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本文主要内容 1.0 执行概要 2 2.0 前言 2 3.0 董事会的组成 3 3.10 文献综述 3 3.20 董事会的具体构成 4 3.30 董事会的具体分析 6 4.0 所需的技能 6 4.01 执行董事和非执行董事的区别 7 4.02 执行董事和非执行董事的职责 7 4.03 执行董事和非执行董事 8 5.0 完善内部制衡机制 8 6.0 开发了非执行董事系统 9 7.0 强调市场机制对公司治理的影响 10 8.0 结论 10
9.0 参考 11
1.0 执行概要
在股东会议上，董事会不仅扮演着经纪人的角色,同时也是管理者的主体。董事会在公司治理结构中起着非常重要的作用,它已经成为公司治理结构的核心组件。董事会的构成直接决定一个企业能够有效发挥董事会的作用,因此选择合理的董事会模式，不仅可以保护股东的利益,同时也具有促进企业长期发展的战略意义。此外,建立一个标准的、独立的、结构合理的、富有效率的董事会是完善公司治理结构的重要内容。
Table of Contents 1.0 Executive summary. 2 2.0 Introduction. 2 3.0 The composition of the board of directors. 3 3.10 Literature Review.. 3 3.20 The specific composition of the board of directors. 4 3.30 The specific analysis of the board of directors. 6 4.0 skill sets needed of directors. 6 4.01 The difference between executive directors and non-executive directors. 7 4.02 The duties of executive directors and non-executive directors. 7 4.03 The combination of executive directors and non-executive directors. 8 5.0 Perfect internal checks and balances mechanism.. 8 6.0 Developed non-executive director system.. 9 7.0 Emphasis the market mechanism effects on corporate governance. 10 8.0 Conclusion. 10
9.0 Reference list 11
1.0 Executive summary
The board of directors not only plays the agent of shareholders' meeting, but also plays the principal of managers. Then the board of directors plays very important position in the company governance structure and it has become the core component of the corporate governance structure. The composition of the board of directors in an enterprise directly decides effective play of function of the board of directors, so choosing rational the board of directors’ mode not only protect the interests of the shareholders, but also has strategic significance for the long-term development of enterprise. In addition, establishing a standard, independent, reasonable structure, the rich efficiency of the board of directors is the important content to perfect corporate governance structure.
In this article, we will critically discuss the effective make up of a board of directors, include in your answer the number of non executive directors, skill sets needed, experience etc that would be necessary for effective governance (Maria, 2008).
2.0 Introduction
On December 6, 2011，the third party commission which appointed by Olympus published final survey results about Olympus false, the results show that in the late 1990 s, Olympus company lost nearly 135 billion yen ($1.74 billion) because of speculative investment. However, the top tried to t cover up the fact through the complex transactions. Since the Olympus scandal in 2010 Japan’s corporate governance system has come under increased scrutiny. Japan was downgraded in a survey of corporate governance in Asia on Wednesday after a move to require companies to appoint at least one independent director was squashed (Reuters Wednesday 19th September 2012).
The so-called corporate governance structure refers to the power and responsibility arrangement of institution distributions in companies (Daily, Dalton and Rajagopalan, 2003). It includes two contents: how to divide the company’s power; how to distribute these powers into company’s organizations (Hermalin, 2005). The goal is to clearly determine the rights, responsibilities, interests and the relationship between checks and balances among the shareholders, the board of directors and managers. According to the difference in investors exercising power, the corporate governance structure can be divided into external control mode and internal control model two kinds (Bebchuk, Cohen and Ferrell, 2009). The United States and Britain are the representatives about external control mode of corporate governance structure and also known as the common law type company governance structure. Germany and Japan are representatives of internal control model of corporate governance structure (Gompers, Ishii and Metrick. 2003). The main characteristic of this kind of mode is that company's equity is relatively concentrated. Especially there exists the phenomenon of cross shareholdings and bank holding a large proportion of the shares and smaller dependence on stock market.
