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PI CONTENTS Corporate Governance Corporate Governance PREFACE ACKNOWLEDGEMENTS SOURCE ACKNOWLEDGEMENTS LlST OF FIGURES LlST OF TABLES LlST OF ABBREVIATIONS GLOSSARY nhunhu vii viii ix xv xvi K V i~ xviii 1 lntroduction PART ONE Developments in Corporate Governance 2 Theoretical Aspects of Corporate Governance lntroduction Theories associated with the development of corporate governance Agency theory Separation of ownership and control Transaction cost economics Stakeholder theory Stewardship theory The theories in context Convergence Conclusions 3 Development of Corporate Governance Codes The growth in corporate governance codes Corporate governance in the UK Cadbury Report ( 1 992) OECD Principles of Corporate Governance (1999) as revised (2004) World Bank Global Corporate Governance Forum International Corporate Governance Network Commonwealth Association for Corporate Governance EU Company Law Experts Basle Committee US corporate governance Delaware corporate law Employee Retirement Income Security Act 1974 Sarbanes-Oxley Act 2002 Commission on Public Trust and Private Enterprise 2003 Conclusions PART TWO Owners and Stakeholders 4 Shareholders and Stakeholders Shareholders and stakeholders Stakeholder groups Guidance on shareholders' and stakeholders' interests Roles of shareholders and stakeholders Conclusions 5 Family-owned Firms lntroduction ' Ownership structures around the world Family-owned firms and governance Smaller quoted companies Conclusions 6 The Role of lnstitutional Investors in Corporate Governance lntroduction Growth of institutional share ownership Influence of institutional investors Institutional investors' relationship with investee companies Tools of corporate governance Corporate governance and corporate performance Conclusions 7 Socially Responsible Investment lntroduction SRI and corporate governance Strategies for SRI lnstitutional investors' policies International guidance CSR indices Corporate social responsibility The impact on shareholder value Conclusions PART THREE Directors and Board Structure 8 Directors and Board Structure Introduction Unitary board versus dual board Combined Code The board of directors Role of the board Role, duties, and responsibilities Board sub-committees Audit committee Remuneration committee Nomination committee Risk committee Non-executive directors Independence of non-executive directors Contribution of non-executive directors Higgs Review Director evaluation Conclusions Directors' Performance and Remuneration The directors' remuneration debate Key elements of directors' remuneration Role of the remuneration committee Performance measures Remuneration of non-executive directors Disclosure of directors' remuneration International guidance on executive remuneration Conclusions 9 PART FOUR International Corporate Governance 10 Corporate Governance in Continental Europe Background Germany Denmark France Italy Convergence or divergence Conclusions Corporate Governance in Central and Eastern Europe lntroduction Privatization process and its implications The Czech Republic Poland Russia Hungary Conclusions Corporate Governance in the Asia-Pacific lntroduction Japan South Korea Malaysia China Australia Conclusions Corporate Governance in South Africa, India, and Brazil lntroduction South Africa India Brazil Conclusions Conclusions FRC: THE COMBINED CODE ON CORPORATE GOVERNANCE (2006) INDEX