49090731 anglo american model ppt 1

7/29/2019 49090731 Anglo American Model Ppt 1

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Corporate Governance Models

Anglo American German

Japanese

Indian


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Outsider and Insider Model

An outsider is a person or institution which has nodirect relationship with the corporation or corporatemanagement.

An insider is a person who is employed by thecorporation (an executive, manager or employee)who has significant personal or businessrelationships with corporate management.


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Outsider and Insider ModelInsider Outsider

Share Ownership Concentrated Dispersed

Voting Power High Concentration Low Concentration

Main Shareholders Families, Banks, othercompanies, Government

Institutional Investors ,Individual shareholders

Corporate ControlMarket

Low level of takeover High activity in corporatecontrol market

Information Private Public

Composition of BOD Large number of directorsappointed by the mainblock holder

Presence of outsidedirectors

Control on Management High Low


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January 24, 2007. Karl Kamb Jr., a former HP vicepresident of business development and strategy, fileda counter suit in U.S. District Court for the EasternDistrict of Texas against HP, former HP ChairmanPatricia Dunn and former HP attorney KevinHunsaker, saying that HP used the illegal tactic ofpretexting in order to obtain his private phonerecords. If true, this would indicate that HP's practice

of employing possibly illegal investigation tacticswent beyond an effort to find the source ofboardroom leaks.


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The counter suit is in response to a suit by HP's suitagainst Kamb, another former HP employee andByd:sign, a rival rival flat-screen TV company thatHP claims Kamb started while still working at HP. HPare seeking $100 million dollars as part of their lawsuit.

Included in the counter claim is the allegation that in2002, HP hired Katsumi Iizuka, a president of DellJapan until 1995, to supply information on Dell'splans to enter the printer business and that "seniorHP management" signed off on the payments toIizuka.


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The lawsuit alleged that HP CEO Mark Hurd,together with other senior executives and directorssold about $41.3 million of HP stock in a two-and-a-half week period in 2006, preceding HP's publicdisclosure about its involvement in a potentiallydamaging investigation. Hurd is said to have sold$1.4 million worth of stock options on August 25, thesame day he was interviewed by HP attorneys aboutthe company's investigation into news leaks.


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The lawsuit contends that the defendants sold sharesbecause they knew "the market's perception of HPwould be significantly damaged when (not if) themarket became aware of the full extent of distrustand acrimony among board members, the outlandishsmear campaign tactics the acrimony had spurnedand the illegality of the investigatory tactics beingused."


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The suit alleged that in addition to the sales of sharesby insiders, Hewlett Packard's board approved stockbuybacks of about $10 billion "to keep thecompany's stock price propped up while insiderswere selling."

HP responded by saying that the lawsuit "representsa transparent effort to exploit issues related to HP'srecent investigation for personal gain" and that "HPwill defend itself vigorously".


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On December 12, 2006, members of Congress BartStupak and John Dingell wrote asking Hurd toexplain his actions. In a December 21, 2006 reply(made public on January 19, 2007) Hurd states thathis August 25, 2006 sale of shares underlying100,000 options was made in the regular course ofan investment strategy, represented only 5 percentof his HP holdings, and did not cause the stock priceto decline.
http://heritageinstitute.com/governance/hp/hurdletter.htmhttp://heritageinstitute.com/governance/hp/hurdletter.htm


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In April 2005, the timing of Hurd's sale of NCR stockwas also questioned. Hurd was CEO of NCR fromMarch 2003 to March 2005. In that sale, Hurd made

$2.3 million by selling NCR stock in the two monthsprior to being named HP's CEO. Following theannouncement of Hurd's resignation from NCR,NCR's stock fell 17 percent to $31.40 a share.

In 2006, Hurd received $10 million dollars in directcompensation: $8.6 million dollars in bonuses and asalary of $1.4 million dollars.