British’s board of directors is a single board of directors system. The board of directors’ as a key subject of corporate governance effectiveness becomes a key of success or failure in corporate governance, and board independence is playing its effectiveness of prerequisites. In Britain, the corporate governance structure about board of directors has specific provision. Cadbury report in 1992 the first time put forward that one person must not take charge both CEO and chairman of the board of directors. More than half board of directors must be hold by non-executive directors who do not participate in daily management work. These rules suggest that corporation should differentiate high power, encourage shareholding make operation decision and make effective supervision behaviors of management independent on managers. Higgs committee in 2003 unfold investigation research specialized non-executive role and effectiveness, in addition to again emphasize two hats separation, the report further emphasize the duty and authority about non-executive director.
3.0 The composition of the board of directors 3.10 Literature Review
According to the director's independence size and whether it is directly involved in the company’s top management, the composition of board of directors can be divided into the executive director and the executive director. So far, there are many scholars have made in-depth study the composition of the board of directors of the problem. Baysinger has studied from an empirical perspective and the results found that the proportion of the executive director and the enterprise research and development spending exist positive relationship (Baysinger and Hoskisson, 1990). Zhara’s study found: the executive director’s proportion and entrepreneurial innovation activities exist an inverse relationship. Tricker points out that governance is the work of the board of director (Tricker, 1994). However, management is managers’ things. Putting the board of directors as a circle and put it into the top of the management system. The main task of the board of directors is engaged in corporate governance but management system is a level type and it mainly is engaged in business management. 3.20 The specific composition of the board of directors
According to above analysis about the members of the board of directors and management personnel relationship (Andres and Javier, 2000), there are four kinds of board composition: the first type is that all of the board of directors is made up by executive directors; the second type is that the board of directors is mainly constituted by the executive directors; the third type is that the board of directors is mainly constituted by the executive directors (Calabrò, Di Carlo and Ranalli, 2009); the fourth type is a double layer structure, namely, the board of directors and management does not have a cross and overlap, no one is both directors and management personnel.
The above four types also can find its prototype in reality: the first type is corresponding to many small companies, family company and group company internal subsidiary corporate board of directors structure; the typical of the second type is Japanese company, almost all of the board of directors are made up by the executive director composition (Ran, Matsusaka and Oguzhan, 2010); the typical of the third type is the United States company’s board of directors, non-executive directors account for the vast majority; the typical of the fourth type is the German company’s board of supervisors which is equivalent to the board of directors in other countries and senior management personnel cannot concurrently work as a supervisor.
Different countries’ board of directors structure also appear very big difference, a very important reason is the difference of the law and system. As America’s rules and regulations, in the board of directors of the listed company, they must set up compensation committee, director of the nomination committee and the audit committee, directors of these committees must be or is basically independent directors. Other countries do not have so strict rules, which from the regulation, makes the proportion of non-executive directors of listed company in the United States is much higher than other countries (Gilson, 2001).
And if having such laws and regulations is related to the degree of emphasis on the board of directors’ independence and other stakeholders in corporate governance. Such as the company law of the United States particularly emphasis independence of the board of directors and the loyalty to the interest of shareholder, which caused the board of directors which put non-executive directors and stakeholders’ interests in a leading role; Germany and Japan emphasize the labor relations coordination and importance of other stakeholders, employees, creditors and other stakeholders have its representative in the board of directors. Especially, German also uses law to carry out cooperation decision-making (Johanna, 2012).#p#分页标题#e#
In the highest authority of the company—the board of supervisors, the representatives of the employees and representatives of shareholders are half and half and supervisors can't serve concurrently as senior management personnel. In contrast with the independence of outside directors in other countries, almost all directors are promoted layer upon layer from workers according to the internal promotion system. And the board of directors is also a level type structures, the honorary chairman has the highest status and in general, the former general manager (President) who mainly use its popularity in favor of links with the outside government and banks assume its office.
