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• Corporate governance is vital for economic development at both the company and economy level.

"LOGIC" of Governance

• Includes continuous learning, oversight, guidance, information, and culture.

Anglo-US Model

• Key Players in corporate governance include management, shareholders, and the board of directors, forming a governance triangle.
• Shareholders contribute capital and maintain ownership, generally avoiding legal liability.
• Management acts as the agent of investors, handling corporate affairs.
• The Board of Directors acts as fiduciaries, overseeing management on behalf of shareholders’ interests.
• Ownership is held by individual or institutional investors (outside shareholders), like banks, insurance companies, and hedge funds.
• Equity financing involves companies raising capital by selling shares to investors, granting them ownership.
• The Board of Directors includes insiders (those with a significant relationship with the company) and outsiders (those without a direct relationship).
• Routine corporate actions needing shareholder approval are elections of directors and appointment of auditors.
• Non-routine actions include establishing stock option plans, mergers, restructurings, and amending incorporation articles.
• Interaction occurs across a wide range of institutional investors and financial specialists.

German Model

• Features affiliated banks and companies with strong, long-term affiliations.
• Governance operates through an open-ended hexagon involving outside shareholders, independent directors, government, Keiretsu, management, and a bank.
• The main bank provides loans and services related to bond, equity, and settlement accounts.
• Keiretsu is a financial/industrial network with interlocking trading relationships.
• The government directs industrial policies.
• Specialists monitor the corporation's performance.
• Shareholders can exercise voting rights through a proxy.
• The Board of Directors is composed almost completely of insiders (executive heads).
• Routine corporate actions needing shareholder approval include dividend payments and auditor appointments.
• Non-routine actions include capital authorizations and amendments to the articles.
• Interaction strengthens relationships, largely excluding outside shareholders.
• Shareholder activism is restricted.

Japanese Model

• Focuses on German banks and Corporations.
• Governance features German Banks and Shareholders (to a lesser extent)
• Composed of a management board (Vorstand) responsible for the company's daily management.
• This model is designed to include the interests of labor, corporations, banks, and shareholders.
• Shareholders need to be present or represented in person to vote.

Chinese Model

• The government holds a substantial stake, so there must be shareholders and other key entities
• Consists of shareholders, government entities, board of directors, and employees.
• The Board of Directors makes strategic decisions and supervises administration.
• The Board of Administrators monitors operations and ensures compliance.
• Board composition favors individuals with government and industry ties.
• Board independence provides an objective perspective.
• Government regulation heavily influences the operations.

Framework

• Corporate governance is heavily influenced by government policies and security regulations
• These regulations oversee stock exchanges and enforce disclosure requirements.
• The Company Law of PRC provides guidelines for corporate governance.
• Interactions are complex on all levels of corporate structure.

Agency problems in corporate governance

• Corporate Social Responsibility is a business approach promoting ethical practices and sustainability while balancing profitability.
• Agency theory views the firm as a contract between resource providers (principals) and controllers (agents).
• Principal-agent specific issues include conflicts over diversification vs. dividends.
• Shareholders may want dividends declared, while managers often prefer reinvesting available funds.
• Managerial opportunism and a lack of maximized shareholder returns can occur via unrelated diversification.
• Power supremacy and technical expertise cause shareholders to await a final result.
• Agency problems include adverse selection, agency costs, and conflicts of interest.

Identified agency problems

• Agency costs arise since decision-making is delegated.
• Conflict of interest will happen if managers have objectives beyond that of the shareholders
• Legal requirements can cause opportunistic behavior.

Remedies within shareholders

• Proxy voting allows shareholders to vote through a special authority.
• Derivative suits are lawsuits filed by a shareholder on behalf of the corporation against a third party.
• Takeover transfers control from one shareholder group to another.
• A friendly takeover informs a company's board of directors before making an offer.
• A hostile takeover bypasses the target company's management if they're uncooperative.
• A reverse takeover lets private companies become publicly-traded without an IPO.
• Tender offers are public and open invitations from a prospective acquirer to stockholders.

Financing a Takeover

• Securing over a corporation through stock purchases.
• Debt financing uses dept, also known as leveraged buyouts.
• Partial or full equity conversion, can include debt payment shares
• Share Swaps, creates new share holders.

External forces affecting governance

• Competitors that offer and produce the same products.
• Financers assist with projects.
• Regulatory Agencies are those incharge of corporate activity via authority.
• Watchdogs will help determine compliance.
• Predator Companies will capitalize on friendly takeovers.

The History of Corporate Social Responsibility

• Corporate Social Responsibility began showing up in the 1960's.
• Adam Smith in 18th century articulated business in an honest, and fair model format
• 20th century included backlash and momentum for large corporations.

The areas of focus for Corporate Social Responsibility

• Social goal with advocated focus to increase social responsiveness.
• Economic compliance is the production of goods and services in a way that is profitable to owners.
• Ethical responsibilities should abide be the norms set in that society.
• Philanthropic responsibilities should go beyond donations with volunteering and sponsorships.

Arguments for CSR.

• The "Economic" focus on free market in order to benefit society.
• "Competitive" focus on addressing issues that come at a cost to businesses.
• "Capability" focus on managerial issues.
• "Self-interest" focus which encourages corps to act in a way for the benefits of all.

Specific relevance of CSR

• Investors consider that business help resolve climate change.
• Social expectations push public and consumers to expect more as companies produce goods and services.
• Competitive labor markets improve the benefits of business philanthropy
• Globalization can bring to light, or at least to the attention of public corporations' business.
• Suppliers may not buy productes from manufacturers if they don't follow and adhere to standards.

Wealth and vulnerabilities focus

• The customer is who the company should focus to satisfy:

• with Satisfaction, ethical practices, transparency in the company, and continuous improvement.

• Ethical Leadership leaders should protect rights with concerns for others

• Ethical & Legal Compliance: is a means where code of conduct and reporting are compliant with policies and fair.

• Environmental Sustainability: Environmental awareness.

• Community Involvement; With Local organizations

Philanthropic Activities

• Include Charity, volunteering, in-kind donations and gift matches.
• Key elements in corporate citizenship consist of a concern for quality control

Corporate Greenwashing

• Is a practice of deceptive assertions created by corporations that offer services and products.

Greenwashing Sins

• Of the Hidden Trade includes energy efficient and hazardous products

Spotting Greenwashing

• Stay specific, do your homework, check the jargon, inquire more.