has been a long-standing concern in government towards public sector accountability, management, efficiency and service delivery. A number of studies have attempted to analyse the multitude of individual changes and their manifestations through analyses based on a variety of institutional, policy and governmental distinctions. This paper attempts to specify the changes with particular reference to planning, and to consider the evolution of the public service ethic in planning towards more openness, scrutiny, transparency and efficiency with particular reference to the changing ethos of the professional employee. We first explore the  main impacts upon local government, the public service ethic and professional planning as a consequence of the Modernization agenda and freedoms and flexibilities initiative. We then look at how such changes have impacted upon the ethos and values in public service and planning. We draw on some evidence of Ombudsman cases to highlight issues of professional values in planning practice over the past decade before finally drawing these strands together in some conclusions. Our principal findings indicate that the much-trumpeted decline of services and standards may not have been as apparent as is sometimes portrayed and that internal professional attitudes and values towards the external changes may not have significantly altered over the same period.

Notes: Inspired by New Public Management, many countries have changed their central public apparatus from an integrated to a more segregated structural model. A central element in this process is structural devolution and the establishment of new or reorganized state-owned companies with increased business autonomy and new formal control systems. This paper focuses on how this development, as exemplified by the case of Norway, is affecting the role of central executive political and administrative leaders. The study, based on elite interviews, shows that corporatization has made the role of central leaders more complex and ambiguous and undermined traditional political control. We interpret this development from a transformative perspective, underlining how structural devolution is filtered through the dynamic context of environmental pressure and internal structural and cultural factors; in addition, experiences from New Zealand are used to contrast the Norwegian case.

Notes: Public management reforms at the local (community) and regional (canton) level in Switzerland almost all embrace elements of the new public management. In addition, in Switzerland, the merging of small communities as well as new developments such as electronic government are becoming apparent. The new public management model has been adapted for Swiss needs according to the perception of decision makers on problems that require solution in a Swiss context. NPM has developed, therefore, into rather different models in practice, aimed at the solution of these diverse problems. Foreign examples, such as the Dutch Tilburg Model and the German Neues Steuerungsmodell, played a major role at the start of this process, but have continuously lost their influence as actual models to be emulated. The most outstanding peculiarities of the Swiss reforms are an early and subsequent outcome focus together with the strong influence of direct democracy.

Notes: This article, part of a sequence of comparative articles on local government reforms in The Netherlands, Switzerland and Germany, describes and analyses the recent public management reforms at the local level of Germany. After an overview about the constitutional framework of local self government and the reform waves of the last decades, the paper concentrates on the ‘new steering model’ as the German variant of NPM. The article shows the short history of this reform movement, describes the main elements of the reform concept and explains some of the causes, forces and actors of implementation. It goes on to discuss the present status of implementation, explains several shortcomings of the concept, and presents the – very limited – empirical evidence of achieved results. Finally, the paper draws some conclusions from a comparative view on the similarities and differences of local management reforms in Germany and the two other countries.

Notes: Books reviewed in this article:B. Guy Peters and Jon Pierre (eds.), Politicians, bureaucrats and administrative reformHugh Atkinson and Stuart Wilks-Heeg, Local government from Thatcher to Blair: the politics of creative autonomyAlex Wright (ed.), Scotland: the challenge of devolutionChristopher Hood, Henry Rothstein and Robert Baldwin, The government of risk: understanding risk regulation regimesAlison Young, The politics of regulation: privatized utilities in Britain

Notes: The United States is commonly referred to as the last global superpower, exercising unrivalled political, economic, military and social influence. Yet, paradoxically, unlike any other nation, Americans were – and remain – radically antistatist. Until roughly the twentieth century the United States did not want, need, nor create a powerful administrative state to govern itself, let alone others abroad. This essay explores that peculiar paradox, namely how Americans govern as the last global superpower today, yet retain an inherently fierce hostility to government. The thesis that is developed argues that it is a deep–rooted reformist faith which ultimately shapes US statecraft as a unique style of reformcraft, with both benign and not–sobenign consequences.