The second is the President, according to the position’s high-low, directors can be divided into senior management director, management director and director. Because Japan's big companies also put directors as a social identity and status symbols award to those who have made outstanding contributions to the company and company does not give real power so that the number of the directors will inflate. In generally, the number of the directors less is thirty people, more is fifty and the same size company in American and British generally is more than ten people. 3.30 The specific analysis of the board of directors
The board of directors has the right proportion of executive director and non-executive directors and let them being occupied in work which is suitable for its status and role. This set not only can play executive director’s master enterprise internal information and carry out the board of director resolution, etc, but also can play the advantages of the executive director in supervision and independence and having the investment, finance, law, management, and other professional knowledge and skills. From the extreme situation, if company’s top management all are experts in investment, finance, securities and law, company don't need to hire experts on this subject as directors. On the contrary, if the company internal talents are very plaque var, we need to hire experts do directors from external (Gabrielsson, Winlund, 2000).
Be like again, for these companies which equity is dispersed or exist a single big company, when the board of directors appears internal conflict, if company has more than one third of the independent directors, therefore, the board of directors may strengthen the positive factors and make it to make the correct decision-making. Therefore, if company’s independent directors accounted for more than one third, it may be a good board of director structure (Switzer, Cao, 2011). However, for a big company, above structure is not necessarily the best, such as Japan.
These all show that for the composition of the board of directors, it is unfavorable using law or system to make unified regulation of the proportion of executive directors and non- executive directors except having strong responsibilities require the independent director to do (O'Higgins, 2002). If want to make a regulation, at best, we can only make a regulation of the bottom line of the provisions about the proportion of independent directors. But the specific proportion shall be made according to the enterprise actual to set.
4.0 skill sets needed of directors
In order to preferably perform the responsibility of board of directors, the board of directors should have following core competence and each director should have at least a following domain knowledge, experience and skills: accounting and finance; business judgment; management skills; crisis response; industry knowledge; the international market experience; leadership; strategic vision and so on. Because personal wisdom and ability are limited, if corporate want to fully play the function of the board of directors and corporate should collocate knowledge, skills, the special skill and the age of different directors in order to form effective and reasonable structure of the board of directors (Maria, 2008). 4.01 The difference between executive directors and non-executive directors
Because executive directors and non-executive directors have different identities and expertise, when carrying out different responsibility and duties of the board of directors, they have its inherent advantages and defects. In the supervision function, because executive director directly be responsible for the company’s internal a business decision and implementation, executive director can master more internal situation and provide important information (Adams, Hermalin and Weisbach, 2010). However, If they fulfill the supervisory function, they will be blur the boundaries between supervisor and a performer, is difficult to oversee itself and at the same time, due to the general manager's command, independence in the supervision of manager is not strong, which is disadvantageous to the board of directors of the supervisory function. In this regard, non-executive directors come from business or academic celebrities but not the company staff, and enterprise have not direct interests, which can play a supervisory role from the position of neutrality. 4.02 The duties of executive directors and non-executive directors
But it is because they and corporate have no direct interests, not as a representative of the shareholders, have enough profit space to supervise and mainly rely on to maintain their own reputation to supervision. In addition, non-executive directors are mostly very busy and they may be other company’s general manager, director and several serve concurrently as the directors of other companies. Therefore, they do not have enough time to collect company's detailed information but mainly rely on the information provided by the manager (Levrau, Berghe, 2007).
