Corporate Governance

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  • Edition: 5th
  • Format: Paperback
  • Copyright: 2011-08-15
  • Publisher: Wiley

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In the wake of the recent global financial collapse the timely new edition of this successful text provides students and business professionals with a welcome update of the key issues facing managers, boards of directors, investors, and shareholders.In addition to its authoritative overview of the history, the myth and the reality of corporate governance, this new edition has been updated to include: analysis of the financial crisis; the reasons for the global scale of the recession the failure of international risk management An overview of corporate governance guidelines and codes of practice; new cases.Once again in the new edition of their textbook, Robert A. G. Monks and Nell Minow show clearly the role of corporate governance in making sure the right questions are asked and the necessary checks and balances in place to protect the long-term, sustainable value of the enterprise.Features 18 case studies of institutions and corporations in crisis, and analyses the reasons for their fall (Cases include Lehman Brothers, General Motors, American Express, Time Warner, IBM and Premier Oil.)

Author Biography

Robert A.G. Monks and Nell Minow are founders of GovernanceMetrics International, the leading independent research firm dedicated to corporate governance. Formerly principals of the Lens Fund and officers of Institutional Shareholder Services, Monks & Minow have also collaborated on two other books: Power and Accountability and Watching the Watchers.

Table of Contents

Cases in Pointp. xiii
Prefacep. xvii
Acknowledgmentsp. xxvii
Introduction ‚«Ű How to Use this Bookp. 1
What is a Corporation?p. 3
Defining the Corporate Structure, Purpose, and Powersp. 5
Evolution of the Corporate Structurep. 6
The Purpose of a Corporationp. 9
Satisfying the human need for ambition, creativity, and meaningp. 9
Social structurep. 10
Efficiency and efficacyp. 10
Ubiquity and flexibilityp. 11
Identityp. 11
The Corporation as a "Person"p. 12
The Corporation as a Complex Adaptive Systemp. 12
Are Corporate Decisions "Moral"?p. 14
Are Corporations Accountable?p. 16
Three Key External Mechanisms for Directing Corporate Behavior: Law, the Market, and Performance Measurementp. 18
Government: legislation, regulation, enforcementp. 18
What Does "Within the Limits of the Law" Mean?p. 20
When and how do you punish a corporation?p. 28
Probation of corporationsp. 29
The problem of serial offendersp. 31
Securities analyst settlementp. 32
What is the role of shareholders in making this system work?p. 33
The market: too big to failp. 36
The corporation and electionsp. 40
Citizens unitedp. 41
The corporation and the lawp. 45
A Market Test: Measuring Performancep. 47
Long term versus short termp. 50
Corporate decision making: whose interests does this "person"/adaptive creature serve?p. 55
Another (failed) market test: NGOsp. 61
Measuring value enhancementp. 62
GAAPp. 62
Market valuep. 69
Earnings per sharep. 70
EVA¬“: economic value addedp. 71
Human capital: "It‚«÷s not what you own but what you know"p. 72
The "value chain"p. 73
Knowledge capitalp. 74
The value of cashp. 74
Corporate "externalities"p. 79
Equilibrium: The Cadbury Paradigmp. 79
ESG: Environment, Social Governance ‚«Ű A New Way to Analyze Investment Risk and Valuep. 83
Quantifying Nontraditional Assets and Liabilitiesp. 87
Future Directionsp. 92
Summary and Discussion Questionsp. 93
Notesp. 95
Shareholders: Ownershipp. 101
Definitionsp. 105
Early Concepts of Ownershipp. 106
Early Concepts of the Corporationp. 107
A Dual Heritage: Individual and Corporate "Rights"p. 108
The Reinvention of the Corporation: Eastern Europe in the 1990sp. 110
The Evolution of the American Corporationp. 111
The Essential Elements of the Corporate Structurep. 115
The Mechanics of Shareholder Rightsp. 117
The Separation of Ownership and Control,
Berle and Meansp. 118
Fractionated Ownershipp. 125
The Separation of Ownership and Control,
The Takeover Erap. 129
Waking the Sleeping Giantp. 134
A Framework for Shareholder Monitoring and Responsep. 140
Ownership and Responsibilityp. 141
No innocent shareholderp. 141
To Sell or Not to Sell: The Prisoner‚«÷s Dilemmap. 143
Who the Institutional Investors Arep. 144
Bank trustsp. 145
Mutual fundsp. 146
Insurance companiesp. 149
Universities and foundationsp. 149
Executive pay from the consumer side ‚«Ű a leading indicator of riskp. 150
Pension plansp. 154
The Biggest Pool of Money in the Worldp. 154
Pension plans as investorsp. 164
Pension plans as ownersp. 166
Public Pension Fundsp. 169
Divestment initiativesp. 188
Economically targeted investmentsp. 189
AFSCMEp. 195
Federal Employees‚«÷ Retirement Systemp. 197
Private Pension Fundsp. 201
The Sleeping Giant Awakens: Shareholder Proxy Proposals on Governance Issuesp. 206
Focus on the Boardp. 212
Hedge Fundsp. 220
Synthesis: Hermesp. 221