Notes: To understand governance, we ask who is telling the story from within which tradition. We argue there is no essentialist notion of governance but at least four conceptions each rooted in a distinctive tradition. The first section of the paper describes the relevant traditions: Tory, Liberal, Whig and Socialist. The second section describes the different notions of governance associated with each tradition; intermediate institutions, marketizing public services, reinventing the constitution and trust and negotiation. We explain these distinct conceptions of governance as responses to the dilemmas of inflation and state overload. In the conclusion, we summarize how and why traditions change, concluding, there is no such thing as governance, but only the differing constructions of the several traditions.

Notes: The article explores the evolution of competing views on state, administration and governance in Germany from an historical perspective, with an emphasis on the last five decades. To understand the governance discourse in Germany one has to start from different notions of the state. The first part therefore offers a brief, somewhat polemic, overview about different state traditions in Germany in the twentieth and twenty–first centuries. The second part looks at how discourses about the proper role, the appropriate structures and processes of the public sector and its interactions with its environment have changed during the history of the Federal Republic. The analytic focus is on the different narratives about administrative policies, understood as the various scenarios, assumptions and arguments on which competing policy–suggestions for the public sector have been based. The article argues that it is not sufficient to interpret the ups and downs of different discourses and Leitbilder as more or less erratic, post–modern fashions and fads. Instead, the line up of the central catch–phrases, from democratic via active and lean to the activating state, reflect learning processes, driven above all by the political competition creating a continuous demand for ‘better’, more appropriate narratives to guide and explain current policies.

Notes: This article explores the basic traditions of governance in contemporary France and the narratives of public sector reform associated with them. It should be stressed right from the outset that this article does not aim to describe the set of public sector reforms that have been implemented in France in the last ten years or so. Instead, the aim is to demonstrate the similarities and differences between the narratives of the left and the right with regard to these reforms and to show how these narratives help to explain the types of reform that have been enacted. The basic argument is that there is a certain commonality to both the left and the right with regard to their narratives of public sector reform. At the same time, though, there are differences of emphasis both within each tradition and between the two main traditions themselves. Except where indicated, all translations are the author's own.

Notes: This article revisits the country case studies and seeks to answer two questions. What are the strengths and weaknesses of an interpretive approach? What lessons can we draw from our analysis of public sector reform? To assess an interpretive approach, we discuss: the issues raised in identifying beliefs; the meaning of explanation; how to select traditions; the shift from prediction to informed conjecture and policy advice as storytelling. To assess the lessons, we outline our preferred story of public sector reform. We seek to show that an interpretive approach produces insights for students of public administration. We argue it remains feasible to give policy advice to public sector managers by telling them stories and providing rules of thumb (proverbs) to guide managerial practices.

Notes: Compared to other continental European countries, especially Germany and Switzerland, which have experimented with New Public Management (NPM) in local government, The Netherlands has been relatively quick in following trends stemming from Anglo-Saxon management thinking, but also relatively quick in redressing its course. The rise of the New Public Management in Dutch local government has been relatively swift and strong but also relatively superficial and non-committal. The dominant picture that emerges is one of an administrative system that, while responsive to the latest trends, is also surprisingly stable. Management reforms, forcefully advocated in the 1980s, were decisively revised and redressed in the 1990s, with the city of Tilburg, celebrated for its ‘Tilburg Model’, a case in point. The Werdegang of NPM (that is, how things developed) in Dutch local government, detailed in this article, can be understood only partially as a result of changing economic and budgetary constraints. The article shows that endogenous features of the Dutch politico-administrative system – more specifically: the compact, dense and decentralized pattern of the intergovernmental network, the administrative tradition of pragmatism, dynamic conservatism and the comparatively technocratic character of local government – have also strongly influenced the reception, effect and correction of NPM in Dutch local government.

