State of corporate governance. Corporate governance in Russia and its features
Corporate Governance characterizes the system top level management of the joint-stock company. In 1932, the book "Modern Corporation and Private Property" by A. Burley and G. Minza was published, where for the first time the issues of separation from management and control from property in joint-stock companies. This led to the emergence of a new layer of professional managers and development, since in 200 large companies 58% of the assets were controlled.
Corporate governance system- This is an organizational model that is designed, on the one hand, to regulate the relationship between company managers and their owners, on the other hand, to coordinate the goals of various stakeholders, ensuring the effective functioning of companies. There are several models of corporate governance.
Main models of corporate governance
The variety of national forms of corporate governance can be conditionally divided into groups that gravitate towards two opposite models:
- American, or outsider, model;
- German, or insider, model.
American, or outsider, the model is a management model based on a high level of use of external in relation to the joint-stock company, or market, corporate control mechanisms, or control over the management of the joint-stock company.
The Anglo-American model is typical for the USA, Great Britain, Australia, Canada, New Zealand. The interests of shareholders are represented by a large number of small investors isolated from each other, who are dependent on the management of the corporation. The role of the stock market is increasing, through which control over the management of the corporation is exercised.
German, or insider, the model is a model of management of joint-stock companies, based mainly on the use of internal methods of corporate control, or methods of self-control.
The German corporate governance model is typical for the countries of Central Europe, the Scandinavian countries, less typical for Belgium and France. It is based on the principle of social interaction: all parties interested in the activities of the corporation have the right to participate in the decision-making process (shareholders, managers, staff, banks, public organizations). The German model is characterized by a weak focus on stock markets and shareholder value in management, as the company itself controls its competitiveness and performance.
The American and German models of corporate governance are two opposite systems, between which there are many options with the predominant dominance of one or another system and reflecting the national characteristics of a particular country. The development of a certain corporate governance model within the framework depends mainly on three factors:
- mechanism;
- functions and tasks;
- level of information disclosure.
Japanese model of corporate governance was formed in the post-war period on the basis of financial and industrial groups (keiretsu) and is characterized as completely closed, based on bank control, which reduces the problem of managerial control.
Family model of corporate governance spread throughout the world. Corporations are managed by members of the same family.
In the emerging in Russia corporate governance models the principle of separation of ownership and control rights is not recognized. The corporate governance system in Russia does not correspond to any of the above models, further development business will be focused on several models of corporate governance at once.
Conditions for applying the American model of corporate governance
The American system of corporate governance is directly related to the features of national joint stock ownership, which are:
- the highest degree of dispersion of the capital of American corporations, as a result, as a rule, none of the groups of shareholders claims special representation in the corporation;
- the highest level of liquidity of shares, the presence of highly developed, which allows any shareholder to quickly and easily sell their shares, and the investor - to buy them.
The key forms of market control for the American market are numerous mergers, acquisitions and buyouts of companies, which provides effective market control over the activities of managers through the corporate control market.
Reasons for using the German corporate governance model
The German model stems from factors directly opposite to those that give rise to the American model. These factors are:
- the concentration of equity capital among various types of institutional investors and the comparatively lower degree of its dispersal among private investors;
- relatively weak development of the stock market.
American model of corporate governance
Typical management structure of an American corporation
The supreme governing body of the corporation is the general meeting of shareholders held regularly, at least once a year. Shareholders take part in the management of the corporation by participating in voting on issues of introducing amendments and additions to the charter of the corporation, electing or removing directors, as well as on other decisions that are most important for the corporation's activities, such as reorganization and liquidation of the corporation, etc.
At the same time, meetings of shareholders are largely formal in nature, since shareholders have rather limited opportunities to participate in the management of the corporation, since the main burden of the real management of the corporation falls on the board of directors, which is usually entrusted with the following main tasks:
- solution of the most important corporate issues;
- appointment and control over the activities of the administration;
- control of financial activity;
- ensuring the compliance of the corporation's activities with the current legal norms.
The main responsibility of the board of directors is to protect the interests of shareholders and maximize their wealth. He must provide a level of management that guarantees the growth of the value of the corporation. AT last years the trend of increasing the role of the board of directors in the management of the corporation has become more and more noticeable. This is manifested primarily in the control over the financial state of affairs. Financial results the work of the corporation is considered at meetings of the board of directors, as a rule, at least once a quarter.
Members of the board of directors, being representatives of shareholders, are responsible for the state of affairs in the corporation. They may be subject to administrative and criminal liability in the event of the bankruptcy of the corporation or the commission of actions aimed at obtaining their own benefit to the detriment of the interests of the shareholders of the corporation.
The quantitative composition of the board of directors is determined based on the needs of effective management, and its minimum number in accordance with state laws can be from one to three.
The Board of Directors is elected from internal and external (independent) members of the joint-stock company. Most The board of directors is made up of independent directors.
Internal members are selected from among the corporate administration and serve as both executive directors and managers of the company. Independent directors are persons who have no interests in the company. They are representatives of banks, other companies with close technological or financial ties, well-known lawyers and scientists.
Both groups of directors, or, in other words, all directors are equally responsible for the affairs of the company.
Structurally, the board of directors of American corporations is divided into standing committees. The number of committees and the direction of their activities in each corporation is different. Their task is to develop recommendations on issues adopted by the board of directors. Boards of directors most often have committees on governance and wages, Audit Committee (Audit Committee), Finance Committee, Electoral Committee, Operations Committee, in large corporations- public relations committees, etc. At the request of the US Securities and Exchange Commission, audit and remuneration committees must be in each corporation.
The executive body of the corporation is its directorate. The board of directors selects and appoints the president, vice-presidents, treasurer, secretary and other heads of the corporation, as provided for by its charter. The appointed head of the corporation has very great powers and is accountable only to the board of directors and shareholders.
German model of corporate governance
Typical management structure of a German corporation
The typical management structure of a German company is also three-level and is represented by a general meeting of shareholders, a supervisory board and a management board. The supreme governing body is the general meeting of shareholders. His competence includes the solution of issues typical for all models of management of joint-stock companies:
- election and dismissal of members of the supervisory board and the board;
- the procedure for using the company's profits;
- appointment of an auditor;
- amendments and additions to the charter of the company;
- change in the value of the company's capital;
- company liquidation, etc.
The frequency of holding meetings of shareholders is determined by law and the charter of the company. The meeting is held at the initiative of the management bodies or shareholders, owners of at least 5% of the shares. The process of preparing the meeting includes the obligation to publish in advance the agenda of the meeting of shareholders and the options proposed by the Supervisory Board and the Management Board for each issue. Any shareholder within a week after the publication of the agenda may propose their own version of the solution of a particular issue. Decisions at the meeting are taken by a simple majority of votes, the most important - by three-fourths of the votes of the shareholders present at the meeting. Decisions made at the meeting come into force only after they are notarized or certified by the court.
