Comparison Between Corporate Governance Models

Comparison between Corporate Governance Models Objective

Anglo American Maximize the shareholders’ profit

Continental European Maximi Maximize ze shareh sharehold olders ers’’ profit profit

Oriented towards Interest party

tock Market hareholder

!anking Market hareholders

Shareholder Concentration

#ow" shareholders group hold small percentage of total shares Most are agents of financial institutions

$igh" shareholders group hold large percentages of total number of shares Most are private companies &'()*+()," followed by financial institutions &-()* (), and then private persons &-/)*/), 1ewer companies are publicly traded. 0eople mostly invest on an individual basis.

Shareholder Identity

Liquidity o !ar"et

#iscipline !echanism !anagement Control

Agency $roblem

Many companies are listed and their shares publicly traded. 0ension plan provides financial resources for the stock market External discipline mechanism. Executive directors and non* executive directors Control is concentrated in the hands of a small number of investors with a variety of interests 2nterest between managers and dispersed shareholders

Japanese Ensuri Ensuring ng firms firms are are run by using society’s resources efficiently and taking into account a range of stakeholders. !anking Market hareholders" employees" suppliers and customers. $igh" ma%ority of the companies are founded and ran by families Mostly are private persons who founded and ran the company and financial institutions 1ewer companies are publicly traded. 0eople mostly invest on an individual basis.

2nternal 2nternal discipl discipline ine mechanisms mechanisms

2nternal 2nternal discipli discipline ne mechani mechanisms sms

upervisor !oard and !oard of 3irectors Control is concentrated in large number of anonymous investors

!oard of 3irectors and revision commission Control is concentrated in ma%ority shareholders

2nterest between controlling shareholders and powerless minority shareholders.

2nterest between managers and firm

Insider%Outsider System #ecision !a"ing Long term% short term oriented Corporate Control &inancial resources

#ual structure o CEO

!ajority o the board Compensation

Anglo American 4utsider system Management hort term $ostile 5akeover 4ver investments" decision making will be the management’s interest.  7uthority pressures to separate function of CE4 and Chairman. $owever" most of the CE4s in 8 companies are also the chairman of the board in -99-. External directors :ages based on the nature of  %ob done" no

Continental European 2nsider system hareholders with large percentages of shares #ong term

#imited" ownership is concentrated" only few owners are e6uity suppliers eparate function of CE4 and Chairman.

2nternal directors :ages and allowance for personal circumstances.

Japanese 2nsider system ub%ect to the influence of employees and owners #ong term Cross*shareholdings #imited" ownership is concentrated eparate function of CE4 and Chairman

Accounting System Employees !obility Inluences

G770 $igh 1oreign influences

&ocus

;ole of free market based on it to exercise a control over the companies’ owners

Evaluation o governance eiciency Issues covered by governance Ethical $rincipal

1inancial performance

;eturn on social capital

2nternal directors :ages based on the stock prices and allowance for personal circumstances. G770 and 21; #ow Government or familial control and local control !usiness network acting in an interdependent way and on the own interests of all involved parties. ;eturn on human capital

Capital market

5ransactions

Corporations network

8tilitarianism

3eontological

3eontological

21; #ow Government or familial control and local control 0roduces richness and being the engine of national wealth

Corporate 'overnance &ramewor" in !alaysia  7ccording to !ursa Malaysia" the corporate governance framework in Malaysia has adopted a $ybrid 7pproach which consist of mandatory and voluntary guideline as shown in the figure below<

Acts and 'uidelines or Corporate 'overnance in !alaysia( -. 5he Companies 7ct -9=/ '. Capital Market and ervices 7ct '(-' . ecurities Commission 7ct -99 +. ecurity 2ndustries &Central 3epositories, 7ct -99/. ecurity 2ndustry 7ct -9> =. 1utures 2ndustry 7ct -99 ?. 3emutualisation &@uala #umpur tock Exchange, 7ct '(( >. !ursa Malaysia #isting ;e6uirements 9. 7sset Aaluations guideline -(. 1inancial ;eporting 7ct -99? --. Malaysia Code on Corporate Governance '(-' -'. !ursa Malaysia Corporate Governance Guide 13.!ursa Malaysia ustainability Guide for 3irectors