Corporate Governance

407 Pages·2013·3.242 MB·English

by  Christine Mallin

Corporate Governance
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Corporate
Governance
FOURTH EDITION
Christine A. Mallin
(cid:1)
(cid:1)
Great Clarendon Street, Oxford OX2 6DP,
United Kingdom
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© Christine Mallin 2013
The moral rights of the author have been asserted
First Edition Published 2004
Second Edition Published 2007
Third Edition Published 2010
Impression: 1
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Principles of Good Corporate Governance and Best Practice Recommendations,
ASX Corporate Governance Council, (2003) © Australian Securities Exchange
Limited ABN 98 008 624 691 (ASX) 2006 and Corporate Governance Principles
and Recommendations, ASX Corporate Governance Council (2007) © Australian
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To: Mum and Dad
Preface
Corporate governance is an area that has grown rapidly in the past few years. The global
financial crisis, corporate scandals and collapses, and public concern over the apparent lack
of effective boards and perceived excessive executive remuneration packages have all
contributed to an explosion of interest in this area. The corporate and investment sectors, as
well as public, voluntary, and non-profit organizations, are all placing much more emphasis
on good governance. More and more universities, both in the UK and internationally, are
offering corporate governance courses on undergraduate or postgraduate degree programmes.
Some universities have dedicated taught masters in corporate governance and/or PhD
students specializing in this as their area of research.
Corporate governance is now an integral part of everyday business life and this book pro-
vides insights into its importance not just in the UK, but also globally, including the USA,
Europe, Asia, South Africa, Latin America, Egypt, India, and Australia. The book is designed to
provide an understanding of the development of corporate governance over the past two
decades and to illustrate the importance of corporate governance to the firm, to directors,
shareholders, and other stakeholders, and to the wider business community. It also seeks to
shed light on why there are continuing incidences of corporate scandals, to what extent these
are a corporate governance failure, and in which ways corporate governance—and the
behaviour of those involved in ensuring good governance in their business—may be improved
in the future.
CAM
May 2012
Acknowledgements
I would like to thank everyone who has encouraged and supported me in writing this book.
First, thanks go to those who have encouraged me to research and write about corporate
governance. In the early 1990s, Sir Adrian Cadbury inspired me to undertake research in the
field of corporate governance and has continued to do so. Other leading figures who have
influenced me with their contributions to the development of corporate governance include
Robert (Bob) A.G. Monks, Nell Minow, Jonathan Charkham, Steve Davis, and Professor Bob
Tricker, to name but a few.
Thank you to everyone at Oxford University Press who has contributed to the publication
of this book but especially to Kirsty Reade for her enthusiasm, expertise, and helpful advice.
Thanks also go to the anonymous reviewers who constructively reviewed earlier drafts of the
book and gave many helpful comments.
A heartfelt thanks to family and friends who have encouraged me to write this book, and
have always been there for me, especially to: Paul; Rita, Bernard, and Christopher; Pam and
Tom; Liz; Alice, Yu-Loon, and Thorsten; Ioana, Costin, and Mara; and Jane. Also a special
thank you to Ben. Finally, to Merlin and Harry (‘the two magicians ’) for their patience, devo-
tion, and sense of fun at all times.
Source Acknowledgements
The author and publisher wish to thank the following for kind permission to use copyright
material: The Association of British Insurers (ABI) for extracts from various ABI Guidelines
2001–2008; the Australian Stock Exchange for extracts from the Principles of Good Corporate
Governance and Best Practice Recommendations, ASX Corporate Governance Council (2003),
and Corporate Governance Principles and Recommendations (2007); the Basel Committee on