Supervisory Board performs the functions of control over economic activity companies. It is formed from representatives of shareholders and employees of the company. In addition to these two groups, the supervisory board may also include representatives of banks and enterprises that have close business ties with the company. The high representation of company employees on the Supervisory Board, with a share of up to 50% of seats, is a hallmark of the German Supervisory Board formation system. In order to avoid conflicts of interest between shareholders and employees represented on the Supervisory Board, each of these parties has the right to veto the election of representatives of the opposite group.
The main task of the supervisory board is the selection of company managers and control over their work. The scope for resolving issues of strategic importance within the competence of the Supervisory Board is clearly defined and includes the acquisition of other companies, the sale of part of the assets or the liquidation of an enterprise, the consideration and approval of annual balance sheets and reports, big deals and the amount of dividends.
Decisions of the Supervisory Board are taken by a three-quarters majority vote.
The size of the supervisory board depends on the size of the company. The minimum membership must be at least three members. German law prescribes large supervisory boards.
Members of the Supervisory Board are elected by shareholders for a period of four business years after the commencement of operations. Prior to the expiration of their terms of office, members of the Supervisory Board may be re-elected by the General Meeting of Shareholders by a three-quarters majority. The Supervisory Board elects a chairman and a deputy chairman from among its members.
The board is formed from the management of the company. The Board may consist of one or more persons. The management is entrusted with the task of direct economic management of the company and responsibility for the results of its activities. Members of the Management Board are appointed by the Supervisory Board for a term of up to five years. Members of the Management Board are prohibited from engaging in any commercial activity outside of their main job, as well as participating in the management bodies of other companies without the consent of the Supervisory Board. The work of the board is built on a collegiate basis, when decisions are made on the basis of consensus. In difficult situations, when consensus cannot be reached, decisions are made by voting. Each member of the board has one vote, the decision is considered adopted if the majority of the board members voted for it.
The main differences between the American model and the German one
The main differences between the considered models of corporate governance are as follows:
- in the American model, the interests of shareholders are, for the most part, the interests of small private investors isolated from each other, who, due to their disunity, are highly dependent on the management of corporations. As a counterweight to this situation, the role of the market is increasing, which exercises control over the management of joint-stock companies through the corporate control market;
- in the German model, shareholders are a set of fairly large shareholders, and therefore they can unite with each other to pursue their common interests and, on this basis, have firm control over the management of a joint-stock company. In such a situation, the role of the market as an external controller of the activities of society is sharply reduced, because the corporation itself controls its competitiveness and its performance;
From what has been said, there is a difference in the functions of the board of directors. In the American model, this is the board of directors as a board of governors, which in fact manages all the activities of the joint-stock company and is responsible for it to the meeting of shareholders and the state control bodies.
In the German management model, there is a strict separation of management and control functions. In it, the board of directors has a supervisory board, more precisely, a controlling body, and not a body that exercises full control of the joint-stock company. Its control functions are directly related to the ability to quickly change the current management of the corporation in the event that its activities cease to satisfy the interests of shareholders. Participation in the supervisory boards of representatives of other corporations makes it possible to take into account in the activities of the corporation not only the interests of its shareholders, but also the interests of other corporations, one way or another connected with its activities. As a result, the interests of certain groups of shareholders of a German corporation are usually not prevailing, since the interests of the company as a whole are put forward in the first place.
The concept of corporate governance
Currently, there are many approaches to determining the essence of corporate governance (CG). Most often it is customary to identify it with a special form of relationship that arises between managers and owners (shareholders). corporate organizations, which includes a set of norms, rules, traditions and measures that allow the latter to exercise control over the activities of the company's management and fairly distribute its results.
Definition 1
A corporation is a special form of business organization that involves the concentration of ownership in the hands of shareholders. Most often, corporations take the form of joint-stock companies (public and non-public).
Corporate governance is directly related to the organization of managing the relationship between the corporation and its stakeholders.
Stakeholders should be understood as persons interested in the activities of the corporation. As a rule, they are:
- shareholders (owners);
- management (managers);
- employees (personnel);
- clients (consumers);
- suppliers;
- state;
- local community.
The corporate governance system involves building effective relationships between them.
In itself, corporate governance is usually considered in three basic aspects (Figure 1).
Figure 1. Main approaches to defining the essence of corporate governance. Author24 - online exchange of student papers
In the first case, it is customary to identify corporate governance as an independent system of knowledge, that is, to consider it as a science.
In the second case, the essence of corporate governance will be determined from the standpoint of a systematic approach. Then it is fair to speak of it as a set of managerial relations.
In the third case, the definition of the essence of corporate governance is based on the process approach. It is a kind of managerial impact, through which the corporation represents and serves the multidirectional interests of stakeholders, while ensuring a balance between the goals of the economic and social order.
Applied to real practice functioning economic systems corporate governance involves building a system of its organization.
Essence and composition of the corporate governance system
The corporate governance system is organizational model by which a corporation represents and protects the interests of its investors and shareholders. It can also be defined as a set of principles and mechanisms for making corporate decisions and monitoring their implementation.
The CG system is based on a number of principles and rules that define the relationship between owners, hired managers and other groups of stakeholders.
It is believed that the corporate governance system should be based on universal human values, such as:
- honesty;
- transparency and openness;
- responsibility;
- dialogue with stakeholders;
- cooperation with society, etc.
Remark 1
The corporate governance system is based on the interaction and mutual reporting of stakeholders. Its main goal is to increase the corporation's profits and ensure the sustainability of its development, subject to compliance with current legislation, taking into account international standards.
AT general view the model of the corporate governance system is shown in Figure 2.
Figure 2. Scheme of the corporate governance system. Author24 - online exchange of student papers
Figure 2 shows that the CG system is inextricably linked with the distribution of information flows and coordinating interaction between shareholders, management and the board of directors. One way or another, it is aimed at regulating the relationship between managers and owners and is designed not only to minimize agency costs, but also to ensure the consistency of the goals of all stakeholder groups in order to ensure the effective functioning of the corporation.
Ultimately, the CG system is designed to encourage participants in corporate relations to develop such company development strategies, the implementation of which can lead to an increase in business value.
Features of building corporate management systems
lining up effective system CU is a complex multi-stage process. Its main steps are:
- development of uniform principles for the work of a corporation, which may be reflected in the form of a mission, philosophy or other fundamental document;
- determining the fundamental goals of the company, as well as isolating ways to motivate its owners;
- selection of an organizational structure that would be adequate to the goals.
Building a corporate governance system is associated with a number of problems, the totality of which can be divided into two groups. The first comes down to the definition of what exactly the corporation should build, and the second to the quality of its construction.
The primary role is given to the formation of the basic parameters of the elements of the system, which should be directly related to the four blocks of corporate governance, affecting the rights of shareholders, management bodies, social responsibility of business and disclosure of information. All of them should be built in such a way as to ensure the sustainability of the development of the corporation, while minimizing the conflict of interests of the main groups of stakeholders and maximizing the satisfaction of their interests, as well as individual corporate goals, while maintaining the congruence of goals.
Most often, building a corporate governance system takes the following form (Figure 3). This nose approach is simplistic.
Figure 3. Corporate governance bodies. Author24 - online exchange of student papers
As part of a broader approach to building a corporate governance system, it also includes such elements as CG participants (at the micro and macro levels), objects and mechanisms of its impact, as well as information support for its functioning.
