Board Structure and Corporate Governance Review and Trends 中山大学公司财务和 与金融工程高端论坛的课件.pptx

Board Structure and Corporate Governance: Review and TrendsXiaoyun YuIndiana UniversityCorporate governanceCorporate governance is “the system by which companies are directed and controlled”Cadbury Committee (1992)It involves a set of relationships between a company’s management, its board, its shareholders and other stakeholdersIt deals with prevention or mitigation of the conflict of interests of stakeholdersCorporate governanceAgency problem between shareholders and managersIn theory, managers should maximize shareholders’ valueIn reality, managers’ own interest is not always aligned with the interest of shareholdersHow should we mitigate this problem?Executive compensationShareholder lawsuitsDelegated monitoring by corporate boardVote against management (shareholder activism)Hostile takeoversCorporate board and board structureCorporate boardElected or appointed members who jointly oversee the activities of a companyWhat can corporate boards do?Advise and governMonitor and disciplineExamplesGoverning the organization by establishing broad policies and objectivesSelecting, appointing, supporting and reviewing the performance of the chief executiveEnsuring the availability of adequate financial resourcesApproving annual budgetsAccounting to the stakeholders for the organizations performanceSetting the salaries and compensation of company management.Do corporate boards matter?Difficult to observe their day-to-day impactsHowever, the adverse consequence is substantial when board fails to monitorExample: EnronWhat researchers are interestedIf there is poor governance, why was that board structure chosen?How do we measure the effectiveness of governance by board directors?What makes a director an effective monitor?The Sarbanes-Oxley Act (SOX)Enacted after the surfaces of frauds such as Enron and WorldComIntroduced new standards of accountability on boards of U.S. companies or companies listed on U.S. stock exchangesDirectors risk large fines and prison sentences in the