Notes: In this paper we develop an integrated approach towards corporate governance and business ethics. Our central argument is that organisations can learn from the development of strategic planning in the 1970s and 1980s. We identify three weaknesses – a bureaucratic and formalised approach, lack of implementation and lack of integration throughout the organisation – which were prevalent in strategic planning in the past and which are potentially just as problematic for an integrated corporate governance approach to business ethics. We suggest ways these weaknesses might be avoided and provide questions for boards of directors to consider when integrating ethical concerns into their organisations’ corporate governance structures.

Notes: This paper analyses recent corporate governance codes issued by 20 countries for evidence of convergence in corporate governance systems in Europe. The analysis shows that there has been a degree of convergence towards an Anglo-Saxon model of corporate governance as the audit committee concept is widely accepted in countries with both unitary and two-tier governance systems. Further, the latest audit committee recommendations in countries that have issued several governance codes show a strengthening of the recommendations for an audit committee over time in line with the Anglo-Saxon audit committee concept and convergence with the debate in the US and UK on issues such as the independence and financial expertise of members. However, consistent with the literature on the convergence of European corporate governance systems, at an operational level there is limited consistency in the recommended structure and role of audit committees.

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: We suggest that the equivocal empirical results of board leadership structure on firm performance have both methodological and conceptual roots. We stress that whether board leadership structure enhances or lowers performance depends on its fit with a firm's internal and external conditions, a point that has not been comprehensively addressed by the extant literature. To guide future research in this field, we develop five testable propositions and offer some suggestions on how these propositions may be empirically tested.

Notes: This paper examines the effects of board of directors’ network characteristics on firm performance using a sample of 199 large, publicly traded Korean companies from 1990 through 1999. Two board network characteristics are discussed, namely: board network density and board external social capital. Board network density is defined as the extensiveness or the cohesiveness of contact among the members of board of directors, and board external social capital refers to the degree to which board members have outside contacts in the external environment. The test results suggest that a moderate level of board network density enhances firm value, while too cohesive a board network destroys it. It is also found that board members’ elite school networks were positively associated with firm performance.

Notes: Under what conditions do stakeholders consent to a regime of corporate governance? We propose that consent by the governed in corporate governance cannot be satisfactorily explained without reference to the collective value of procedural fairness that underlies markets. Drawing on the social psychology of justice and the political economy of social choice, we highlight the critical role played by democratic procedures in achieving consent by the governed in modern society. This line of reasoning leads us to suggest that the evolution of corporate governance, too, can be understood in terms of Tocqueville's well-known hypothesis that democracy eventually prevails in all spheres of organised activity. Examining the historical record of institutional reform in France, Germany, the United Kingdom and the United  States,  we  find  that  corporate  governance  has  indeed  evolved  to  make  increasing  use of democratic procedures. Viewed over the long-term of two centuries of capitalist development, corporate governance is seen to have successively incorporated enfranchisement, separation of powers and representation. In conclusion, we consider the implications of basing the study of corporate governance on the question of stakeholder consent and the practice of corporate governance on the procedures of democracy.

Notes: Recent debates on the corporate governance role of institutional investors have centred around whether they monitor their portfolio firms (exercise voice) or vote with their feet (exit). We examine these competing views in the context of how institutions’ voice vs exit role, proxied by institutional ownership levels, is associated with their portfolio firms’ earnings management in multiple settings. We extend Koh (2003, The British Accounting Review, 35, 105–128) by examining the effect of both short-term and long-term oriented institutional ownership on the extent of earnings management by portfolios firms with different incentives for earnings management. Specifically, we expect that the non-linear relation between institutional ownership and earnings management found in Koh (2003) is more likely to be present for portfolio firms with stronger incentives to meet/beat earnings thresholds. Our results suggest that transient and long-term oriented institutions co-exist and have differential effects on portfolio firms’ earnings management. Transient institutions are associated with upward accruals management, while long-term oriented institutions constrain such upward accruals management for portfolio firms that have strong incentives to do so (specifically, firms with non-discretionary earnings below prior year earnings). This suggests long-term oriented institutions can act as a corporate governance mechanism to mitigate aggressive earnings management. Overall, we find that the association between institutional ownership and earnings management is not systematic across all firms and is context dependent, suggesting complex associations between institutional ownership and earnings management strategies exist.