Gracheva Maria Senior Financial Expert, ECORYS Nederland, Davit Karapetyan - IFC Corporate Governance in Russia
Magazine "Management of the company" No. 1 2004
| Strange as it may sound, the practice of corporate governance has been around for centuries. Recall, for example: Shakespeare describes the unrest of a merchant who is forced to entrust the care of his property - ships and goods - to other persons (in modern terms, to separate property from control over it). But a full-fledged theory of corporate governance began to take shape only in the 80s. the last century. True, at the same time, the slowness of comprehending the prevailing realities was more than compensated for by research and the intensification of regulation of relations in this area. Analyzing the features of the modern era and the two previous ones, scientists conclude that in the XIX century. entrepreneurship was the engine of economic development, in the 20th century - management, and in the 21st century. this function is moving to corporate governance (Fig. 1). |
| A Brief History of Corporate Governance 1553: The Muscovy Company, the first English joint-stock company (England), was established. 1600: The Governor and Company of Merchants of London Trading into the East Indies was created, which from 1612 became a permanent joint stock company with limited liability. In addition to the meeting of owners, a meeting of directors (consisting of 24 members) with 10 committees was formed in it. The owner of shares in the amount of not less than 2 thousand pounds could become a director. Art. (England). 1602: The Dutch East India Trading Company (Verenigde Oostindische Compagnie) is created - a joint-stock company in which the separation of ownership from control was first implemented - an assembly of gentlemen (i.e. directors) was created, consisting of 17 members who represented shareholders 6 regional chambers of the company in proportion to their shares in the capital (Netherlands). 1776: A. Smith warns in a book about weak control mechanisms over the activities of managers (Great Britain). 1844: Joint Stock Companies Act (Great Britain) passed. 1855: Limited Liability Act (Great Britain) passed. 1931: A. Burley and G. Means (USA) publish their seminal work. 1933-1934: The Securities Trading Act of 1933 becomes the first law to regulate markets valuable papers(in particular, the requirement to disclose registration data has been introduced). The 1934 law delegated enforcement functions to the Securities and Exchange Commission (USA). 1968: The European Economic Community (EEC) adopts a corporate law directive for European companies. 1986: Law on financial services, which had a huge impact on the role of stock exchanges in the regulatory system (USA). 1987: The Treadway Commission submits a report on financial reporting fraud, confirms the role and status of audit committees, and develops the concept of internal control, or the COSO (Committee of Sponsoring Organizations of the Treadway Commission) model, published in 1992 (USA). 1990-1991: Collapse of Polly Peck corporations (losses of £1.3bn) and BCCI, and fraud pension fund of Maxwell Communications (£480m) indicate the need for improved corporate governance practices to protect investors (UK). 1992: Cadbury committee publishes first Corporate Governance Code (UK). 1993: Companies listed on the London Stock Exchange are required to disclose compliance with the Cadbury Code on principle (UK). 1994: Publication of the King Report (South Africa). 1994 -1995: publication of reports: Rutteman - about internal control and financial reporting, Greenbury - on the remuneration of members of the boards of directors (Great Britain). 1995: publication of the Viénot report (France). 1996: Publication of Peters report (Netherlands). 1998: Publication of the Hampel Report on Fundamental Principles of Corporate Governance and the Consolidated Code based on the Cadbury, Greenbury and Hampel Reports (UK). 1999: Publication of the Turnbull Report on Internal Control, which replaced the Rutteman Report (UK); publication, which became the first international standard in the field of corporate governance. 2001: Publication of the Meiners Report on Institutional Investors (UK). 2002: publication of the German Corporate Governance Code - the Kromme Code (Germany); Russian Code of Corporate Conduct (RF). the collapse of Enron and other corporate scandals lead to the passage of the Sarbanes-Oxley Act (USA). Publication of Bouton Report (France) and Winter Report on European Corporate Law Reform (EU). 2003: Papers published: Higgs on the role of non-executive directors, Smith on audit committees. Introduction new edition United Code of Corporate Governance (UK). Source: IFC, 2003. |
Corporate governance: what is it?
Now in developed countries the foundations of the system of relations between the main actors of the corporate (shareholders, managers, directors, creditors, employees, suppliers, buyers, government officials, residents of local communities, members of the public organizations and movements). Such a system is created to solve three main tasks of the corporation: ensuring its maximum efficiency, attracting investments, and fulfilling legal and social obligations.
Corporate management and corporate governance are not the same thing. The first term refers to the activities of professional specialists in the course of business transactions. In other words, management is focused on the mechanics of doing business. The second concept is much broader: it means the interaction of many individuals and organizations related to the most diverse aspects of the functioning of the company. Corporate governance is at a higher level of company management than management. The intersection of the functions of corporate governance and management takes place only when developing a company's development strategy.
In April 1999, in a special document approved by the Organization for Economic Cooperation and Development (which unites 29 countries with developed market economies), the following definition of corporate governance was formulated: 1. Five main principles of good corporate governance were also described in detail there:
- The rights of shareholders (the corporate governance system should protect the rights of shareholders).
- Equal treatment of shareholders (the corporate governance system should ensure equal treatment of all shareholders, including small and foreign shareholders).
- The role of stakeholders in corporate governance (the corporate governance system should recognize the statutory rights of stakeholders and encourage active cooperation between the company and all stakeholders in order to increase social wealth, create new jobs and achieve financial stability corporate sector).
- Information disclosure and transparency (the corporate governance system should provide timely disclosure of reliable information about all significant aspects of the functioning of the corporation, including information about the financial position, performance results, composition of owners and management structure).
- Responsibilities of the board of directors (the board of directors provides strategic guidance to the business, effective control over the work of managers and is obliged to report to shareholders and the company as a whole).
On fig. 2 shows the process of forming a corporate governance system in developed countries. It reflects the internal and external factors that determine the behavior of the firm and the effectiveness of its functioning.
In developed countries, two main models of corporate governance are used. The Anglo-American operates, in addition to Great Britain and the USA, also in Australia, India, Ireland, New Zealand, Canada, and South Africa. The German model is typical for Germany itself, some other countries of continental Europe, as well as for Japan (sometimes the Japanese model is distinguished as an independent one).
The Anglo-American model operates where a dispersed share capital structure has formed, i.e. dominated by many small shareholders. This model implies the existence of a single corporate board of directors, which performs both supervisory and executive functions. The proper implementation of both functions is ensured by the formation of this body from non-executive directors, including independent directors (), and executive directors (). The German model develops on the basis of a concentrated shareholding structure, in other words, when there are several large shareholders. In this case, the company management system is two-level and includes, firstly, the supervisory board (it includes representatives of shareholders and employees of the corporation; usually the interests of the personnel are represented by trade unions) and, secondly, the executive body (board), whose members are managers. A feature of such a system is a clear separation of the functions of supervision (given to the supervisory board) and execution (delegated to the board). In the Anglo-American model, the board is not created as an independent body, it is actually in the board of directors. The Russian model of corporate governance is in the process of formation, and it shows the features of both models described above.