In addition, non-executive directors may be recommended and hired by general manager and in order to Thanksgiving, winning re-election and salary, they may accommodate oneself to the general manager. So, whether executive directors or non-executive directors, either because of not independence or neutral, because of lack of motivation or too busy, the actual supervision function may not too ideal, even in some company, the board of directors of the company has been criticized as "the decorations on the Christmas tree”. In strategic management, because non-executive directors are proficient in finance, financial, investment and law knowledge and so on. Besides, non-executive directors can provide specialized knowledge and executive directors can provide more enterprise internal information about company’s strategic decision and can facilitate the implementation of strategic decision. 4.03 The combination of executive directors and non-executive directors
To guarantee the spirit of the entrepreneur’s play, executive directors and non-executive directors are also believed to have bigger difference. Because non-executive directors are lack of internal enough information and are also considered to tend to rely on financial standards rather than innovation criterion to evaluate enterprise long-term operation. Non-executive directors are also believed to support the preference by buying and take-over wait for epitaxial way to enlarge the scale of the enterprise and because it is more suitable to financial criteria. On the contrary, because executive directors have more information about enterprise internal activity，they can more accurate assessment of the value of the enterprise innovation than executive directors and more consider enterprise's operation and development from strategic and innovation aspects.
5.0 Perfect internal checks and balances mechanism
Most of the company’s governance structure is divided into three layers: shareholders’ meeting, board of directors and management layer. Shareholders and board of directors are two different organization forms. However, most people often ignore difference among them in practice. Because board of directors plays a pivot role between the company shareholders and operators, it is responsible for shareholder and manager and responsible for the coordinate interests among shareholders, top managers, employees, consumers and the surrounding community stakeholders. Therefore, the board of directors is in the core status in the corporate governance. Different from the United States, in the British company’s chairman and chief executive officer (CEO) was not the same person to prevent the person lacking of supervision and checks and balances because his or and hers too much power.
6.0 Developed non-executive director system
In Britain, the non-executive directors are defined as someone who can’t participate in the company’s daily management. Their responsibility is only limited to prepare and participate in the board of directors meeting instead of the company staff director. Look from the director’s duty, non-executive directors in Britain are very similar to the independent directors in the United States (Code, 2003).
Corporate governance structure joint integrity has clear requirements to independent directors system and qualifications to independent directors. Board of directors should include enough non-executive directors. The opinions that they come up should have a significant impact on board of directors’ decision-making. Company governance structure joint integrity suggested that non-executive director should attain a third of the number of the directors at least. The nomination committee shall mainly include non-executive directors.
Non-executive directors should have independence. The British insurance association and British pension fund federation are the most important institutional investors in securities Market and their investment fund amount equals the half of the London stock market’s capital. In 1997, the association proposed together 10 species relationship which may affect the independence, which applied to their invested company: former senior management personnel of company; someone who has other
qualifications except non-executive directors and charges for the company's remuneration at present or past; produce not through the normal electoral procedure; term of office over nine years; have business contract relationship with company; with the company's stock options, accept the salary based on the performance, or receive pension from the company; control shareholder or the shareholder's representative; without having independence judged by company for any reason (Ioannis et al. 2012).
7.0 Emphasis the market mechanism effects on corporate governance
British corporate governance requirements that conform to the market mechanism or by the market pressure industry organization to make effect on corporate governance. Different from America's Sarbanes Oxley, the British about governance of listed company’s report, such as card DE ruin report, ham pellet report, the company governance structure joint integrity, etc., all is not mandatory. Most belong to guide the content of the class (Marnet, 2008). If a company does not abide by the company governance structure joint integrity, it will not lead to retreat city, also won’t limit listed. But the company has the obligation to disclose the degree abides by the rules and the reason why not obeys (Mertzanis, 2011). However, for the listed company, the pressure which comes from investors have been enhanced strictly abide by these principles need. In practice, more and more listed companies’ board of directors have been in accordance with these principles act. Some companies which did not abide by the rules suffered from the consequence that they share price has greatly decreased.
8.0 Conclusion
Corporate governance has attracted hot social concern, investors, government, community, the media and employees in the look at the board of directors of company, the CEO's performance. With the world economic and technological advance by leaps and bounds, the internal and external environment about corporate governance mechanism has undergone tremendous changes, in this context, the corporate governance will be where to go is a question worth our further study. In this article, we will critically discuss the effective make up of a board of director, include in your answer the number of non executive directors, skill sets needed, experience etc that would be necessary for effective governance.