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: There is a need for regional studies of women on corporate boards to capture experiences of smaller companies and to understand the nature of local resources for expanding the pool of women candidates for board seats. New findings from a statewide study of women on corporate boards are reported. The paper examines the status of women on corporate boards compared to other regions in the United States and around the world. Change efforts of governments and professional organisations for helping women overcome barriers to the boardroom are described to demonstrate the need for local knowledge in determining an effective change approach. Results from this study indicate that the local pool of women in academia and consulting has provided alternative routes to the boardroom. This knowledge can be used to direct change efforts for promoting women on boards. Practical implications are discussed for women seeking board seats and for firms seeking qualified women director candidates.

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: 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: 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: 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: Corporate governance systems develop as a result of cultural underpinnings, legal structures and different forms of financing business. This paper describes these factors in the US and UK, two examples of strong shareholder ownership patterns of financing, and Germany, a country with a tradition of strong creditor financing. Recommendations are made for best practices in governance. Although enhanced governance mechanisms is a sound goal to pursue, the results may be meaningless unless internal controls are strengthened and top management and the board of directors establish an ethical tone at the top.

Notes: The challenge for boards is to prevent crises in the organisations they govern. Performance evaluation is a key means by which boards can recognise and correct corporate governance problems and add real value to their organisations. Our paper provides a practical introduction to board and director evaluations. We discuss the reasons for governance failures and how board evaluations can help prevent them from occurring. We then review the performance pressures facing boards and the benefits of board evaluations in meeting these pressures. Finally, we introduce our framework for a successful board and/or individual director evaluation, whatever the company type. In this framework, we suggest there are seven key questions to consider when planning a board evaluation and discuss each of these seven decision areas.

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: 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: The Canadian Securities Administrators’ National Policy 58-201 Corporate Governance Guidelines (the “Policy”),1 released 15 April 2005, on which the author provided detailed advice, reads that:〈list style="custom"〉• “[t]he board should develop clear position descriptions for the chair and the chair of each board committee” (section 3.5);• the board should engage in an explicit two-step “competencies and skills” recruitment of individual directors (sections 3.12 and 3.14);2 and• individual directors should be regularly assessed and that these assessments should consider “the applicable position description(s), as well as the competencies and skills each individual director is expected to bring to the board” (section 3.18).The Canadian Securities Administrators, subject to receiving the required approvals, intend for the Policy to come into force in Canadian jurisdictions on 30 June 2005.This article canvasses some of the aspects in assessing board leadership.

Notes: This study, based on a comparison of the Combined Code Guidelines for non-executive directors between listed and unlisted boards, suggests that on unlisted boards non-executive directors have a greater degree of involvement in strategic development, financial monitoring, shareholder communication and overall board contribution than on listed boards, but a lesser degree of involvement in the monitoring of management, the setting of executive remuneration, the appointment and removal of executives, and succession planning. The importance of risk analysis and induction is considered high across both sectors, although board development and independence is considered less important on unlisted boards.

Notes: Among the many roles boards of directors perform, the monitoring role of the board has received the most attention recently, resulting in higher demands on boards and directors to be vigilant monitors. By presenting a framework to tailor the monitoring role of the board to the specific situation and needs of the company, this paper tries to overcome the negative effects of an excessive focus on control. In so far as boards are, to a certain extent, free to define their own delegation policy, this framework highlights two essential decisions of the board, namely the decision which responsibilities and authorities are delegated to management and the decision whether to delegate them to a single-headed or joint management. Some preliminary empirical findings supporting the central argument are presented, together with some suggestions for further research.

