...The Background of Independent Directors and Corporate Performance 12公司理财 张晨月 2012312482 12公司理财 杨怡 2012312487 Abstract The purpose of this paper is to test the effect of independent directors’ background on company’s performance. Our study found that the education background of the independent directors of has no positive influence on the company's performance. And our study also found that government background of independent directors have a negative impact on company's performance. Studies also support the restriction of individuals that are act as several independent directors. Research of this paper enrich the corporate governance literature and provides a new point of view of the correct understanding of the influence of independent directors on company performance. Besides, it provides important empirical evidence for the further reform of corporate governance in our country . Keywords: background of independent directors The board of directors company's business performance ,corporate governance PART I. Introduction The introduction of independent director to the board of directors of the company hopes to improve the level of corporate governance and protect of rights and interests of small shareholders. More importantly, they also hope that the independent directors can promote the management decision of company management level from the perspective of experts, so as to improve the business performance of enterprises. As a result, whether the...
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...“Deconstructing Independent Directors”(*) María Gutiérrez Maribel Sáez Universidad Carlos III de Madrid and ECGI Universidad Autónoma de Madrid January 2012 Abstract In this paper we argue that boards of directors lack the mandate, the incentives and the ability to control insiders, especially in jurisdictions where the main agency problem arises between controlling and minority shareholders. We analyze the problems that render independents an inefficient monitoring device for companies with concentrated ownership structures and conclude that the current focus of the regulators and codes of best practice on empowering independents is ineffective and companies would be better off choosing their board members at liberty. Nevertheless, we also present two different proposals for reform: independents as gatekeepers for the regulator and independents as surrogates of the minority. Both proposals are based on the idea that if independent directors are expected to monitor controlling shareholders their most important characteristic should be accountability rather than mere independence. JEL Classifications: G32; G34; K22 Keywords: Independent directors, Board of directors, Concentrated ownership, Monitoring, Corporate Law (*)The authors wish to thank, Jesus Alfaro, Magda Bianco, Fernando Gómez Pomar and Assaf Hamdani and seminar audiences at AEDE 2010 and SIDE 2011 for many useful comments. The contents of this paper are the sole responsibility of...
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...of today, there is a clear business case for complying with principle of good Corporate Governance. In the era of Globalization & Liberalization market forces plays a crucial role. We know that liberalization in emerging economy has made access to foreign funds easier. Availability of foreign funds will lower the cost of capital. It is quite understood. All companies will like this to happen, but the international lenders will be careful. They will expect that the companies they lend to follow good Corporate Governance. These lenders will demand transparency. These factors force the companies to modify their behavior and values to meet the norms of Corporate Governance. It is critical for any company that people they recruit believe in the company in the company's values and takes in those values. For Example: Infosys group lays lot of emphasis on its values, integrity and transparency, while recruiting people in its group....
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...It is widely accepted that the presence of independent directors in the boardroom improves the quality of corporate governance. Accordingly, corporate governance mechanisms all over the globe, including in India, focus on 'independent directors'. The Companies Bill 2011 includes number of new provisions related to independent directors. It includes a 'Code For Independent Directors' (Schedule IV). According to the Bill an independent director is a director other than a managing director or a whole-time director or a nominee director, who is not a promoter and who fulfils certain conditions specified in the Bill. Primarily he/she does not have any pecuniary relationship with the company or he/she, with relatives, does not hold more than two percent of the voting power of the company. The Bill describes an independent director as a person of integrity, who possesses relevant expertise and experience. The government expects independent directors to bring an independent judgment to bear on the Board's deliberations especially on issues of strategy, performance, risk management, resources, key appointments and standards of conduct; and to bring an objective view in the evaluation of the performance of board and management. As per the Companies Bill, their responsibility is to safeguard the interest of stakeholders, particularly minority shareholders and to balance conflicting interests of stakeholders. Balancing the conflicting interest is a tricky job and most experts believe that...
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...OLDTOWN BERHAD (797771-M) OLDTOWN BERHAD (797771-M) (Incorporated in Malaysia) (Incorporated in Malaysia) The Board of Directors (“the Board”) of Oldtown Berhad (“the Company”) recognises the value of good governance and believes that a high standard of corporate governance will deliver long-term sustainable shareholder value. The Board is committed to ensure good corporate governance practices are applied throughout the Company and its subsidiaries (“the Group”). This Statement sets out the key aspects of how the Company has applied the Principles and Recommendations of the Malaysian Code on Corporate Governance 2012 (“MCCG 2012”) during the financial year ended 31 March 2014 and any non-observation of the Recommendations of MCCG 2012, including the reasons thereof, has been included in this Statement. Principle 1 – Establish Clear Roles and Responsibilities 1.1 Clear Functions of The Board and Management The Board leads the Group and plays a strategic role in overseeing the Group’s corporate objectives, directions and long term goals of the business. The Board is responsible for oversight and overall management of the Group. The Board Committees are established to assist the Board in discharging its responsibilities. The Board delegates specific responsibilities to three (3) principal Committees, namely the Audit Committee, the Nomination Committee and the Remuneration Committee. All committees have written terms of references and operating...
