l-11 cg models.ppt

8/13/2019 L-11 CG Models.ppt

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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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l-11 cg models.ppt

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