Banking Supervision for extracts from Enhancing Corporate Governance for Banking Organisa-
tions (2006) [please note: in this book the English spelling ‘Basle’ has been used]; the Budapest
Stock Exchange for extracts from the Corporate Governance Recommendations (2004); the
China Securities Regulatory Commission for extracts from the Code of Corporate Governance
for Listed Companies in China (2001); the Conference Board for extracts from the Commission
on Public Trust and Private Enterprise Findings and Recommendations, Parts 1, 2, and 3 (2002,
2003); the Copenhagen Stock Exchange for extracts from the Nørby Commission’s Recom-
mendations for Good Corporate Governance in Denmark (2001); the Czech Securities Com-
mission for extracts from the Revised Corporate Governance Code (2001); Ethical Investment
Research Service for details of socially responsible investment strategies; the Internal Mar-
ket Directorate General of the European Communities 2002, for Gregory, H.J. and Simmelk-
jaer, R.T. (2002) Comparative Study of Corporate Governance Codes Relevant to the European
Union and its Member States; the Financial Reporting Council for extracts from the Combined
Code on Corporate Governance (2006); Gee Publishing Ltd. for extracts from the Report of
the Committee on the Financial Aspects of Corporate Governance (1992); the German Com-
mission for extracts from the German Corporate Governance Code (2002); Hermes Pensions
Management Limited for extracts from The Hermes Principles (2002) and the Hermes Cor-
porate Governance Principles (2006); International Financial Services London for the ex-
tract from Sovereign Wealth Funds (2009); the UK Institute of Directors for extracts from
Standards for the Board (2006); the South African Institute of Directors for extracts from
the King Report on Corporate Governance (2002); the Investment Management Associa-
tion for extracts from the Responsibilities of Institutional Shareholders and Agents—A State-
ment of Principles (2002 and 2005); the Japan Corporate Governance Forum for extracts
from the Revised Corporate Governance Principles; Maciej Dzierzanowski and Piotr Tamo-
wicz of the Gdansk Institute for Market Economics for extracts from the Corporate Govern-
ance Code for Polish Listed Compani es (2002); the High Pay Commission for extracts from
Cheques with Balances: why tackling high pay is in the national interest (2011); the Mon-
etary Authority of Singapore for extracts from Code of Corporate Governance (2012); ecoDa
for extracts from Corporate Governance Guidance and Principles for Unlisted Companies in
Europe (2010); the Financial Reporting Council for extracts from the UK Corporate Govern-
ance Code (2010); TheCityUK/SWF Institute for extracts from Sovereign Wealth Funds 2011
(2012); UK Sustainable Investment and Finance Association (UKSIF) (UKSIF) for extracts from
Focused on the Future: Celebrating ten years of responsible investment disclosure by UK oc-
cupational pension funds (2010); the Financial Times for Sullivan, R. (2012) ‘Squeezed Chari-
ties Seek Better Investment’, 22 April. Crown copyright material is reproduced under Class
SOURCE ACKNOWLEDGEMENTS ix
Licence Number C01P0000148 with the permission of the Controller of HMSO and the
Queen’s printer for Scotland. The author and publisher also wish to thank the Financial Times
for: Armstrong, P. and Spellman, J.D. (2009) ‘Integrity is Key to Gaining Good Governance’,
2 February; Jacob, R. (2012) ‘Kwok Brothers Row Escalates After Arrests’, 13 May; Sullivan, R.
(2012) ‘Institutions Wary of Full Disclosure on How They Vote’, 29 April; Sullivan, R. (2012)
‘Managers “Talk More than Walk” on SRI’, 1 April; Smith, A. (2011) ‘Increase in Overseas
Directors in UK’, 27 November; Davoudi, S. (2012) ‘Trinity Mirror Investors Rebel Over Pay’,
10 May; Sanderson, R. (2012) ‘Italy Groups’ Cross-holdings in Spotlight’, 26 April; Belton, C.
(2012) ‘Investors Wary Over Rusal Stand-off’, 14 March; Cookson, R. (2012) ‘Auditor Quits
Chinese Group Boshiwa’, 15 March; and Crabtree, J. (2012) ‘TCI Fund Clashes with Indian
Deference’, 15 March.
Every effort has been made to trace all copyright holders, but if any have been inadvert-
ently overlooked the publishers will be pleased to make the necessary arrangements at the
first opportunity.