l-11 cg models.ppt
TRANSCRIPT
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Corporate Governance Models
Lecture- 11 (BECG)
Prof. C. Anand
FacultyIBS, Hyderabad
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Contents
(i) Introduction to CG Models(ii) Anglo-American Model
(iii) German Model
(iv) Japanese Model
(v) Indian Model
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(i) Introduction to CG Models
CG is all about promoting corporate fairness,
transparency and accountability. There are many CG
Models involving various stakeholders like
shareholders, employees, suppliers, FIs. Banks, etc.,
in governing a company or corporation. Some of the
important models are:
1. Anglo-American Model
2. German Model
3. Japanese Model
4. Indian Model.
These models are briefly described in the coming
paragraphs.
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(ii) Anglo-American Model
1. Shareholders elect the Board and control the
company. The Board performs three majorfunctions: Representation; Direction; & Oversight.
2. In this model, the main stakeholders are:Employees, Suppliers & Creditors.
3.
Creditors have a lien on the assets of the co.4. Board designates the policy which is implemented
by management through a well designedinformation system.
5. The model is most useful for a
production/manufacture-oriented organization.
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(iii) German Model
1. Shareholders do not directly control CG. Employees
also have a say.2. Half of the Board members are elected by Labor
Unions. Remaining half are elected by shareholders.
3. Employees are responsible for policies (product,
profit, market share etc.)4. Board monitors the management. Board, which
conducts day-to-day operations will independently
report to the supervisory board.
5. Labor relations officer finds a place on the Boardleading to workers participation.
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(iii) Japanese Model
1. Banks/FIs have a major say in CG of a company.
2. Shareholders and Banks/FIs together appoint theBoard (Supervisory Board) and also the President
who consults the Board.
3. Usually The Board ratifies the Presidents decision.
4. The Board carries out the management functions.5. Usually, FIs monitor the management functions by
appointing their nominees.
6. Banks/FI have powers to suspend the Board
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(iv) Indian Model
1. it is a mix of both Anglo-American and German CG
Models.2. Companies in India can be grouped into (i) Pvt. Co.,
(ii) Public Co. and (iii) Banks/other corporations.
3. The Promoters / Founders and their associates have
maximum control on Business in planning, etc. Therole of external finance is minimum.
4. In Public enterprises, Central/State Governments
have major control and say. The interest of stake-
holders are given low priority.5. Large Public Sector enterprises serve the interests
of the Government rather than maximizing their own
long term ownership value.
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