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...lot of investor lost all of their money. Then very recently major financial institutions like Sonali Bank, Basic Bank etc. were caught in financial scam which again shook the confidence of the market to such industries. These events renewed and reinforced people’s interest in study of corporate governance and how it could have prevented such mishaps. Corporate governance describes the structure of rights and responsibilities among the parties that have a stake in a firm. System of corporate governance could be defined as a set of processes and structures used to direct a corporation's business. Once implemented, an effective corporate governance system can help to ensure an appropriate division of power among shareholders, the board of directors, and management. It is not just corporate management; it is something much broader which include a fair, efficient and transparent administration to meet certain well-defined objectives. When it is practiced under a well-laid out system, it leads to the building of a legal, commercial and institutional framework and demarcates the boundaries within which these functions...
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...1.0 COMPANY BACKGROUND Bank Islam, established in 1983, is Malaysia’s maiden Shariah-based institution. Since its inception, it has emerged as the symbol of Islamic banking in Malaysia and its vision to be “A Global Leader in Islamic Banking” illustrates the Bank’s status as the flag bearer of the country’s financial services industry (“the industry”). Bank Islam has been growing from strength to strength as evidenced by its financial performance and paid-up capital, which in turn, was instrumental in making the growth of its assets. Throughout the year, Bank Islam has been embarking on a number of expansion programmes with its involvement in, among others, notable transaction in Sukuk and Corporate Mandates. Living up to its pioneering spirit, the Bank has continued to provide innovative and enhanced products and services which has resulted in a growing number of customers seeing Islamic banking as a true alternative to conventional banking. This growing list of clienteles in addition to truly ground breaking and quality banking solutions have been recognised by the global industry which is reflected by the Bank's position as one of the top banks in the country. From the traditional financing, savings and investment types of products exclusively for individual customers during the early years of establishment, the range of Bank Islam’s Shariah-based financial products, services and business solutions has significantly...
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...essence of the Blueprint is to achieve excellence in corporate governance through strengthening self and market discipline and promoting good compliance and corporate governance culture. Boards and shareholders must embrace the understanding that good business is not just about achieving the desired financial bottom line by being competitive, but by also being ethical and sustainable. The Malaysian Code on Corporate Governance (Code), first issued in March 2000, marked a significant milestone in corporate governance reform in Malaysia. The Code was later revised in 2007 (2007 Code) to strengthen the roles and responsibilities of the board of directors, audit committee and the internal audit function. The Malaysian Code on Corporate Governance 2012 (MCCG 2012) focuses on strengthening board structure and composition recognising the role of directors as active and responsible fiduciaries. They have a duty to be effective stewards and guardians of the company, not just in setting strategic direction and overseeing...
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...costs, corporate governance mechanisms and performance of public listed family firms in Malaysia H. Ibrahim* School of Management, Universiti Sains Malaysia, 11800 USM, Penang, Malaysia haslindar@usm.my F.A. Samad Faculty of Business and Accountancy, University of Malaya, 50603 Kuala Lumpur, Malaysia mfazilah@um.edu.my Received June 2009 We compare corporate governance and performance between family and non-family ownership of public listed companies in Malaysia from 1999 through 2005 measured by Tobin’s Q and ROA. We also examine the governance mechanisms as a tool in monitoring agency costs based on asset utilization ratio and expense ratio as proxy for agency costs. We find that on average firm value is lower in family firms than non-family firms, while board size, independent director and duality have a significant impact on firm performance in family firms as compared to non family firms. We also find that these governance mechanisms have significant impact on agency costs for both family and non family firms. *To whom all correspondence should be addressed. Introduction The family-controlled firm or family ownership is the most common form of business organization in the world. A various stream of literature explains that family ownership is central in most countries. La Porta, Lopez-De-Silanes, and Shleifer (1999) studied the 20 largest publicly traded companies in the richest 27 countries worldwide and found most companies are private and the ownership of listed firms is...
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...necessary in order to add more value to the firm. The board’s composition is likely to impact how the board functions, how it makes its investment and financial decisions and how authority and influence are allocated and manifested within the board.[1] Each organisation has its own regulations and guidelines for the formation, roles and compensation of the management board as there is “no one size fits all” rule, they are largely governed by governmental regulations and other international regulatory bodies such as the Organization for Economic Co-operation and Development (OECD) and the International Finance Corporation (IFC). Some positive relationships have been explored between the number of women, director ages, nationalities and other minorities on the board and the overall value of the firm. Being a household products and pharmaceutical company it is imperative for HouseDreams to incorporate measures to include more women on its board of directors thereby making it more diverse. This is because of the fact that women are the prime household decision makers and have a better understanding on the company’s target consumer. Boards with no or limited female membership may be weak in terms of understanding and connecting with the customer and workforce and offer limited encouragement to female employees. Based on research, analysis and examples, this memorandum supports the argument that a diversified board structure and composition brings increased value to the organisation. ...