9.0 Reference list Bol Tricker.(1994)，“Corporate Governance”, an International View, pp. 20. Baysinger, B.D., R.E. Hoskisson.(1990)，“The Composition of Boards of Directors and Strategic Control: Effects on Corporate Strategy”, Academy of Management Review, pp. 72-87. Daily, C. M., Dalton, D. R., Rajagopalan, N. (2003), “Governance Through Ownership: Centuries of Practice, Decades of Research”, Academy of Management Journal, vol. 46, pp. 151-159. Andrea Calabrò, Emiliano Di Carlo, Francesco Ranalli. (2009), “Which Conflict? Understanding Conflicts inside the Board of Directors”, DSI Essays Series. Lucian Bebchuk, Alma Cohen, Allen Ferrell. (2009), “What Matters in Corporate Governance”, Review of Financial Studies, Society for Financial Studies, pp. 783-827. Paul Gompers, Joy Ishii, Andrew Metrick. (2003), “Corporate Governance and Equity Prices”, The Quarterly Journal of Economics, pp. 107-155. Duchin, Ran, Matsusaka, John G., Ozbas, Oguzhan. (2010), “When are outside directors effective?”, Journal of Financial Economics, pp. 195-214. Oliver E. Williamson. (2008), “Corporate Boards of Directors: In Principle and in Practice”, Journal of Law, Economics and Organization, Oxford University Press,), pp. 247-272. Lorne N. Switzer, Yu Cao. (2011), “Shareholder interests vs board of director members' interests and company performance: A new look”, Review of Accounting and Finance, pp. 228-245. Palmberg, Johanna. (2012), “The Performance Effects of Corporate Board of Directors”, Ratio Working Paper. Levrau, A. & Van den Berghe, L. (2007), “Identifying key determinants of effective boards of directors”, Vlerick Leuven Gent Management School Working Paper Series 2007-11, Vlerick Leuven Gent Management School. Eleanor O'Higgins. (2002), “Non-executive Directors on Boards in Ireland: co-option, characteristics and contributions”, Corporate Governance an International Review, pp. 19-28. Vagliasindi, Maria. (2008), “The effectiveness of boards of directors of state owned enterprises in developing countries”, Policy Research Working Paper Series with number 4579. Jonas Gabrielsson & Henrik Winlund. (2000), “Boards of directors in small and medium-sized industrial firms: examining the effects of the board's working style on board task”, Entrepreneurship & Regional Development, pp. 311-330. Renee B. Adams, Benjamin E. Hermalin, Michael S. Weisbach. (2010), “The Role of Boards of Directors in Corporate Governance: A Conceptual Framework and Survey”, Journal of Economic Literature, American Economic Association, pp. 58-107. Benjamin E. Hermalin. (2005), “Trends in Corporate Governance”, Journal of Finance, American Finance Association, pp. 2351-2384. Almazan, Andres & Suarez, Javier. (2000), “Optimal Corporate Governance Structures”, CEPR Discussion Papers 2391, C.E.P.R. Discussion Papers. Noel O'Sullivan. (2000), “The Determinants of Non-Executive Representation on the Boards of Large UK Companies”, Journal of Management and Governance, pp. 283-297. Ronald J. Gilson. (2001), “Globalizing Corporate Governance: Convergence of Form or Function”, The American Journal of Comparative Law, pp. 329-357. Marco Becht, Patrick Bolton, Ailsa Röell. (2003), “Corporate governance and control”, Handbook of the Economics of Finance, pp. 1–109. Combined Code. (2003), “The Combined Code on Corporate Governance, London”, The Financial Reporting Council. Oliver Marnet. (2008), “Behaviour and Rationality in Corporate Governanee”, NewYOrk: Routledge. Harilaos Mertzanis. (2011), “The effectiveness of corporate governance policy in Greece”, Journal of Financial Regulation and Compliance, Vol. 19 Iss: 3 pp. 222 - 243 |
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