战略管理(第十三章).ppt

Chapter 13Corporate Governance in the Twenty-First Century OBJECTIVES Explain what is meant by corporate governance1Describe how corporate governance relates to competitive advantage and understand its basic principles and practices 2Identify the roles of owners and different types of ownership profiles in corporate governance 3Describe how boards of directors are structured and the roles they play in corporate governance4Explain and design executive incentives as a corporate governance device5Describe how the market for corporate control is related to corporate governance6Compare and contrast corporate governance practices around the world71SUNBEAM Al Dunlaps mgmt.philosophy1.Shareholders are most important corporate constituents2.Most corporations have bloated bureaucracies 3.Drastic layoffs are usually neededto save failing companies4.Layoffs should be quick,one-time events 5.CEOs should be rewarded likestars when they perform welland fired when they do not6.Board members should have significant personal investmentsin the company Results Board fines DunlapHe looses his stock optionsSunbeam stock is delistedWith R&D budgets cut,newproduct development hamperedGrowth fails to meet targetsCompany accused of“channel stuffing”Costs slashed Stock doubled in first monthMarket cap rises from$1.1billion to$5 billionEarlysuccessFailure Signsof problems2CORPORATE GOVERNANCE Corporate governanceThe system by which organizations,particularly business corporations,are directed and controlled by their owners In a broader perspective,governance determines how all stakeholders influence the corporation:BoardEmployeesShare holdersCorporationEnvironmentManagementSociety3CORPORATE GOVERNANCE IMPACTS PERFORMANCE The Italian stock exchange started a new exchange called STAR for small and mid-sized companies that followed strict governance prescriptions Companies of the STAR exchange consistently out perform their counterparts on the regular exchange(e.g.,during 2004 STAR firms achieved returns 24.5%greater than their counter parts)4EARLY WARNING SIGNS OF PROBLEMS WITH KRISPY KREME Source:M.Maremont and R.Brooks,“Fresh Woes Batter Krispy Kreme;Doughnut Firm to Restate Results,Delay SEC Filing;Shares Take a 15%Tumble,”Wall Street Journal(Eastern edition),January 5,2005.p.A35AGENTS AND PRINCIPALS When interests are virtually identical,the agency problem is small:executives do what is in principals best interestsHowever interests often do not overlap.Then agents may act to detriment of principals and visa-versa(e.g.,executives raise salaries and reduce returns)Agents PrincipalsShareholders of a firmAct on behalfof principalsin managingthe firm 6EXAMPLES OF CODES OF GOVERNANCECountry United Kingdom Cadbury Code1 Singapore CG Committee(2001)Russia CG Code(2002)Brazil CVM Code(2002)United States Conference Board and CalPers(2003)2Can the same executive be both CEO&chairperson?Split recommendedSplit recommended Split required by lawSplit recommendedSeparation is one of three acceptable alternatives Is auditor rotation required?Periodic rotation of lead auditorNot addressed Not addressed Not addressed Recommended3Is disclosure required if the company does not comply with the recommendations?Yes Yes No No No What is the recommendation on director independence?Majority At least one-third At least one-quarter As many as possibleSubstantial majority 1.In 2003,a Combined Code made further additions to the code,but these basic principles remain2.Just one of several codes in existence in the United States3.The Sarbanes-Oxley Act requires that the lead audit partner be rotated every 5 years;changing audit firm after 10 years of continual relationship or if former audit partner is employed by the company7SOME NEW COMPLIANCE RULES FROM SARBANES-OXLEY Auditors must list the non-audit services they are unable to perform during an auditA one-year waiting period for audit-firm employees who leave an accounting firm to become an executive for a former clientTransactions and relationships that are off the balance sheet but that may affect financial status must now be disclosed Personal loans from a corporation to its executives are now largely prohibited Research analysts for securities firms must now file conflict of interest disclosures.For instance,analysts must report whether they hold any securities in a company or have received corporate compensationBrokers and dealers must disclose if the public company is a clientAltering,destroying,concealing,or