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On a January 24, 2007 U.S. District Court Judge Michael

Schneider ordered Kamb to withdraw his counterclaimagainst HP and to resubmit it under seal. He also issueda restraining order barring parties in the case fromdiscussing the counterclaim allegations with the media.

HP Sued: Insider Trading and State Civil Suit - Did HPBosses Profit During the Scandal?

January 31, 2007. On November 30, 2006, a lawsuit

against HP was filed in state court in San Jose, Californiaon behalf of investors including a union pension fund


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Threatened California State Civil Suit Settled

December 7, 2006. California's Attorney General'sOffice announced that Hewlett-Packard will pay$14.5 million to settle a civil complaint it filed atSanta Clara County Superior Court - a complaint

filed at the same time as the settlement.


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In addition to the felony charges brought against fiveindividuals, California Attorney General Bill Lockyer,had earlier announced that he was considering acivil-suit against HP on the basis of damages

suffered by individuals who were spied upon andwhose phone records had been obtained bymethods that are the subject of the felony charges.


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Of the $14.5 million settlement, $13.5 million - willfund state and local investigations into privacy rights

and intellectual property violations, $650,000 is incivil penalties, and $350,000 will go to cover thestate's investigation and other costs.


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The settlement includes an agreement that HP will"finance a new law enforcement fund to fightviolations of privacy and intellectual-property rights,"and adopt corporate governance reforms.


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"With its corporate governance reforms, thissettlement should help guide companies across thecountry as they seek to protect confidential businessinformation without violating corporate ethics or

privacy rights." The attorney general added that thenew fund will help ensure that businesses will beheld accountable when they step across legalboundaries.


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Threatened California State Civil Suit ettled

As part of the settlement, HP will for five years:

Continue to employ a chief ethics and complianceofficer Expand the role of its chief privacy officer to review

HP's investigation practices Expand its employee and vendor codes to ensurethat they address ethical standards regardinginvestigations, and


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Retain an expert in the field of investigations to assist

the company's chief ethics officer with regard toinvestigations.HP recently appointed G. Kennedy Thompson, the CEOof Wachovia, as an independent director with theresponsibility for reviewing and reporting on HP'scompliance with legal and ethical requirements related to

investigations.


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Anglo American

Single Tier Board

Anglo-Saxon model where executive and non-executive

directors sit together

Chairman works closely with CEO, and there are board

committees for audit, remuneration and nomination


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Fig.1 : The Anglo-American Model

Company

Officers(Managers)

Board of Directors(Supervisors)

Legal/RegulatorySystem

Stakeholders

Creditors

Shareholders

Elect

Monitors &Regulates

Own

Stake in

Appoints &Supervises

Manage


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Continental European Model

Two tier Board

Continental European model where a Supervisory

Board consists solely of non-executives and alower level management board consists of full-timemanaging directors.

Supervisory Board totally independent frommanagement board.


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The German Model

Company

Management Board(Including LabourRelations Officer)

Supervisory Board

Employeesand Labour

Unions

Shareholders

Appoints and

Supervises

Appoint50%

Appoint50%

Manage


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The Japanese Model

Company

Executive Management(Primarily Board of Directors)

President

Supervisory Board(Including President)

MainBank

Shareholders

Provides Loans

elect

Ratifies thePresidentsDecisions

Consults

Manages

Provides Loans

Owns

Own

Provides Managers

Monitors & Acts inEmergencies


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Fig.4 : Indian Corporate Governance Model

External Environment

Government Regulations, Corporate Culture, Structure,Policies, Guidelines etc. Characteristics, Influences

Company Acts Depositors, Borrowers,

SEBI Customers and otherStock Exchanges External Stakeholders

Internal Environment

Company vision; mission, policies, norms

Internal AuditorsStakeholders Board of Directors

Proper governance Shareholdervalue

Corporate Governance Outcomes / Benefits to Society

Transparency

Investor protection Concern forcustomer

Healthy corporate sector development

CORPORATEGOVERNANCE

SYSTEM


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What Is Good Corporate Governance?