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: Corporate governance frameworks can be perceived as institutional attempts to create a structured dialogue between companies and their shareholders and stakeholders with the purpose of paving the way for understanding the company's strategic and operational goals, including critical success factors for achieving those goals. This article focuses on the disclosure on corporate governance in Danish companies (SMEs). It also provides evidence from the literature as well as analyses of company annual reports. Furthermore, the findings open the way for a discussion on further research on corporate governance and disclosure on strategic management and transparency.

Notes: The aim of this paper is to distinguish between different roles of boards of directors in companies and to fit the theoretical debate into a framework for better understanding. A simple framework, constructed from the literature, is used to distinguish between the archetypes of roles from a two-dimensional perspective. The paper includes a preliminary qualitative study of Icelandic companies with the aim of testing the framework and exploring the roles of boards in Iceland. The study shows that boards have various roles or patterns of roles and that the roles can change with change of circumstances.

Notes: Books reviewed:Jay Lorsch, Leslie Berlowitz and Andy Zelleke, eds, Restoring Trust in American Business, Cambridge MA: MIT Press, 2005, ISBN 0-262-74027-3 
Reviewed by Bob MonksJulian Roche, Corporate Governance in Asia, Oxford and New York: Routledge, 2005, ISBN 0-415-33975-8 
Reviewed by Bob Tricker 
Honorary Professor University of Hong KongMark Hirschey Kose John and Anil K., Makhija, eds, Corporate Governance, Advances in Financial Economics Volume 9, Amsterdam: Elsevier, 2004, ISBN 0-7623-1133-9 
Reviewed by Guy Liu 
Brunel Business School & 
Sichuan University Business School, China

Notes: This study examines the behavioural biases of Japanese institutional investors and discusses implications for their role in corporate governance, based on the findings of a questionnaire survey of fund managers carried out in 2003. Statistical analysis of the survey results reveals a short-term bias in fund managers’ investment time horizons, herding and self-marketing to improve the appearance of portfolio performance under the pressure either of customers or of institutional restraints. We conclude that institutional investors’ behaviour contradicts their role as shareholders.

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: 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: This paper examines how different control mechanisms relate to one another in the Spanish corporate governance system. We propose a new empirical approach that consists of analysing control mechanisms according to the non-linearity of the value-ownership relation, and emphasising entrenchment and expropriation phenomena. Our evidence contributes to understanding the role played by several control mechanisms in the Spanish corporate governance system, which largely differs from the US one. Our results show that control mechanisms (especially insider ownership, debt and dividends) are used in a complementary way by Spanish firms. Additionally, this complementarity is only observed when the interests of managers and owners converge, but not when there are controlling owners whose interests need not coincide with those of minority shareholders. Therefore, entrenchment and expropriation effects do influence the relationship among control mechanisms.

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: In the UK there has been a recent debate over the role of the independent non-executive director, with that debate resulting in changes to a revised Code applicable to companies reporting after 1 November, 2003. This article reflects on an aspect of the proposed changes that was ignored, namely changes to the legal duties and liabilities of non-executive directors. This appears to have been a missed opportunity in seeking to enhance the effectiveness of independent non-executives and their contributions to enhancing corporate governance. This paper considers enhancing the governance role of non-executive directors by introducing “gatekeeper liability”.

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: 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: The term “corporate governance”, and all that it implies, is now in everyday use in Germany. This is due to the enormous changes Germany has experienced in recent years, in international business, international finance and in German industrial structures. This contribution deals with recent changes in the German system of corporate governance. After a short historical review, the major elements of the international context that form the background for changes in Germany are discussed. This is followed by an explanation of the German Corporate Governance Code and its role, concluding with a prospectus for further possible developments and a summary of key points.