Effective corporate governance: the importance of implementing the system, the cost of its creation, the demand from companies
Companies with high corporate governance standards tend to have better access to capital than poorly managed corporations and outperform the latter in the long run. Securities markets, which are subject to strict requirements for the corporate governance system, help to reduce investment risks. Typically, such markets attract more investors who are willing to provide capital at a reasonable price, and are much more effective in bringing together capital owners and entrepreneurs in need of external financial resources.
Efficiently managed companies contribute more significantly to the national economy and the development of society as a whole. They are more financially sustainable, creating more value for shareholders, workers, local communities and countries as a whole. This is in contrast to poorly managed companies such as Enron, whose failures cause job losses, loss of pension contributions, and can even undermine confidence in the stock markets. The stages of building an effective corporate governance system and its advantages are shown in fig. 3.
Facilitating access to the capital market
The practice of corporate governance is a factor that can determine the success or failure of companies when entering the capital market. Investors perceive well-managed companies as friendly, inspiring more confidence that they are able to provide shareholders with an acceptable level of return on investment. On fig. Figure 4 shows that the level of corporate governance plays a special role in countries with emerging markets, where there is no such a serious system of protecting the rights of shareholders as in countries with developed markets.
New share registration requirements adopted by many of the world's stock exchanges make it necessary for companies to comply with increasingly stringent corporate governance standards. There is a clear tendency among investors to include corporate governance practices in the list of key criteria used in the process of making investment decisions. The higher the level of corporate governance, the more likely it is that assets are used in the interests of shareholders, and not stolen by managers.
Reducing the cost of capital
Companies that adhere to proper corporate governance standards can achieve a reduction in the cost of external financial resources used by them in their activities and, consequently, a reduction in the cost of capital in general. This pattern is especially characteristic of countries such as Russia, where legal system is in the process of formation, and judicial institutions do not always provide effective assistance to investors in case of violation of their rights2. Joint-stock companies that have managed to achieve even small improvements in corporate governance can receive very significant advantages in the eyes of investors compared to other JSCs operating in the same countries and industries (Fig. 5).
As you know, in Russia the cost of borrowed capital is quite high, and there is practically no attraction of external resources through the issuance of shares. This situation has developed for many reasons, primarily due to the strongest structural deformation of the economy, which serious problems with the development of companies as reliable borrowers and objects for investing shareholders' funds. At the same time, the spread of corruption, insufficient development of legislation and weak judicial enforcement and, of course, flaws in corporate governance3 play a significant role. Therefore, an increase in the level of corporate governance can have a very quick and noticeable effect, ensuring a decrease in the cost of a company's capital and an increase in its capitalization.
Promoting Efficiency
Good corporate governance can help companies achieve high performance and efficiency. As a result of better management, the accountability system becomes clearer, the oversight of the performance of managers is improved, and the link between the reward system of managers and the company's performance is strengthened. In addition, the decision-making process of the board of directors is being improved by obtaining reliable and timely information and increasing financial transparency. Effective corporate governance creates favorable conditions for succession planning and sustainable long-term development of the company. Conducted studies show that high-quality corporate governance streamlines all business processes occurring in the company, which contributes to the growth of turnover and profit while reducing the volume of required capital investments4.
Implementing a clear accountability system reduces the risk of managerial and shareholder interests divergence and minimizes the risk of company officials cheating and making transactions in their own interests. If the transparency of a joint-stock company increases, investors get an opportunity to penetrate the essence of business operations. Even if the information coming from a company that has increased its transparency turns out to be negative, shareholders benefit from a reduction in the risk of uncertainty. Thus, incentives are formed for the board of directors to conduct a systematic analysis and risk assessment.
Effective corporate governance, which ensures compliance with laws, standards, rules, rights and obligations, allows companies to avoid the costs associated with litigation, shareholder claims and other business disputes. In addition, the resolution of corporate conflicts between minority and controlling shareholders, between managers and shareholders, as well as between shareholders and stakeholders is improving. Finally, executive officials are able to avoid harsh penalties and imprisonment.
Reputation improvement
Companies that adhere to high ethical standards, respect the rights of shareholders and creditors, and ensure financial transparency and accountability will develop a reputation as zealous guardians of the interests of investors. As a result, such companies will be able to become worthy and enjoy greater public confidence.
The cost of effective corporate governance
The organization of an effective corporate governance system entails certain costs, including the costs of attracting specialists, such as corporate secretaries and other professionals, necessary to ensure work in this area. Companies will have to pay remuneration to external legal advisers, auditors and consultants. The costs associated with disclosing additional information can be significant. In addition, managers and board members will have to devote a lot of time to solving emerging problems, especially at the initial stage. Therefore, in large joint-stock companies, the implementation of a proper corporate governance system usually occurs much faster than in small and medium-sized ones, since the former have the necessary financial, material, human, and information resources for this.
However, the benefits of such a system far outweigh the costs. This becomes clear if, when calculating economic efficiency take into account the losses that may be faced by: employees of firms - due to job cuts and loss of pension contributions, investors - as a result of the loss of invested capital, local communities - in the event of a collapse of companies. In an emergency, systemic corporate governance problems can even undermine confidence in financial markets and threaten the stability of a market economy.
Demand from companies
Of course, a system of proper corporate governance is needed primarily by open joint-stock companies with a large number of shareholders that do business in industries with high growth rates and are interested in mobilizing external financial resources in the capital market. However, its usefulness is also undeniable for open joint stock companies with a small number of shareholders, closed joint stock companies and limited liability companies, as well as for companies operating in industries with medium and low growth rates. As already mentioned, the introduction of such a system allows companies to optimize internal business processes and prevent conflicts by properly organizing relations with owners, creditors, potential investors, suppliers, consumers, employees, representatives of government agencies and public organizations.
In addition, any company seeking to increase its market share sooner or later faces limited internal financial resources and the impossibility of a long-term increase in the debt burden without increasing the share equity in liabilities. Therefore, it is better to engage in the implementation of the principles of good corporate governance in advance: this will ensure the future competitive advantage companies and thereby give it the opportunity to get ahead of rivals. In other words, the soldier who does not dream of becoming a general is bad.
So, corporate governance is not a fashionable term, but quite a tangible reality. In countries with economies in transition, it is characterized by very significant features (as well as other attributes of the market), without understanding which it is impossible to effectively regulate the activities of companies. Consider the specifics of the Russian situation in the field of corporate governance.
Research results
In the fall of 2002, the Interactive Research Group, in cooperation with the Association of Independent Directors, conducted a special study of corporate governance practices in Russian companies. The study was commissioned by the International Finance Corporation (a member of the World Bank Group), with the support of the Swiss State Secretariat for Economic Relations (SECO) and the Senter International Agency of the Ministry of Economy of the Netherlands5.
The survey involved senior officials of 307 joint-stock companies representing a wide range of industries and operating in four regions of Russia: Yekaterinburg and Sverdlovsk region, Rostov-on-Don and the Rostov region, Samara and the Samara region, St. Petersburg. The uniqueness of the study lies in the fact that it focuses on the regions and is based on a solid and representative sample. The average characteristics of the respondent firms are as follows: the number of employees - 250, the number of shareholders - 255, the sales volume - $1.1 million. , general directors or their deputies.