Obligation to society at large

o National Interest

o Political Non-alignment

o Legal Compliances

o Rule of Law

o Honest and Ethical Conduct

oCorporate Citizenship

o Ethical Behaviour

o Social Concerns

o Corporate Social Responsibility


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igation to investors

o Environment-friendliness

o Health, Safety and Working Environment

o Competition

o Trusteeship

o Accountability

o Effectiveness and Efficiency

o Timely Responsiveness

o Corporations Should Uphold the Fair Name of the Country

o Towards Shareholders

o Measures Promoting Transparency and Informed

Shareholder Participation

o Transparency

o Financial Reporting and Records


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Obligation to customers

o Quality of Products and Services

o Products at Affordable Prices

o Unwavering Commitment to

o Customer Satisfaction

Obligation to employees

o Fair Employment Practices

o Equal-opportunities Employer

o Encouraging Whistle Blowing

o Humane Treatment


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o Participation

o Empowerment

o Equity and Inclusiveness

o Participative and Collaborative Environment

Managerial obligation

o Protecting Companys Assets

o Behaviour Towards Government Agencies

o Control

o Consensus Oriented

o Gifts and Donations

o Role and Responsibilities of Corporate Board and Directors

o Direction and Management must be Distinguished

o Managing and Whole-Time Directors


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Johnson & Johnsons excellent Credo exemplarilyepitomises what an ideal corporate should aspire to be.

Our Credo

We believe our first responsibility is to the doctors, nurses and

patients,

to mothers and fathers and all others who use our products andservices.

In meeting their needs everything we do must be of high quality.

We must constantly strive to reduce our costs

in order to maintain reasonable prices.

Customers' orders must be serviced promptly and accurately.

Our suppliers and distributors must have an opportunity to make a

fair profit.


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We are responsible to our employees,the men and women who work with us throughout the world.

Everyone must be considered as an individual.

We must respect their dignity and recognize their merit.

They must have a sense of security in their jobs.Compensation must be fair and adequate,

and working conditions clean, orderly and safe.

We must be mindful of ways to help our employees fulfill their familyresponsibilities.

Employees must feel free to make suggestions and complaints.There must be equal opportunity for employment, development

and advancement for those qualified.

We must provide competent management,and their actions must be just and ethical.


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We are responsible to the communities in which we live and workand to the world community as well.

We must be good citizens support good works and charitiesand bear our fair share of taxes.

We must encourage civic improvements and better health and education.We must maintain in good orderthe property we are privileged to use,

protecting the environment and natural resources.

Our final responsibility is to our stockholders.Business must make a sound profit.We must experiment with new ideas.

Research must be carried on, innovative programs developed and mistakes paid for.New equipment must be purchased, new facilities provided and new products launched.


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Reserves must be created to provide for adverse times.

When we operate according to these principles,

the stockholders should realize a fair return.

Johnson & Johnson

Corporate Governance in India

Problems

o Inadequate Sanction and Enforcement.

o No clear demarcation of control mechanisms between

SEBI, DCA and Stock Exchanges.

o Lack of Professionalism of Directors

o Institutional Investors show poor commitment

o Indian boards are not professional

o Unindependent Independent directors

o Whistle Blower Policy not in place


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o Too many unlisted companies

o Accounting gimmicks

o Poor Shareholder participation

o Obliging auditors

o Soft State, lethargic judiciary, inefficient market regulator,

poor enforcement machinery, and a value system which is

indifferent to moral turpitudes.


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However things are improving now

o The market is competition driven

o Professional new players are coming in

o High growth in market capitalisation

o Well-focussed, well-researched portfolio investors

o Media influences

o Influence of banks and financial institutions

o Realisation among Indian companies of the benefits of

corporate governance and

o Impending Capital Account Convertibility will exert its ownpressure.

49090731 anglo american model ppt 1

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