Notes: Germany and Japan are often seen deviating from an economic model of shareholder control and thereby as being similar by virtue of their mutual contrast with the US. Given the common challenges for bank-based and stakeholder-oriented models of corporate governance, Germany–Japan comparison seems particularly timely. This article provides an introductory overview and analysis for the Special Issue by comparing recent developments in corporate law reform, banking and finance, and employment in Germany and Japan. While rejecting arguments for international convergence, we discuss this evidence of simultaneous continuity and change in corporate governance as a potential form of hybridisation of national models or renegotiation of stakeholder coalitions in German and Japanese firms. One consequence is the growing diversity of firm-level corporate governance practices within national systems.

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: Corporate crises and international trends in corporate governance have revealed the need for reform, and resulted in a great number of changes in corporate law. In spite of this, the existing legal framework for corporate governance in Germany presents itself reluctant to major changes. The German approach to reform has focused on the improvement of corporate monitoring by the supervisory board. It neither questions the two-tier structure, nor does it reconsider the existing representation of shareholders or other stakeholders under the current form of co-determination. The German Corporate Governance Code represents a new instrument of soft law and its recommendations are likely argued to improve the work of the supervisory board by providing detailed guidelines for corporate decision-making that express a generally accepted standard of best practice.

Notes: The German corporate governance system has long been cited as the standard example of an insider-controlled and stakeholder-oriented system. We argue that despite important reforms and substantial changes of individual elements of the German corporate governance system, the main characteristics of the traditional German system as a whole are still in place. However, in our opinion the changing role of big universal banks in governance undermines the stability of the corporate governance system in Germany. Therefore a breakdown of the traditional system leading to a control vacuum or a fundamental change to a capital market-based system could be in the offing.

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: Throughout the 20th century, banks have dominated Germany's financial system and also played a key role in corporate governance. Recently, however, a number of efforts have been made to increase the role of markets within this bank-based financial system, including regulatory innovations and a reform of the pension system. This article finds that, despite these changes, there are a surprising number of continuities in the structure of the financial system. The German financial system can therefore still be characterised as bank-based. Furthermore, banks have only partially withdrawn from the stakeholder system of corporate governance, and to some extent been replaced by insurance companies. An explanation for these continuities is advanced which emphasises stability in household investment behaviour and in patterns of company sector demand for finance.

Notes: The purpose of this paper is to test hypotheses regarding the mix of bank borrowing and bonds that occur under relationship banking, thereby constructing a detailed data set on the debt structure of large Japanese firms from the late 1980s to the 1990s. We show that debt choice is affected by main bank relationships, in the sense that successful firms with strong bank ties are much more likely to issue public bonds than resort to bank borrowing.

Notes: The purpose of this paper is to analyse whether companies’“way to pay their director” matters or not. Firstly, we fail to find a positive relationship between the performance–pay sensitivity and company performance. Thus, these results do not support our hypothesis that those companies that intensify the performance–pay sensitivity are more likely to improve their performance. In addition, this research fails to find a positive relationship between the change of pay policy and performance. These results are consistent with previous studies that directors’ pay is not designed to motivate directors to work toward shareholders’ value.

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: 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: The OECD Principles of Corporate Governance were revised in 2004 to respond to corporate governance developments including corporate scandals that further focused the minds of governments on improving corporate governance practices. Since they were first issued in 1999, the OECD Principles of Corporate Governance have gained worldwide recognition as an international benchmark for sound corporate governance. They are actively used by governments, regulators, investors, corporations and stakeholders in both OECD and non-OECD countries and have been adopted by the Financial Stability Forum as one of the Twelve Key Standards for Sound Financial Systems. The 2004 revision of the OECD Principles reflects not only the experience of OECD countries but also that of emerging and developing economies. This article shows how the revised Principles take into account recent lessons from non-OECD countries so that they continue to maintain their global relevance.