The analysis made it possible to reveal the presence of certain general patterns. In general, companies that have achieved some success in terms of corporate governance practices include those that:
- more in terms of turnover and net profit;
- feel the need to attract investment;
- hold regular meetings of the board of directors and the board;
- provide training for members of the board of directors.
- commitment of companies to the principles of good corporate governance;
- activities of the board of directors and executive bodies;
- shareholder rights;
- disclosure and transparency.
1. Commitment to the principles of good corporate governance
To date, only a few companies have made real changes in corporate governance (CG), so it needs serious improvement. Only in 10% of companies the state of CG practice can be assessed as, at the same time, the share of companies with unsatisfactory CG practice is 27% of the sample.
Many companies are not aware of the existence of the Code of Corporate Conduct (hereinafter - the Code), which was developed under the auspices of the Federal Commission for the Securities Market (FCSM) and is the main Russian standard corporate governance. While the Code is targeted at companies with more than 1,000 shareholders (this is more than average number of shareholders in the sample), it is applicable to companies of any size. Only half of the respondents are aware of the existence of the Code, of which about one third (i.e. 17% of the entire sample) have implemented its recommendations or intended to do so in 2003.
Many companies plan to improve their CG practices and would like outside help to do so. More than 50% of the firms surveyed intend to use the services of CG consultants, and 38% of respondents intend to organize training programs for board members.
2. Activities of the board of directors and executive bodies
Board of Directors
Boards of Directors (Boards) go beyond the scope of their competence under Russian law. The boards of directors of some companies are either not aware of the limits of their powers, or deliberately ignore them. Thus, every fourth Board of Directors approves an independent auditor of the company, and in 18% of respondent firms, the boards of directors elect members of the Board of Directors and terminate their powers.
Only a few members of the SD are independent. In addition, the problem of protecting the rights of minority shareholders is a matter of concern. Only 28% of surveyed companies have independent board members. Only 14% of respondents have the number of independent directors in line with the recommendations of the Code.
There are practically no committees in the structure of boards of directors. They are organized only in 3.3% of the companies participating in the study. Audit committees have 2% of respondent firms. None of the firms has an independent director as chairman of the audit committee.
Almost all companies meet the legal requirements for a minimum number of directors. 59% of companies in the Board of Directors do not have women. The average number of SD members is 6.8, and only one of the SD members is a woman.
Board meetings are held fairly regularly. On average, board meetings are organized 7.9 times a year, which is slightly less than the Code, which recommends such meetings to be held every 6 weeks (or about 8 times a year).
Only a few companies organize training for members of the Board of Directors, they very rarely turn to help independent consultants on corporate governance issues. Only 5.6% of respondents provided training to board members during the previous year. Even fewer companies (3.9%) used the services of CG consulting firms.
The remuneration of the members of the Board of Directors is at a low level and, quite likely, is incomparable with the responsibility assigned to them. 70% of companies do not pay the work of directors at all and do not compensate them for the expenses associated with their activities. The average remuneration of a member of the Board of Directors is $550 per year; in companies with less than 1,000 shareholders - $475, and in companies with more than 1,000 shareholders - $1,200 per year.
The corporate secretary in companies with this position, as a rule, combines his main job with the performance of other functions. 47% of respondents indicated that they have introduced the position of a corporate secretary, whose main duties are to organize interaction with shareholders and help in establishing cooperation between the Board of Directors and other management bodies of the company. In 87% of such companies, the functions of a corporate secretary are combined with the performance of other duties.
Executive bodies (board and CEO)
Most companies do not have collegial executive bodies. The Code recommends the formation of a collegial executive body - the board, responsible for the day-to-day work of the company, but only one quarter of the respondent firms has such a body.
In some companies, collegial executive bodies go beyond the scope of competence provided for by Russian law. As in the case of the Board of Directors, collegial executive bodies either do not fully understand or deliberately ignore the limits of their powers. Thus, 30% of collegial executive bodies make decisions on conducting extraordinary audits, and 14% approve independent auditors. Further, 9% elect senior executives and board members and terminate their powers; 5% elect the chairman of the board and CEO and terminate their powers; 4% elect the chairman and members of the Board of Directors and terminate their powers. Finally, 2% of the collegial executive bodies approve an additional issue of the company's shares.
Board meetings are held less frequently than recommended by the Code. Meetings of the collegial executive body are held on average once a month. Only 3% of companies follow the Code's recommendations to hold meetings once a week. At the same time, the results of the study show that the more often board meetings are held, the higher the profitability of companies.
3. Rights of shareholders
All surveyed companies hold annual general meetings of shareholders in accordance with the requirements of the law.
All respondent firms comply with legal requirements regarding the information channels used to notify shareholders of a general meeting.
The majority of survey participants inform shareholders that the meeting is properly conducted. At the same time, 3% of companies include additional issues on the agenda of the meeting without proper notification of shareholders.
In a number of companies, the Board of Directors or collegial executive bodies have appropriated certain powers of the general meeting. In 19% of firms, the general meeting is not given the opportunity to approve the board's recommendation to appoint an independent auditor.
Although the majority of respondents notify shareholders of the results of the general meeting, many companies do not provide shareholders with any information on this issue. Shareholders of 29% of surveyed companies are not informed about the results of the general meeting.
Many firms do not meet their obligations to pay dividends on preferred shares. Almost 55% of the surveyed companies with preferred shares did not pay declared dividends in 2001 (the number of such companies turned out to be 7% more than in 2000).
It is not uncommon for declared dividends to be paid late or not at all. The results of the study show that in 2001, 35% of companies paid dividends after 60 days had elapsed from the date the payment was announced. The Code recommends that payment be made no later than 60 days after the announcement. At the time of the study, 9% of companies had not paid dividends declared based on the results of 2000.
4. Disclosure and transparency
94% of companies do not have internal disclosure policy documents.
The ownership structure is still a well-kept secret. 92% of companies do not disclose information about major shareholders. Nearly half of these firms have shareholders owning more than 20 percent authorized capital, and 46% has shareholders owning more than 5% of the outstanding shares.
Almost all responding firms provide shareholders with their financial statements (only 3% of companies do not).
In most companies, audit practices leave much to be desired, and in some firms, auditing is carried out in a very sloppy manner. 3% of respondent firms do not conduct an external audit of financial statements. Internal audit absent in 19% of companies with audit commissions. 5% of study participants do not have audit commission provided by law.
The way in which many respondent firms approve the external auditor raises serious concerns about the independence of the latter. According to Russian law, the approval of the external auditor is the exclusive prerogative of the shareholders. In practice, auditors are asserted: in 27% of companies - boards of directors, in 5% of companies - executive bodies, in 3% of companies - other bodies and persons.