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...Corporate governance Two definitions: 1. ASX CGC: rules, relationship, systems and processes help a company to monitor and assess risk, optimize performance, create value and provide accountability. a) A narrow definition which consistent with agency theory focuses on relationship between company and shareholders. 2. OECD: a system a company can be directed and controlled, specify rights, responsibilities and rules; set and achieve objectives and monitor performance. b) A board definition consider relationship between company and stakeholders 3. Agency theory c) A contract under which one or more person engage another person or persons to perform some service on their behalf d) Agency problem rise because of the conflict of interest between principle and agent e) Three specific problems: i. Managers try to maximize their wealth at the expense of shareholders ii. Tendency for management to focus on short-term performance iii. Different attitude of managers and shareholders towards risk f) Corporate governance structures, policies and relationships can help to overcome these three related agency problems iv. Independent board of directors v. Independent board chair vi. Independent board subcommittees such as audit, remuneration and nomination 4. Stakeholder theory g) Reject the only important relationship is shareholders and managers, but consider...
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...produce an efficiently functioning the corporation, ideally geared to produce long term value. ISSUES IN CORPORATE GOVERNANCE * Asymmetry of power * Asymmetry of information * Interests of shareholders as residual owners * Role of owner management * Theory of separation of powers * Division of corporate pie among stakeholders CURRENT STATUS ON CORPORATE GOVERNANCE * Insistence on forms and structures * Overarching regulations * Regulatory overkill * Lack of adequate number of strong, independent directors * Large liabilities for companies and officers Scope of Corporate Governance * “Corporate Governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interest of individuals, corporations and society. * The foundation of any structure of corporate governance is disclosure. Openness is the basis of public confidence in the corporate system and funds will flow to centers of economic activity that inspire trust.” -Sir Adrian Cadbury. * “Shareholders role in governance is to appoint the directors and the auditors. Poor corporate governance has ruined companies, sent directors to jail, and destroyed a global accounting firm and threatened economies and governments...
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...GMI (Governance Metrics International) for MINDTREE Research Methodology GMI rating criteria are based on securities regulations, stock exchange listing requirements and various corporate governance codes and principles. Among the latter are principles promulgated by the OECD, the Commonwealth Association for Corporate Governance, the International Corporate Governance Network and the Business Roundtable. In addition, we have sought the views of various corporate governance and legal advisors, institutional investors, corporate officers and company directors, and utilized the combined experience of the founding partners.This endeavor has produced a set of hundreds of metrics structured in a manner that can only produce yes, no or not disclosed answers. In this way we have attempted to eliminate a large degree of subjectivity to answer these metrics from official company filings with securities regulators and stock exchanges. The GMI research process starts with a review of all pertinent public data, including regulatory filings, company websites, news services and other specialized websites. All data collected by GMI are entered into a relational database. Once the research template answers have been compiled and have been subjected to various quality control checks, data entry reports are sent to each company in our universe for a final accuracy check. After any company adjustments are made the data are locked and GMI runs a scoring model that calculates and assigns ratings...
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...essence of the Blueprint is to achieve excellence in corporate governance through strengthening self and market discipline and promoting good compliance and corporate governance culture. Boards and shareholders must embrace the understanding that good business is not just about achieving the desired financial bottom line by being competitive, but by also being ethical and sustainable. The Malaysian Code on Corporate Governance (Code), first issued in March 2000, marked a significant milestone in corporate governance reform in Malaysia. The Code was later revised in 2007 (2007 Code) to strengthen the roles and responsibilities of the board of directors, audit committee and the internal audit function. The Malaysian Code on Corporate Governance 2012 (MCCG 2012) focuses on strengthening board structure and composition recognising the role of directors as active and responsible fiduciaries. They have a duty to be effective stewards and guardians of the company, not just in setting strategic direction and overseeing the conduct...
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...agencies having so many guidelines & so called checks & balances allowed it to happen . How can we enact laws like Chit Fund Act 1982 which may have so many loose ends .This is not one of its kind case in India in recent past . We had the Harshad Mehta Scam, Ketan Parikh Scam, UTI Scam, Vanishing Company Scam, Bhansali Scam ,2G scam ,Coal scam and the story goes on this front unabated. To cut a long story short there is immediate need to revitalize in-house system of vigil ,ethics & morality by empowering the Board and adding teeth to it . Independence of the Board, credibility of the auditors and observance of corporate ethics can prove to be the hallmarks of good corporate governance. The purpose of boardroom should be value addition & giving strategic direction rather than getting involved in routine jobs. The qualification & selection...
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