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: The Cadbury Committee drew attention to the need for improved assurance regarding the going concern status of companies. This paper presents evidence drawn from the comments on two exposure drafts of the auditing standard SAS 130 to show that those arguing for a limitation on the “foreseeable future” were able to limit the impact of the Cadbury recommendations for both auditors and directors without attracting any significant volume of protest on behalf of users or the general interest. A model of a cooperative game between directors and auditors is used to show that this was a predictable outcome.

Notes: Newly privatised firms can often fall between the cracks, being at the same time more risky than SOEs and less profitable/competitive than private firms. A well-designed corporate governance regime is an important tool to make the transition period shorter and less painful. After reviewing the partially or wholly privatised European telecom sector, the paper proposes eight lessons for policy makers in charge of designing privatisation. First, where the State remains an important owner after partial privatisation, it should organise its shareholding function to pursue exclusively shareholder value objectives. Second, any privatisation-related asymmetries between control and cash-flow rights among shareholders should be limited in time and scope. Third, while some minority shareholder power, such as direct shareholder nomination and cumulative voting are welcome, the board needs to develop its own cohesiveness and culture. Fourth, the board should be actively and effectively involved in the development and validation of the company's strategy and the control of major transactions. Fifth, the privatised firms should strive to list in a market with high and credible disclosure requirements. Sixth, privatised firms should focus on developing a disclosure culture, especially as regards non-financial disclosure. Seventh, the board should conduct a regular, thorough and independent evaluation of the CEO, based on a set of criteria and yearly objectives agreed at the beginning of each exercise.

Notes: This study examines whether the equity markets value firms that have a succession plan in place. We find that firms with an heir apparent already designated upon the death of the CEO have significantly higher cumulative abnormal returns on the date of death than firms that have not identified an heir apparent. This study contributes to the existing governance/succession planning literature by providing empirical evidence that succession planning appears to be valuable to companies engaged in succession transitions.

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 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: 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: Empirical studies of corporate governance and corporate competitiveness tend to focus on specific dimensions of these two sets of corporate conditions. The findings on their relationships are mixed and inconclusive. This study uses a questionnaire to survey corporate conditions on a holistic basis, with a sample of international companies. My findings provide strong evidence that firstly, most international companies conform to good corporate governance practices; secondly, the higher such conformance is to good corporate governance practices, the stronger is the firm's competitiveness; thirdly, the relationship between corporate governance and corporate competitiveness is much stronger when corporate governance is evaluated on a holistic basis than on an individual dimension or attribute; and finally, corporate governance attributes are inter-related and it is more appropriate to pursue or study them on a collective basis.

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: 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: Top management pay has been the focus of intense scrutiny and debate in many countries. Important issues include how compensation is decided and whether it is a function of performance. The purpose of this study is to examine top management pay in Hong Kong and to investigate how it is affected by firms’ ownership and governance characteristics. A distinguishing characteristic of many listed firms in Hong Kong is the large proportion of share capital owned by the directors, and we argue that this moderates top management pay. We also investigate the role of institutional ownership and board composition in the determination of pay. We find that director and institutional ownership moderate compensation but that there is little evidence that they encourage pay-for-performance reward schemes.

Notes: Past literature in board research has centred on board structure and company performance. Over the years, empirical studies do not reveal a conclusive relationship between these two variables (Dalton and Daily, 1999. Across the Board, March, 28–32). Until recently, the literature on board processes has been sparse. The reason for insufficient empirical work on board processes possibly is due to the difficulty of gaining access to boards. In this paper, we propose a conceptual model and tested the model on publicly listed companies in Singapore. Based on a sample of 212 company responses and 299 directors, we conclude that board structure does not affect board process while board process is related to board performance. In terms of individual parameters, effort norms, cognitive conflict and the presence and usage of skills are positively related to board roles and board transparency. Also, affective and process conflicts are negatively related to board roles and board transparency. Finally, board process does not mediate the relationship between board structure and board performance.