Board audit committees are organized very rarely. None of the companies in the sample has an audit committee composed entirely of independent directors.
start to spread international standards financial statements (IFRS), and this is especially true for companies that need to attract financial resources. 18% of surveyed firms currently prepare IFRS financial statements, and 43% of respondents intend to implement IFRS in the near future.
Based on the results of the survey, the respondent companies were assessed in accordance with 18 indicators characterizing the practice of corporate governance and divided into the four groups indicated above (Fig. 6).
Overall, performance across all four categories can be significantly improved, with the following indicators requiring particular attention:
- training of members of the Board of Directors;
- increase in the number of independent directors;
- formation of key committees of the Board of Directors and approval of an independent director as the chairman of the audit committee;
- accounting in accordance with international financial reporting standards;
- improved disclosure of information about related party transactions.
It turned out that the CG indices in the companies participating in the study differ significantly. The best AO received 16 out of 18 points, the worst - only one.
At least ten positive indicators have 11% of the companies in the sample, i.e. only every tenth joint-stock company has CG practices that can be generally considered to be in line with the relevant standards. The remaining 89% of respondents fulfill less than 10 out of 18 indicators. This indicates the need for serious work to improve the practice of corporate governance in the vast majority of joint-stock companies represented in the sample.
Thus, Russian companies have a lot of work to do to improve the level of corporate governance. Those who manage to achieve success in this area will be able to increase their efficiency and investment attractiveness, reduce the cost of attracting financial resources, and, as a result, gain a serious competitive advantage.
If the interests of the stakeholders partly diverge from the interests of the firm, then the effective functioning of private property within the corporation requires the creation of a system of incentives and controls that would reconcile the interests of the participants and balance the benefits and costs associated with the opportunistic behavior of management. The solution to this problem takes place within the framework of the corporate governance system, which differs in each national economy depending on the existing institutional system.
Corporate governance system represents the integrity of organizational elements, designed to regulate not only the relationship between managers and owners and minimize agency costs, but also to coordinate the goals of all stakeholders, ensuring the effective functioning of the company. That is, the corporate governance system should encourage participants to develop such strategies for the development of the company, the implementation of which would lead to an increase in the value of the business.
These relationships are established in accordance with legislative and internal corporate standards, they are distinguished by a high level of dynamism and adaptation to possible changes in the internal and external environment of the corporation's functioning.
The elements of the corporate governance system include:
· Participants (subjects) of corporate governance (at micro and macro levels).
· Objects of corporate management.
· Mechanisms of corporate governance.
· Information support of corporate governance.
Fig.2.3.1. Elements of the corporate governance system
Participants or subjects corporate relations are financially interested parties both at the micro-level - inside the organization, and at the macro-level - outside it. Among the participants in corporate relations, financial (banks, creditors, etc.) and non-financial entities (suppliers, personnel, regional and local authorities) are distinguished.
Table 2.3.1.
Participants in corporate relations at the micro and macro levels.
| Participants in corporate relations at the micro level | Participants of corporate relations at the macro level |
Shareholders
| Federal Commission for the Securities Market (FCSM of Russia), expert advice for Corporate Governance Federal Service for Financial Markets (FFMS) of Russia |
| General Meeting of Shareholders | The World Bank |
Board of Directors (Supervisory Board) (supervisory function)
| Stock exchanges (Russian Trading System– RTS, Moscow Interbank Currency Exchange MICEX, etc.) |
Executive body (management function)
| National Association of Stock Market Participants (NAUFOR), uniting brokers, dealers, securities managers and depositories (PARTAD) |
| Bond holders | Non-profit partnership "National Council for Corporate Governance" |
| Affiliates | Corporate Governance Committee under Russian Union industrialists and entrepreneurs (RSPP) |
| Lenders | Russian Institute of Stock Market and Management |
| Strategic investors | Institute of Professional Directors |
| Suppliers | Guild of Investment and Financial Analysts |
| Staff | Institute of Internal Auditors |
| Intermediaries | Russian Institute of Directors |
| Financial intermediaries | Russian Union of Stock Exchanges |
| Consultants | Institute corporate law and management |
| Independent appraisers | Insurance organizations (provide liability insurance services for directors and managers) |
| Auditors | Managers Association |
| Control and revision service | Association of Russian Banks |
| Analysts | Association of Independent Directors |
| Audit committee | Russian Association for the Protection of Investors' Rights |
| Specialized registrar | International rating agencies (Standard & Poor's, etc.) |
| Corporate Secretary | Global Corporate Governance Forum |
| Regional, local authorities | Court of Arbitration |
| Federal Antimonopoly Service of Russia | |
| Institute of Professional Auditors | |
| Organization for Economic Cooperation and Development (OECD) |
To objects of corporate governance can be attributed:
Ø Ownership structure and influence (transparency of the ownership structure, ownership concentration and shareholder influence).
Ø The rights of shareholders (the procedure for holding a meeting of shareholders and coordination, property rights, measures to protect against takeovers).
Ø Transparency of information disclosure and audit (content of disclosed information, timeliness and availability of disclosed information, audit process).
Ø Distribution of responsibilities and powers in terms of decision-making, including a hierarchical decision-making structure.
Ø The structure and effectiveness of the work of the board of directors (independence of the board of directors, the role of the board of directors).
Ø Corporate values, codes of conduct and other standards of good conduct.
Ø Strategies to evaluate the success of the entire enterprise as a whole and the contribution of an individual employee.
Ø Arrangements for dealing with investors, major shareholders, senior management or others responsible persons making important strategic decisions in the corporation.
Ø Mechanisms of interaction and cooperation between members of the board of directors, management and employees of the corporation.
Ø Risk management, as well as special risk control in cases where the conflict of interests of participants in corporate relations may be particularly significant.
Ø Incentives of a financial and managerial nature in the form of monetary rewards, promotions and other forms of motivation that encourage senior executives, middle managers and corporate employees to take a responsible and conscientious attitude to their duties and increase interest in work.
To minimize agency costs, reliable corporate governance mechanisms are needed - internal and external .
internal mechanisms board of directors and competition for powers of attorney from shareholders.
The board of directors is elected by the shareholders. He, in turn, appoints the executive management of the corporation accountable to him, acting as an intermediary between management and shareholders, regulating their relations.
Competition for powers of attorney from shareholders .
The supreme authority in a joint-stock company is the general meeting of shareholders, or owners of the company. Decisions at general meetings of shareholders are made by majority vote. The higher the concentration of votes among a certain number of shareholders, the greater their influence on the decisions of the meeting.
All decisions of the meeting can be divided into three groups:
Decisions on the charter of the company,
on the choice of the composition of the board of directors and executive managers,
· decisions related to current corporate governance.
To control the activities of the company, it is necessary, first of all, to control the general meeting of shareholders.
The shareholder may participate in general meeting either in person or through a representative. The representative of the shareholder participates in the general meeting on the basis of a power of attorney, which confirms this right and is certified by a notary. The shareholder has the right to appoint any person as his representative. Issues related to the procedure for issuing a power of attorney are regulated special legislation(Civil Code of the Russian Federation).
