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Edited by PAUL U. ALI and GREG N. GREGORIOU
John Wiley & Sons, Inc.
International CorporateGovernance After
Sarbanes-Oxley
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International CorporateGovernance After
Sarbanes-Oxley
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Edited by PAUL U. ALI and GREG N. GREGORIOU
John Wiley & Sons, Inc.
International CorporateGovernance After
Sarbanes-Oxley
ffirs.qxd 1/12/06 7:47 AM Page iii
Copyright 2006 by Paul U. Ali and Greg N. Gregoriou. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.Published simultaneously in Canada.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted inany form or by any means, electronic, mechanical, photocopying, recording, scanning, orotherwise, except as permitted under Section 107 or 108 of the 1976 United StatesCopyright Act, without either the prior written permission of the Publisher, or authorizationthrough payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc.,222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the web at www.copyright.com. Requests to the Publisher for permission should beaddressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street,Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online athttp://www.wiley.com/go/permissions.
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Library of Congress Cataloging-in-Publication Data:
International corporate governance after Sarbanes-Oxley / edited by Paul U.Ali and Greg N. Gregoriou.
p. cm.(Wiley finance series)Published simultaneously in Canada.Includes bibliographical references and index.ISBN-13: 978-0-471-77592-8 (cloth)ISBN-10: 0-471-77592-4 (cloth)1. Corporate governance. 2. United States. Sarbanes-Oxley Act of 2002.
3. Corporate governanceLaw and legislation. I. Ali, Paul U. II.Gregoriou, Greg N., 1956- III. Series.
HD2741.I589 2006658.4dc22
2005026054
Printed in the United States of America.
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www.wiley.com
For my parents.PUA
In loving memory of my father, Nicholas, and to my mom, Evangelia.
GNG
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Contents
Preface xi
Acknowledgments xiii
About the Editors xv
About the Authors xvii
PART ONEFramework of Corporate Governance
CHAPTER 1The Ethics of Corporate Governance: What Would the Political Philosophers Say? 3
Colin Read
CHAPTER 2The Politics of Symbolism: Sarbanes-Oxley in Context 9
Justin OBrien
CHAPTER 3Governance and Performance Revisited 27
yvind Bhren and Bernt Arne degaard
CHAPTER 4Corporate Governance as a Process-Oriented Approach to Socially Responsible Organizations 65
Marijan Cingula
CHAPTER 5The Impact of the New Corporate Governance Code on the Belgian Stock Market 95
Albert Corhay, Andree Dighaye, and Pierre-Armand Michel
vii
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PART TWOCorporate Governance and the Global Financial Markets
CHAPTER 6Improving the Corporate Governance of Hedge Funds 129
Greg N. Gregoriou, William R. Kelting, and Robert Christopherson
CHAPTER 7Corporate Governance Reform in Australia: The Intersection of Investment Fiduciaries and Issuers 137
Martin Gold
CHAPTER 8Corporate Social Responsibility and Fiduciary Investment in Australia 161
Paul U. Ali
CHAPTER 9Issuers Liability for Financial Information as an Instrument of Corporate Governance Enforcement 173
Clemens Vlkl
CHAPTER 10Investing in Death/Speculating on Mortality: Some Thoughts on Life Insurance Securitization 185
Paul U. Ali
PART THREEShare Ownership and Shareholder Control Rights
CHAPTER 11Ownership Structure Metrics 197
Stefan Prigge and Sven Kehren
CHAPTER 12The Effectiveness of Shareholders Meetings: An Overview of Recent Developments 223
Gregory F. Maassen and Darrell Brown
viii CONTENTS
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CHAPTER 13The Market for Corporate Control and the Implications of the Takeover Directive (2004/25) 267
Blanaid Clarke
PART FOURAccountability of Directors and Executives
CHAPTER 14Board Power Relations and the Impact of the U.K.s Combined Code on Corporate Governance 299
Timothy J. Nichol
CHAPTER 15CEO Compensation in Australias Largest Companies 319
Geof Stapledon
CHAPTER 16Directors and Officers Liability in France 337
Alain-Xavier Briatte and Michael Julian
CHAPTER 17Independent Directorship Systems in Greater China 359
Margaret Wang
PART FIVEResponsibilities to Stakeholders and Other Emerging Trends inCorporate Governance
CHAPTER 18The Primary Stakeholder Relationships: Corporate Governance and Value Creation 379
Andrea Beretta Zanoni
CHAPTER 19Family Ownership and Corporate Governance 399
Mara Sacristn-Navarro and Silvia Gmez-Ansn
Contents ix
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CHAPTER 20The European Social Model of Corporate Governance: Prospects for Success in an Enlarged Europe 423
Irene Lynch Fannon
CHAPTER 21Contract Negotiation and Internal Regulation Mechanisms in a Firm 445
Hubert de La Bruslerie
CHAPTER 22Prospects and Limits of Corporate Governance Codes 467
Bjrn Fasterling
CHAPTER 23Assessing the Effectiveness of Boards of Directors and Individual Directors 485
Richard Leblanc
References 525
Index 565
x CONTENTS
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Preface
This reader comprises an edited series of papers on the latest develop-ments in corporate governance worldwide following the introduction ofthe Sarbanes-Oxley Act in the United States. That Act has transformed cor-porate governance practices in the United States and has strongly influ-enced the development of corporate governance in the Asia-Pacific andEuropean markets discussed in the reader. Corporate governance remains atopic of keen interest not only for the accounting, financial, and legal sec-tors but also for the broader business and investor communities due to themeasures taken by regulators around the world in response to the highlypublicized collapses of Enron, Parmalat, and WorldCom and other ac-counting scandals and corporate fraud at Adelphia, Global Crossing,Merck, and Tyco. This is evident in the recent development of corporategovernance standards by professional organizations and societies, thegrowing trend for institutional investors to involve themselves in the gover-nance of the corporations that they invest in, and the increased regulatoryscrutiny of risk management regimes and other internal controls imple-mented by corporations.
This reader brings together experts on corporate governance who haveeach contributed papers on the impact of the Sarbanes-Oxley Act and leg-islation influenced by it on corporate governance worldwide. The reader isdivided into five parts. Part One provides the context for the current de-bate on corporate governance. It discusses the ethical and political under-pinnings of corporate governance and examines the relationship betweencorporate governance and economic performance and stock markets. PartTwo looks at the corporate governance aspects of transactions in theglobal financial markets, including the governance of hedge funds, and therole of institutional and other investors in corporate governance. PartThree deals with sha