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: 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: 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: 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.

Notes: This essay challenges the primacy of shareholder value. Shareholder primacy originates not in company law, but rather in the norms and practices surrounding the rise of the hostile takeover movement in Britain and America in the 1970s and 1980s. It is less strongly institutionalised than might be supposed, because it is essentially a cultural rather than a legal point of reference. Moreover, in the course of the past decade, a shift in the content of shareholder value has occurred which reflects the stakeholder critique of that period: this reflects the idea that shareholders should exercise their power not as representatives of the market, but as agents of society as a whole. The corporate governance of the future will be centrally concerned with how this idea is worked out in practice.

Notes: Corporate governance reforms have been motivated to a considerable degree by concerns about the possible malfunctioning of the executive remuneration determination process in large firms. It is not clear, however, how effective these reforms have been in altering pay-setting procedures in the direction of aligning executive and shareholder interests. This paper reviews some initial evidence and suggests that a mixed picture emerges. It appears that reforms have been more successful in reducing executive tenure – and hence pay-offs in the event of failure – than they have been in linking rewards to performance for continuing executives. It is clear, however, that reforms have facilitated the role for institutional shareholders in approving remuneration packages.

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 studies the relationship between corporate leverage and the ultimate corporate ownership structure, particularly the separation of cash flow rights and control rights. We empirically disentangle the three potential effects of the divergence of control rights from cash flow rights on corporate leverage, i.e. the non-dilution entrenchment effect, the signalling effect of debt and the reduce-debt-for-tunnelling effect. Our evidence from the East Asian corporations mainly supports the notion that controlling shareholders with relatively small ownership share tend to increase leverage out of the motive of raising external finance without diluting their shareholding dominance. The separation of cash flow rights and control rights contributes to the risk-taking tendency of the large controlling shareholders in capital structure choice. We argue that the risky capital structure choice serves as one potential channel through which weak corporate governance contributes to the severity of corporate value losses during the Asian financial crisis.

Notes: This paper uses an in-depth case study in southern Jiangsu to document the last wave of privatisation of Chinese rural enterprises, showing that throughout the economic reforms, particularly at the village level, local cadres and corporate leaders dominated the publicly owned enterprises, from which they benefited disproportionately. It was these same local institutions based on village cadres’ social networks that controlled the entire process of privatisation, leaving nothing to the free market or open competition. Those who positioned themselves in the village administration and enterprises are the same group of specific families and individuals who run the private corporations today. It goes without saying that workers and ordinary villagers have been disenfranchised in this property rights transformation.

Notes: Does the class of shareholdings matter for corporate performance? To answer the question, the paper starts by classifying shareholdings of Chinese publicly listed companies on the basis of the principle of ultimate ownership. A state-dominant shareholding structure is found, in that 81.6 per cent of companies are identified as ultimately controlled by the state. In contrast to our identified shareholdings, the Chinese official shareholding classification is ambiguous for the identification of ultimate controllers of public corporations, which in turn has misled many previous studies in assessing the impact of shareholding classes on performance. Based on our newly established shareholding classes, we undertake a nested performance comparison between these different classes and find significant evidence from the Chinese data that the class of shareholdings does matter for company performance. The least inefficient shareholding class is the holding companies that are wholly listed and have focused industrial business through the state indirect control of the downstream public corporations. This finding provides ground for us to think more about how the corporate control mechanism could be further improved in China's current corporate governance reform.

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: The market, not the regulator, attempts to enforce upon listed companies the “principles” of the UK Combined Code. Even though audit committees feature in the UK Code only at the level of discretionary “provisions”, almost all listed companies have audit committees. The responsibilities of audit committees in the UK and China are broadly similar, though UK guidance gives their audit committees a bigger role with respect to risk management and operational control. In China the market and the regulator are more closely aligned with the State, which is thus more influential in determining compliance with their corporate governance Code.