Corporate Governance Around the World必看课件资料.ppt

Management Ownership * McGraw-Hill/Irwin Copyright ? 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 14 Corporate Governance Around the World Outline Governance and the Public Corporation: Key Issues The Agency Problem Remedies for the Agency Problem Law and Corporate Governance Consequences of Law Corporate Governance Reform The Dodd-Frank Act Governance and the Public Corporation:Key Issues The public corporation, which is jointly owned by a multitude of shareholders protected with limited liability, is a major organizational innovation of vast economic consequences. It is an efficient risk sharing mechanism that allows corporations to raise large amounts of capital. A key weakness is the conflict of interest between managers and shareholders. In principle, shareholders elect a board of directors, who in turn hire and fire the managers who actually run the company. In reality, management-friendly insiders often dominate the board of directors, with relatively few outside directors who can independently monitor the management. Governance and the Public Corporation:Key Issues In the case of Enron and other dysfunctional corporations, the boards of directors grossly failed to safeguard shareholder interests. Furthermore, with diffused ownership, most shareholders have strong enough incentive to incur the costs of monitoring management themselves. It’s easier to just sell your shares, a.k.a. “The Wall Street Walk.” Governance and the Public Corporation:Key Issues The Agency Problem Shareholders allocate decision-making authority to the managers. That’s why the managers are hired in the first place. Many shareholders are not qualified to make complex business decisions. A shareholder with a diversified portfolio would not have the time to devote to making the numerous decisions at each of his many companies anyway. The Agency Problem Having short-term control of the firm’s assets, managers might be tempted to