Corporate Governance Systems
Team 4 Candice Woods
Jennifer Zhang May 27, 2013
What is Corporate Governance?
The system of rules and practices that governs a firms decision making processes
Assigned Article Stakeholder rights and corporate governance:
A cross-national study of hostile takeovers
William D. Schneper
Mauro F. Guillén
What is a Hostile Takeover?
A corporate acquisition implemented either by a shareholder or stakeholder that is in contest to a firms incumbent managers
Conception
Normative
Traditional ViewpointsPower
Hostile Takeover
Hostile Takeover Occurrences
Country Financial System
Governance System
HT Attempts (1988-2003)
Germany Bank-Based Stakeholder Model
7
Japan 3United States Market-Based Shareholder
Model478
United Kingdom
273
Governance SystemsStakeholder Model
Corporate control depends on Support
Ongoing Power Struggle
Risk-averse; utilize capital
Share Price measure of Performance
Hostile Takeovers are rare
Shareholder Model Firms purpose is to
make SH’s Richer Ongoing Power
Struggle Managers vs. SH’s
Profit maximizing; high-risk
Hostile takeover is correlated with economy health and company performance
Findings Hostile Takeover increase when there are
strong SH rights and when financial institutions and workers rights are not strongly protected
Inversely correlated
Article 1
Underperformance does not motivate a hostile takeover
Narrowly defined a hostile takeover Occurs when the managers or BOD have been
replaced during hostile takeover Other wise a Synergistic Takeover
“The role of Hostile Takeovers in Corporate Governance”Rajeeva Sinha
Creative Destruction Schumpeterian process of ‘creative
destruction’ likely the cause of hostile takeovers
Hostile takeovers in Europe
Hostile takeovers occur in waves; correlated to technological advances and political/economical changes
Mechanism to adapt to external environmental changes
1990-1998 199995 127
Currently used Defense Strategies
United States Charter
amendments Litigation Poison Pill
“flip in” “flip over”
Greenmail
United Kingdom
Employed dividendsAnnounced Profits
Article 2
3 Main Stakeholders• Shareholders
• Banks
• Workers
“Stakeholder Theory: Reviewing a Theory That Moves Us” André O.Laplume, Karan Sonpar &Reginald A.Litz
“To be an effective strategist, you must deal
with those groups that
can affect you, while to
be responsive, you must
deal with those group
that you can affect.”
-Freeman
Who else can be the Stakeholders
Internal Stakeholders Owners Customers Employees Suppliers
External Stakeholders
Governments Competitors Consumer
advocates Environmentalists Special interest
groups media
How do Stakeholders Influence Firms
With direct & indirect withholding and conditional usage strategies
Influence depends on relationship structure, contractual forms, and institutional supports
Influence is determined by the power and legitimacy of a stakeholder
By forming coalitions and collaboration.
How Suppliers Influence A Firm’s Decision Making
Porter’s Five Forces Model
The Strength of Bargaining Power of Suppliers
How do firms gain stakeholder support?
By building stakeholder trust and avoiding opportunistic relationships
Maintain a good reputation Become involved in non-profit work Increase work involvement by offering an
employee stock option
Article 3 The second assigned article
“Comparative and International Corporate Governance” Ruth V. Aguilera a & Gregory Jackson
cross-country diversity in corporate governance
Correlations in Conclusion
Recall from the previous slide
Need more studies on
cultural aspects that encourages
HT
SH vs. SKGovernance System + Cultural analysis (Hofstede)
Individualism Collectivism
Masculinity Femininity
High Uncertainty Avoidance Low Uncertainty Avoidance
High Power Distance Low Power Distance
High LTO Low LTO
References Aguilera, R. V., & Jackson, G. 2010. Comparative and
international corporate governance. Academy of Management Annals, 4(1): 485-556. doi: http://dx.doi.org/10.1080/19416520.2010.495525
Laplume, A., Sonpar, K., & Lits, R. (2008). Stakeholder Theory: Reviewing a Theory That Moves Us. Journal of Management, 34:1152. Doi: 10.1177/0149206308324322
Porter, E., M. (2008). The five competitive forces that shape strategy. Harvard Business Review. January, 2008, 79-92.
Schneper, W. D., & Guillen, M. F. 2004. Stakeholder rights and corporate governance: cross-national study of hostile takeovers. Administrative science quarterly, 49(2): 263-295. Retrieved from http://web.ebscohost.com/bsi/pdfviewer/pdfviewer?sid=a2f62067-c872-42d0-994d-e9cd09965b01%40sessionmgr115&vid=52&hid=117
Sinha, R. (2004). The role of hostile takeovers in corporate governance. Applied Financial Economics, 14(18), 1291-1305. doi:10.1080/0960310042000280492
Thank you all for listening and participating!
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