1

Czech archetype of a corporate crook

He manages other people’s money.What sort of bad things can he do?

?

2

Viktor’s choice

MANAGE THE COMPANY WELL AND HONESTLY

MANAGE THE COMPANY BADLY BUT HONESTLY

STEAL FROM THE COMPANY/SHAREHOLDERS

X Y Z

Theoretically achievable value of a company

3

How to tame the bad guy?

STEALING FROM THE COMPANY/SHAREHOLDERS

Legal Rules No stealing Duty of loyalty Corporate opportunity Duty of care

Civil Liability Criminal Liability

Corporate Governance Board composition

Independent directors Board committees Code of ethics

Disclosure Audit Takeover threat Loss of job

MANAGING THE COMPANY BADLY

4

Corporate Governance dashboard – Pfizer example

Board of Directors Information (selection only) 2007Type of Board Unitary Board

Size of Board 14

Average Age of Directors 63

Separate Chairman & CEO No

Number of Independent Directors 12

Lead Independent Director Yes

Independent Directors Hold Meetings Without Management Present Yes

Annual Equity Grant to Non-Employee Directors Yes

Annual Review of Independence of Board Yes

Independent Audit Committee Yes

Independent Compensation Committee Yes

Independent Corporate Governance Committee Yes

Number of Board Meetings Held or Scheduled 9

Annual Board Elections Yes

Code of Ethics Yes