Transcript Nessun titolo diapositiva

Corporate Governance
Piero Formica
Visiting Professor
Faculty of Economics and Business Administration
University of Tartu
Tartu, 25 October 2002
[email protected]
Corporate Governance
• Process by which organisations are
• Directed
• Controlled
• Held to account
• The process encompasses
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Authority
Accountability
Stewardship
Leadership
Direction
Control
Accountability means the requirement
of those who in the organisations hold
the power to render an account both to
their constituencies and themselves and
to explain what they are doing and why.
Corporate Governance System
• The set of
• Incentives
• Safeguards
• Dispute resolution process
Those who are involved….
• Shareholders
• Contractual partners
•
•
•
•
Employees
Customers
Suppliers
creditors
• Communities and
• Societies in which the company operates
The corporate structure does
affect the corporate governance
BU
?
HQs
ENR ON
CORPORATE BUREAUCRACY
Decentralisation & fragmentation + tight monitor of the subsidiaries
PRIVATELY OWNED, FAMILY-RUN,
SMALL- AND MEDIUM-SIZED
COMPANY
?
The third generation syndrome the “Bunddenbrooks” phenomenon
family ownership concentration
kinship groups
firms atomised
and distrustful
of one another
family businesses
founder-entrepreneurs
weak associational life
entrepreneurial energy
familist behaviour
social distrust
18
ENTREPRENEURIAL COMPANY
30%
80%
50%
70%
20%
50%
The type of market economy does
affect the type of corporate governance
• Co-ordinate market
economies
– Interlocking policies and
institutions.
– Long term relationships.
– Intermediate bodies (PPP
- the agency model >>>)
to regulate relationships,
embedded in a culture of
corporatism >>>.
– High taxation and high
subsidies.
• Liberal market economies
– Market mechanism to
regulate relations.
– Free agents in co-opetition.
– Low taxation and low
subsidies.
Corporatism
<<< Corporatism is a rather extreme version
of the legitimate relationship between
interest groups and government in that it
tends to restrict the number of interest
groups involved in the policy process
(B. G. Peters)
Corporatism
<<< Corporatism is an arrangement
characterized by a “limited number of
singular, compulsory, non-competitive,
hierarchically ordered and functionally
differentiated” groups that are given a
virtual license to represent their
particular area of competence.
(Definition put forth by P. Schmitter,
quoted by Peters)
Forms of corporatism (1)
“Societal corporatism”
 Interest groups are the leading actor of policy making (P.
Schmitter).
“State corporatism”
 Government is the dominant actor (P. Schmitter).
“Liberal corporatism” or “corporate pluralism”
 A less formalised relationship between interest groups
and government.
 A more intense negotiation among the groups themselves
during the process of policy making (G. Lehmbruch,
quoted by Peters).
“Meso-corporatism” or “negotiated economy”
 Less restrictive variations of the general pattern of
relationship between the public sector and organised,
private interests (Peters).
Forms of corporatism (2)
“Negotiated corporatism”
• Unaccountable power and concerted actions are
shared between
• politicians,
• public officials,
• former government and party functionaries
• and the most activist self-interested parties
entrenched on the top of the subsidies’ mountain.
• Symbiotic relationships between them impair the
efficiency operation of the economy.
Public-Private Partnership
The Agency Model
Laissez faire
Commanded economy
BUSINESS
GOVERNMENT
Benign neglect
Conflict
CO-OPERATION
PPP
Public-Private Partnership
“Quasi governmental development agency”
PPP….
Aggregation of pressure group interest
• Associational activities
•Industry associations
•Trade associations
•Professional associations
• Unions
• Consortia of firms
=
Collectivist democracy in which public interest adds
up to the aggregate of these pressure group interests.
Critical Issues
(1) Independency and Autonomy
• A board of plainly independent >>> and
autonomous >>> directors, neither chosen
by the chief executive office directly nor
through the influence of partisan
politicking >>>.
BUT:
 Political parties with the complicity of
organised economic groups (vested interests)
select and appoint the directors >>>.
Critical Issues (1 continued)
<<< The appointment process has to be open and
formal.
BUT:
Directors, executives, project co-ordinators are
approached informally by political factions and asked
to take the job, being them drawn almost invariably
from the ranks of political parties or collateral to
them.
Critical Issues (1 continued)
<<< Independence
• When directors are on a board they are there precisely as
directors of that company and should not have the interests
of any other body in mind.
• Nor there should be ties between the directors and the
management.
BUT:
 Directors hold several appointments that are at odds with the
principle of independence.
 Directors change their position into that of managers, and
conversely.
Critical Issues (1 continued)
<<< Autonomy
• An opponent in the board who can act as a
spokesman and “level the playing field” for
shareholders who do not agree with
management.
Critical Issues (1 continued)
<<< Partisan Politicking
• The tenets of political representation has
often provoked two casualties:
 A corporate conduct for which inappropriate
links, cosy or collusive arrangements and
currying favour with politicians and party
functionaries have been the traditional dealmaking habit of the agency.
 A board too large to be fully efficient, and
sometimes lacking in the necessary breadth of
skills which are needed.
Critical Issues
(2) Responsibility
• Board directors should take responsibility
for assigned tasks.
BUT:
 Directors are often appointed on a part-time
base, which do not allow them much time to
attend meetings.
 They are not paid enough to devote proper
attention to the job.
Critical Issues
(3) Board Arrangements
• Board arrangements should define:
• Roles and responsibilities of the chairman and
the chief executive >>>.
• Policies concerning the use and the appointment
of non-executive directors.
• Formation and role of the audit committee >>>.
Critical Issues (3 continued)
<<< Chairman and the chief executive
 What is crucial but it often lacks:
• A clear-cut distinction of role between the
chairman and the chief executive
– the chairman’s job being that of a non-executive who
manages the board, and
– the chief executive’s one that of running the
business.
• In addition, the boardroom should be enriched
with the new blood of a strong independent
deputy chairman to act as a counterweight to a
chairman with a wealth of experience.
Critical Issues (3 continued)
<<< Audit committee
 The members of the agency’s auditing panel must be
genuinely independent.
 The internal auditors more powerful so as they can
withstand the pressure from the board.
 Auditors must observe ethical as well as technical norms.
BUT:
 Often, they do not stop rubber-stamping decisions taken by
the board.
 Paid consultants for the agency sit on the audit
committee.
References
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Canberra, Australian National Audit Office
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of Sociology, University of Pennsylvania
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Press
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