In countries with a developed stock market, often when convening a general meeting of shareholders, management asks them for a power of attorney for the right to vote with their shares and, as a rule, effective management the company receives such from the majority of shareholders. But in the event of poor management of the company, a group of shareholders may also try to obtain from a large number (or most) of other shareholders the power of attorney to participate in voting on their behalf and vote against the current composition of the senior management.
Necessary condition action of this mechanism is a high degree of dispersion of shares in the market. Otherwise, the company's management can block the dissatisfied part of the shareholders by reaching certain agreements with the owners of large blocks of shares.
Due to the high concentration of ownership and the small volume of shares freely traded on the market, the use of this mechanism in Russian conditions is rather limited. However, domestic corporate practice has examples of how obtaining powers of attorney from a significant group of shareholders was used to intercept control of the company by one group of shareholders from another, with the replacement of the board of directors and executive management.
In Russian conditions, managers-owners use following methods, allowing to ensure control over votes at the general meeting of shareholders:
· redemption of the company's shares at the expense of the company's funds with the subsequent sale of shares on the condition of voting on the instructions of managers;
· introduction of material and administrative sanctions in relation to employees - owners of shares who are going to sell their shares, or those who can vote against the company's managers at the general meeting;
· Involvement of local authorities to introduce administrative restrictions on the activities of intermediaries who buy shares of employees;
· the introduction of restrictions in the charter of the company on the ownership of a certain number of shares by one person (legal or natural).
To external mechanisms controls include government regulation, the corporate securities market, the corporate control market, and bankruptcy.
State regulation related to the legislative aspects of the functioning of corporations and bankruptcy procedures. The state sets standards for corporate activities: a system accounting and audit principles.
The corporate securities market is a space that organizes investment processes and provides mechanisms for the creation and exchange of financial assets. It is here that the market price of the share capital of companies is formed, which has a significant disciplining effect on management.
In the corporate control market, there is a process of transfer of ownership and control over firms from one group of shareholders and management to another. The fact is that the stock market reflects only the transfer of property rights. With a certain concentration of ownership, it becomes possible to gain control over the corporation. In this case, the owner can change management and restructure the company in order to increase its value. Such an operation
makes sense if the company's capital is undervalued by the stock market, which is most often associated with inefficient management.
The bankruptcy tool is used by creditors if the company is unable to meet its obligations and the creditors do not approve the exit plan. crisis proposed by the management of the company. The decisions made are oriented towards the interests of creditors, and the requirements of shareholders in relation to the company's assets are satisfied last.
The purpose of the bankruptcy procedure is to recover losses to creditors and transfer inefficiently managed property into the hands of efficient new owners.
Bankruptcy proceedings may result in:
· Liquidation of company;
· change of the owner of the company;
sale of the company as property complex;
settlement agreement with creditors;
· financial "recovery" of the company.
In bankruptcy proceedings, management and the board of directors lose control over the company, which passes to a court-appointed liquidator or bankruptcy trustee.
Russian companies use the bankruptcy procedure as an effective blackmail tool that can lead to a takeover or sale of part of the company's assets. In advance, accounts payable are created, sufficient to apply to the judicial authorities. A new arbitration manager is appointed, in collusion with the group. He addresses the owner with a proposal to conclude a "settlement agreement" on certain conditions. Otherwise, the bankruptcy procedure is brought to an end, the property of the JSC is sold to new owners, and the money goes to creditors involved in extortion. The use of this mechanism for the implementation of the bankruptcy procedure is possible in connection with a high degree corruption in Russia.
Information support of the corporate governance system consists of internal and external support .
External information support represented by the following regulatory documents: Civil Code Russian Federation, Law on Joint Stock Companies, Law on the Securities Market, regulations FCSM of Russia, additional legal acts (on taxes, bankruptcy, etc.), stock exchange listing rules.
The creation of a corporate governance system in the company is carried out taking into account the provisions federal law dated December 26, 1995 No. 208-FZ “On Joint Stock Companies” (as amended on December 1, 2007, January 1, 2008) and the Code of the Federal Securities Commission of Russia, which is advisory in nature. Although, his recommendations have a certain force. If, for example, the presence of certain committees and services is not regulated by Law No. 208-FZ, then the Code may be recommended. This applies, for example, to the position of corporate secretary or control and audit service.
Internal information support.
The company's management has broad powers to create a corporate governance system based on careful study charter and other internal documents, as well as on the basis of the development of the company's own Code. The charters and other internal documents of a company with the status of an open joint stock company are binding and are considered by the courts as a source of law governing the company's activities along with Law No. 208-FZ and securities legislation. But the charters and internal documents of the company should not conflict with the current legislation.
The company's internal documents include the charter, corporate governance code, regulation on the board of directors, regulation on the audit committee, regulation on the corporate governance committee, regulation on the personnel and remuneration committee, regulation on the strategic planning and finance, regulation on executive bodies, regulation on the corporate secretary, regulation on the general meeting of shareholders, regulation on dividend policy, regulation on information policy, regulation on the audit commission, regulation on risk management, regulation on internal control. And also, agreements with members of the board of directors, an agreement with the general director, an agreement with the corporate secretary, minutes of the meeting of the board of directors, schedules for preparing an extraordinary general meeting of shareholders.
Additional documents allow more detailed regulation of the procedure for the activities of governing bodies and reduce the volume of the charter, taking into account the complexity of the procedure for making changes and additions to it. In a number of articles of Law No. 208-FZ, the phrase “... unless otherwise provided by the charter of the company” is quite common. This clause represents a wide field of activity for the board of directors in the field of corporate governance
The table provides an aggregated list of issues on which the governing bodies of an industrial organization can establish their own standards.
Table 2.3.2.
List of corporate governance issues subject to independent detailing in the charter and other internal documents of the company
| Parameter | Issues of corporate governance subject to independent detailing in the charter and other internal documents of the company |
| Timing |
|
| Order / method (regulations) | 5. Procedure for payment of dividends. 6. The procedure for the adoption by the general meeting of decisions on the order of its conduct. 7. Procedure for convening and holding meetings of the board of directors. 8. Procedure for the work of committees of the board of directors. 9. The procedure for electing the audit commission. 10. The procedure and grounds for electing new members of the board of directors in the event early termination powers of the previous one. 11. The procedure for appointing employees of the control and audit service.
|
| Quantitative indicators | |
| Number of votes | 13. Quorum for holding a meeting of the collegial executive body. 14. Quorum for holding a repeated general meeting of shareholders in large joint-stock companies (the number of shareholders is more than 500 thousand), for example, at least 20% of the outstanding voting shares. 15. The number of votes required for the issue and placement of bonds and other securities convertible into shares, if the latter can be converted into 25% or more in previously placed ordinary shares of the organization.
|
| Restrictions | 17. Restrictions on the number of shares held by one shareholder and their total nominal value and restrictions on the maximum number of votes granted to one shareholder. 18. Limitation of the number of organizations in which members of the board of directors can simultaneously be included in its composition (no more than 5).
|
| Organizational structure of management | 20. Number of members of the board of directors, including independent directors (at least 3 or at least 1/4 of its members).
|
| Cost indicators | 22. Remuneration of executive and non-executive directors.