Investing in Activismp. 222
New Models and New Paradigmsp. 223
The "Ideal Owner"p. 228
Pension Funds as "Ideal Owners"p. 233
Is the "Ideal Owner" Enough?p. 234
Summary and Discussion Questionsp. 236
Notesp. 238
Directors: Monitoringp. 251
A Brief History of Anglo-American Boardsp. 255
Who Are They?p. 256
Sizep. 256
Termp. 256
Inside/outside mixp. 257
Qualificationsp. 261
Who Leads the Board? Splitting the Chairman and CEO and the Rise of the Lead Directorp. 261
Agendap. 263
Minutesp. 263
Diversityp. 264
Meetingsp. 264
Communicating with Shareholdersp. 264
Special Obligations of Audit Committeesp. 265
Ownership/Compensationp. 266
Post-Sarbanes‚«ŰOxley Changesp. 266
Board Duties: The Legal Frameworkp. 267
The Board‚«÷s Agendap. 281
The Evolution of Board Responsibilities: The Takeover Erap. 283
The Fiduciary Standard and the Delaware Factorp. 284
How did boards respond?p. 287
Greenmailp. 287
"Poison pills"p. 288
Other anti-takeover devicesp. 290
The Director‚«÷s Role in Crisisp. 291
Limits and Obstacles to Board Oversight of Managersp. 295
Information Flowp. 295
Practical Limits: Time and Moneyp. 301
The Years of Corporate Scandals ‚«Ű Boards Begin to Ask for Morep. 302
Director Information Checklistp. 303
Who Runs the Board?p. 304
Catch 22: The Ex-CEO as Directorp. 306
Director Resignationp. 308
CEO Successionp. 308
Director Nominationp. 309
Limits and Obstacles to Effective Board Oversight by Shareholdersp. 318
Carrots: Director Compensation and Incentivesp. 319
Can Investors Ensure or Improve Board Independence by Replacing Directors who Perform Badly or Suing Directors who Fail to Act as Fiduciaries?p. 324
Can Directors be Held Accountable through the Election Process?p. 324
Staggered boardsp. 327
Confidential votingp. 328
Suing for Failure to Protect the Interests of Shareholders ‚«Ű Are the Duties of Care and Loyalty Enforceable?p. 331
Future Directionsp. 331
Majority voting and proxy accessp. 331
Improving director compensationp. 333
Increasing the authority of independent directorsp. 333
"A market for independent directors"p. 335
"Designated director"p. 336
Board evaluationp. 336
Executive session meetingsp. 336
Succession planning and strategic planningp. 337
Making directors genuinely "independent"p. 337
Involvement by the federal governmentp. 338
Involvement by shareholdersp. 339
Summary and Discussion Questionsp. 339
Notesp. 340
Management: Performancep. 347
Introductionp. 348
What Do We Want from the CEO?p. 354
The Biggest Challengep. 359
Risk Managementp. 363
Executive Compensationp. 363
The pay Czarp. 370
Post-meltdown payp. 370
The Council of Institutional Investorsp. 371
Stock Optionsp. 374
Restricted Stockp. 379
Yes, We Have Good Examplesp. 380
Shareholder Concerns: Several Ways to Pay Dayp. 380
The "guaranteed bonus" ‚«Ű the ultimate oxymoronp. 380
Deliberate obfuscationp. 381
The Christmas treep. 382
Compensation plans that are all upside and no downsidep. 382
Loansp. 382
Accelerated vesting of optionsp. 383
Manipulation of earnings to support bonusesp. 383
Manipulation of peer groupsp. 384
Huge disparity between CEO and other top executivesp. 384
Imputed years of servicep. 384
Excessive departure packagesp. 384
Backdating, bullet-dodging, and spring-loading optionsp. 385
Phony cutsp. 386
Golden hellosp. 386
Transaction bonusesp. 386
Gross-ups and other perquisitesp. 387
Retirement benefitsp. 387
Obstacles to restitution when CEOs are overpaidp. 387
Future Directions for Executive Compensationp. 388
CEO Employment Contractsp. 389
Causep. 390
Change of controlp. 391
Half now, half laterp. 391
CEO Succession Planningp. 391
Sarbanes‚«ŰOxleyp. 392
Creation of the Public Company Accounting Oversight Boardp. 392
Section 404p. 393
Other changesp. 394
Dodd‚«ŰFrankp. 394
Employees: Compensation and Ownershipp. 395
Employee Stock Ownership Plansp. 399
Mondragón and Symmetry: Integration of Employees, Owners, and Directorsp. 403
Conclusionp. 409
Summary and Discussion Questionsp. 410
Notesp. 411
International Corporate Governancep. 415
The Institutional Investor as Proxy for the Public Interestp. 429
Norway in the driver‚«÷s seatp. 431
The International Corporate Governance Networkp. 433
ICGN: Statement of Principles on Institutional Shareholder Responsibilitiesp. 433
The Global Corporate Governance Forump. 435
Swedenp. 435
Canadap. 437
Singaporep. 438
Russiap. 441
Germanyp. 442
Chinap. 443
Japanp. 444
Governance Metrics International (GMI)p. 445
World Bank and G7 Responsep. 458
Azerbaijanp. 459
Slovakiap. 460
Jordanp. 460
Thailandp. 461
Polandp. 461
The Global Carbon Project (GCP)p. 464
A Common Framework for Sustainability Reportingp. 465
Towards a Common Languagep. 468
Visionp. 470
Summary And Discussion Questionsp. 471
Notesp. 473
Afterword: Final Thoughts and Future Directionsp. 475
Beyond the Nation Statep. 477
Government as Shareholder: The Institutional Investor as Proxy for the Public Interestp. 484
Notesp. 486
Indexp. 489
Table of Contents provided by Publisher. All Rights Reserved.

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