falsifying records or documents with the intent to influence a federal investigation or bankruptcy case is subject to fines and up to 20 years of imprisonment 8OWNERSHIP STRUCTURE VARIES Source:Company annual reports 9ROLES AND ACTIONS OF BOARD OF DIRECTORS 10EFFECTS OF CEO FIRINGSSource:M.wiersema,“Holes at the Top:Why CEO Firings Backfire,”Harvard Business Review 80;12(2002),70-7711INCENTIVE ALIGNMENT Conflicts of interest can arise Agents PrincipalsIncentivealignment can solvesuch problemsA company receives a buy-out offerShareholders(principals)would benefit because price assures a good return on investmentManagement(agents)resists because they may lose their jobsExample:Boards can include“golden parachute”provisions in managers compensation packages12HOW WOULD YOU DO THAT?DENDRITE INTERNATIONAL Dendrites challenge:Dendrites solution:How can Dendrite better align managementincentives with shareholders?q20 senior-most executives must own 15,000 to 100,000 shares of stockqMust be common sharesnot optionsqMust be achieved within 5 years qExecutives may elect to receive incentive compensation in stock instead of cash 13EXECUTIVE STOCK OWNERSHIP IN 2004Largest 250 companies withstock ownership guidelinesExecutivesDirectorsNumber ofcompanies142123Percent ofcompanies5749Percent increase from 2001 to 200458127Source:Adapted from Fredrick W.Cook&Co.,Inc.,“Stock Ownership Policies:Prevalence and design of Executive and Director Ownership Policies Among the Top 250 Companies,” Nov 29,2005),Sep 200414INCENTIVE COMPENSATION Annual bonus plansOldest form of incentive pay.Board can evaluate executives performance along multiple dimensions and allocate a year-end cash awardStock optionsAn employee receives the right to buy a set number of shares of company stock at a later date for a predetermined priceOther long-termincentives More recent forms of incentive compensation.Long-term bonuses linked to performance over several years.May help executives avoid short-term myopia and focus on long-term15CEO PAY COMPARISON 16HIGHEST PAID CEOsSource:Company annual reports and ExecComp Service of Thomson Financial17EXECUTIVE PAY TRENDS Source:U.S.Bureau of Labor Statistics 18THE MARKET FOR CORPORATE CONTROL Share holders Board Top management Corporation DirectsHires/firesElect The right to choose the members of the board of directorsof a company andto control all major decisions madeby a companyCorporate control:Example:Corporate raiders such as T.Boone Pickens,CarI Icahn,Ted Turner and Michael MilkenOracle engaged in 18-month battle to gain control of PeopleSoftExample:19POOR CORPORATE GOVERNANCE,A WORLD-WIDE PROBLEMRecent examples of scandal-ridden non-U.S.multinationalsNetherlands Ahold Group(grocery stores)Italys Parmalat(dairy and food products)Frances Vivendi(entertainment)French-Belgian Firm ELF(petroleum)20CORPORATE GOVERNANCE:U.S VS.JAPANOwner-managerrelationshipManager andshareholderrelationshipOwnershipconcentrationU.SAdversarialThrough onecompanyControl functionJapanCo-operativeThrough a Keiretsu(group of interlockingcompanies)Monitoring function21CORPORATE GOVERNANCE IN GERMANY AND CHINA Germany Two-tier board systemManagement board manages the enterpriseSupervisory board appoints,supervises,and advises members of the management board China Only recently started a securities marketMajority of listed companies started off as state-owned enterprisesState ownership remains high across all industries 22HOW WOULD YOU DO THAT?CHIQUITA The Chiquita board set objectives as:1.Delivery of quality products to consumers2.Quality returns to shareholders 3.Transform Chiquita into a global player How should Chiquita compensate its new CEO?Source:Company annual reports Chiquita DoleDel MonteSales 2004($millions)2,6134,7732,171Net income($millions)9684134CEO salary($thousands)950810CEO bonus($thousands)What is appropriate?1,368870CEO total Compensation($thousands)4,3877,39423SUMMARY Explain what is meant by corporate governance1Describe how corporate governance relates to competitive advantage and understand its basic principles and practices 2Identify the roles of owners and different types of ownership profiles in corporate governance 3Describe how boards of directors are structured and the roles they play in corporate governance4Explain and design executive incentives as a corporate governance device5Describe how the market for corporate control is related to corporate governance6Compare and contrast corporate governance practices around the world724