|
| Qualitative indicators | |
| Scope of authority / competence | 24. Competence of committees of the board of directors. 25. Powers of the board of directors to take a decision on reducing the wages of the general director and members of the board in case of payment of dividends in an incomplete amount or at an unspecified date. 26. Assignment to the competence of the board of directors of approval of transactions in the amount of 10% or more of the book value of the organization's assets.
|
| Information Requirements | 29. List of additional information about candidates for the organization's bodies who are elected at the general meeting of shareholders. 30. List of information additionally included in the organization's annual report. 31. Notifying non-controlling shareholders of their right to sell their shares to a shareholder (or group of shareholders) holding at least 30% of ordinary shares.
|
| Other parameters | 33. Formation of the employees' corporatization fund from the net profit (the funds are spent on the acquisition of the organization's shares sold by its shareholders for subsequent placement among employees). 34. Other pre-emptive rights granted by preferred shares (other than the pre-emptive right to receive dividends in comparison with the holders of ordinary shares). 35. The possibility of a non-monetary form of payment for the shares of the organization upon their acquisition. 36. Cases when dividends are paid by the property of the organization. |
Issues for discussion:
1. What is the essence of the agency theory and agency costs?
2. What is the essence of the theory of accomplices? What economic entities can be classified as stakeholders?
3. What relations are included in the system of corporate relations?
4. What are the main subjects of corporate relations and their corporate interests?
5. What is the difference between the management approach to the essence of corporate governance and the approach in terms of economic theory?
6. Explain the contribution of A. Burley and J. Minza to the formation of the theory of corporate governance.
7. Explain the approach of the contract theory of the firm to corporate governance.
8. Explain the contribution of Rafael La Porta to the formation of the theory of corporate governance.
9. What is the essence integrated approach to the study of corporate governance issues?
10. What is the essence of the corporate governance system? What is its purpose?
11. What elements form the corporate governance system?
12. What is the difference between financial and non-financial participants in corporate relations?
13. What is the difference between internal and external corporate governance mechanisms?
14. How does the corporate governance mechanism “competition for powers of attorney from shareholders” work?
15. Why can the bankruptcy mechanism be classified as an external corporate governance mechanism?
16. What is the difference between internal and external information support corporate governance?
17. What are the main parameters a company can set own order organizations?
Test:
| The amount of losses for investors, which is associated with the separation of ownership and control rights, with the discrepancy between the interests of owners of capital and agents managing this capital, are called: a) transaction costs; b) transaction costs; c) agency costs. | |
| The conflict of interest "agent-principal" is due to the fact that: a) the actions of the agent are directed in the interests of the principal; b) the actions of the agent are directed in the interests of the agent-owner; c) the actions of the agent are directed in the interests of the manager. | |
| The means of feedback confirming the proper fulfillment of agency obligations are: a) annual reports of managers; b) financial statements and conclusion of the external audit; c) annual reports of the board of directors. | |
| The theory of discrepancy between the interests of a corporation and the interests of society is called: a) the theory of accomplices; b) the theory of agency costs; c) the theory of the Coase firm. | |
| The shareholder has the right to appoint as its representative: a) any person; b) only a member of the board of directors; c) a person who is a shareholder; d) company manager. | |
| Corporate governance studies the relationship: a) between major and minority shareholders; b) between the corporation (shareholders, managers) and external stakeholders (suppliers, consumers, creditors, government); c) between the shareholders and managers of the company, on the one hand, and the employees of the company, on the other; d) all of the above. | |
| The internal problem of agency relations is the conflict: a) between directors and shareholders, b) between managers; c) between major and minority shareholders. | |
| The structure of the company and its governing bodies - the board of directors, regulations for external and internal managerial interactions, selection and placement of managerial personnel reflect: a) the regulatory and legal aspect of corporate governance; b) organizational aspect of corporate governance; c) information aspect of corporate governance; d) cultural and ethical aspect of corporate governance. | |
| The rules reflected in the documents of the company create a) the institutional superstructure of the company; b) the institutional framework of the company; c) the institutional environment of the company. | |
| The institutional environment of the company is: a) the rules reflected in the documents of the company and the institutional superstructure; b) institutional base and institutional superstructure; c) institutions that are external to the company in question - centralized norms, rules and norms of national and business culture, rules of the business community, etc. | |
| In the process of forming the conditions for interaction, the following are involved: a) all participants in corporate relations; b) shareholders, members of the board of directors, senior managers; c) persons covered by the system of power relations. | |
| As an economic discipline broader on the issues under consideration is: a) "management"; b) "corporate governance"; c) It is impossible to answer unambiguously. | |
| The problem of separation of control from ownership is considered for the first time in the work: a) A. Burley and J. Minza "The Modern Corporation and Private Property" in 1932; b) M. Jensen and W. Meckling "The Theory of the Firm..." in 1976 c) R. Coase "The Nature of the Firm" in 1937 | |
| The revolution of Rafael La Porta is due to the fact that he assigns the main role in the external mechanisms of corporate governance to: a) the stock market, which assesses the capitalization of the company; b) the board of directors; c) legal instruments. | |
| Criticism of Rafael La Porta is connected with the neglect in his theory of: a) the economic aspects of corporate governance, in particular, the aspects of competition; b) legal aspects; c) ethical aspects, moral standards and social responsibility business. | |
| An integrated and rating approach in corporate governance is typical for: a) the period of corporate governance inception; b) the period of the 1980s. c) the current stage of development of corporate governance. | |
| To financial participants corporate relations include: a) banks, creditors; b) suppliers, personnel; c) regional and local authorities. | |
| Participants of corporate relations at the macro level are: a) board of directors; b) World Bank; stock exchanges, Corporate Governance Committee under the Russian Union of Industrialists and Entrepreneurs; c) shareholders: majority and minority. | |
| Concentration of ownership and influence on the part of shareholders refers to the object of corporate governance as: a) ownership structure; b) shareholder rights; c) disclosure transparency and auditing; d) the structure and performance of the board of directors. | |
| Internal control mechanisms include: a) corporate securities market; b) board of directors; c) the corporate control market. | |
| The process of transfer of ownership and control over firms from one group of shareholders and management to another is carried out: a) in the stock market; b) through the intervention of public authorities; c) in the corporate control market. | |
| Under organizational structure management of a corporation is understood as: a) The holistic unity of the following elements: corporate control mechanisms, decision-making procedures, the degree of influence of the capital market on internal management companies that are in close relationship with the operating in the economy financial system, economic legislation, norms of economic behavior of the population, formed by the previous economic development strategic goals corporations with vertical and horizontal relationships. |
Tasks for independent work:
Essay topics.
1. The essence of corporate governance: truth is born in disputes.
2. Correlation between the subject of management and the subject of corporate governance.
3. The contribution of Rafael La Porta to the formation of the theory of corporate governance.
4. The role of economic factors and competition in the studies of Roe M.
5. Features modern approaches to the study of corporate governance.
7. Insider and outsider information.
8. Regulatory requirements for information disclosure in Russia.
9. Corporate governance standards.
10. Relationship between disclosure and company value.
