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2014 | Buch

Corporate Governance

An International Perspective

herausgegeben von: Samuel O Idowu, Kiymet Tunca Çaliyurt

Verlag: Springer Berlin Heidelberg


Über dieses Buch

This book brings together a representative collection of perspectives on the way how corporate governance is being aligned with the social responsibility of an organization and the accountability of its management both in large corporations and in medium sized businesses. Examples are given from various industries and branches as well as from different countries and regions across the globe. All examples are commented and explained in detail. Written by a group of selected academic teachers this book is suitable for adoption as a resource for a case driven approach to teaching "Corporate Governance" courses at an upper undergraduate or graduate level.



Corporate Governance in Europe

Chapter 1. Accounting for Citizenship: Best Practices of Corporate Governance in Portugal
Accounting for citizenship focuses on citizens’ best interest to include both protecting their future financial well-being and ameliorating some of the harsh projections of what the world might look like for future retirees (Williams and Conley, Cornell Int Law J 38:493–551, 2005) and increasingly pressure the company strategic decisions to invest in sustainable practices (Aguilera et al., Corp Gov 14:147–158, 2006) and the better functioning of corporate governance (Aguilera and Cuervo-Cazurra, Corp Gov Int Rev 17:376–387, 2009).
The theoretical part of the research presents a comparative synopsis of the organizational and legal issues of corporate governance in Portugal. Also, different research streams have been investigated to show the role of corporate governance in the citizens’ perception. The empirical part of the research is centered on the annual inquiry of the Portuguese Securities Market Commission, since 1999 till 2011, and on the disclosure of annual reports of listed companies. The results show an important impulse of the disclosure as well as exploration of convergence and divergence on recommendations.
Also, it has been noted that better information reduces the asymmetric information and allows each citizen to understand accounting and corporate governance better. But, this evidence did not establish causality and much more work needs to be done because multiple issues will update recommendations of codes of corporate governance. In this sense, this research demonstrates that monitoring the disclosure practices is an essential task to ensure the informative value of corporate governance report and, thus, the corresponding added value for investor protection.
The findings are consistent and it is urgent that the company, in general, and the citizen, in particular, must promote corporate governance report with full citizenship rights, fighting anomalies or misunderstandings, and encouraging appropriate corporate behavior. However, to the best of the understanding of these authors, the role of corporate governance has not been previously emphasized in accounting for citizenship.
Rute Abreu, Fatima David
Chapter 2. Corporate Governance in Greece
The era of huge profits has gone for most businesses therefore companies nowadays should not waste resources. Within this context, the adoption of effective corporate governance codes is not a luxury, but a challenge and necessity. Corporate governance and internal audit functions within Greek enterprises are imposed by the Greek laws for publicly listed enterprises. In this paper, we examine the current status of the implied corporate governance code in Greece compared with those of South Africa (King Report) and United Kingdom (Combined Code). Both codes are considered as advanced to issues related to corporate governance and internal controls.
The first edition of King Code was published in 1994. The novelty of the corporate governance of South Africa was the issues of sustainable development. In contrast with other editions of King Report, King III Report is obligatory for all the companies of South Africa. The United Kingdom is a country with a free market economic system, which does not wish intervention by the state. The Combined Code is a predominant corporate governance code in the UK as has adopted many provisions from the previous UK corporate codes. The Financial Reporting Council (FRC) is now responsible to update the Combined Corporate Code.
After analyzing the relevant literature review, as well as the details of the codes we are analyzing whether any provisions of the above corporate codes could be implemented in the Greek publicly listed enterprises. The importance of the provisions of the international governance codes is then evaluated by members of the boards of directors and the relevant audit committees, as well as Internal and External Auditors on a small sample basis.
Specifically, our research is based on a case study analysis of six publicly listed enterprises. Three of them are traded in the high capitalization index of the Athens Stock Exchange, while the remaining three are traded in the medium – low capitalization index. Our main research objective is to examine the extent of international corporate governance codes impact in the local laws and regulations, as well as adopted best practices. Also, our secondary research objective is to evaluate the extent of the impact of corporate governance best practices among large and medium-low size publicly listed enterprises. Each selected enterprise represents a different industry.
Andreas G. Koutoupis
Chapter 3. Corporate Governance: Polish Lessons from the Global Financial Crisis
The current economic crisis, resulting from the credit crunch has had a major impact on the global economy and companies. Both national governments and companies were forced to react in order to avoid significant financial problems. So far the Polish economy has proved to have successfully overcome the crisis experiencing an economic slowdown with a GDP growth of 1.7 % at the end of 2009; however several problems in reagard to corporate governance have surfaced. This chapter discusses the characteristics of the Polish corporate governance system and its shortcomings. The central question refers to the activities undertaken by listed companies and regulators, in particular the direction of corporate governance development. The chapter analyses three corporate governance problems of Polish listed companies which were identified as being due to the global financial crisis. These problems include risk management, majority shareholders practices and liquidity problems. The analysis reveals the dynamics of corporate governance development from the perspective of an economy in transition. The Polish governance system has experienced significant improvement over the last 10 years supported by the EU law harmonisation process and market pressure to comply with the best practice code. However, the control standards remain lower as compared to Western Europe and the US, which proved to be significantly visible during the period of the world financial crisis.
Maria Aluchna
Chapter 4. Corporate Governance in the Banking Sector of the Republic of Macedonia
The aim of this chapter is to provide a comprehensive analysis of the corporate governance in the banks in Macedonia and some recommendation for strengthening corporate practices of banks.
The banks in Macedonia have crucial importance in financial intermediation in the economy. Given the prevailing role of banking institutions as a source of finance in Macedonia, the good corporate governance of banks is of the utmost importance. By the implementation of good corporate practices the banks become more efficient, transparent, safe and attractive to investors.
Macedonian banking law defines the framework for corporate governance in banks. However, the largest significance for the establishment of good corporate practices is the adoption of special by-laws for the basic principles of the corporate governance in a bank. There are eight principles, which will be analyzed in this chapter. The principles more clearly define standards for good corporate governance and seek to strengthen the control role of the management, adequate risk management and effective internal control systems and enhance role of internal audit. Improvement of corporate governance will contribute to the creation of a better, stronger and more sustainable banking system in the country. Strengthened corporate governance in banks remains an important objective for the development of the financial sector and the real economy.
Evica Delova-Jolevska
Chapter 5. Corporate Governance in Italian Listed Companies
In the past few decades a growing number of research studies have investigated the effect that insider ownership has on other corporate governance variables like the risk of expropriation for the minor shareholders, the demand for outside directors, etc. An increasing number of studies have analyzed the relationship between insider ownership and corporate performance in Anglo-Saxon countries, Continental Europe and emerging economies.
Regarding Italy, previous studies on corporate governance have highlighted that a listed company featured by concentrated ownership is likely to have a high incidence of insider shareholders representation on the board. This context might enhance an agency conflicts between large controlling shareholders and other stakeholders like minority shareholders and other outside investors. In this case the presence of an adequate number of non executive and independent directors as well as a functioning board’s committees appear to be fundamental to counterbalancing the power exercised by owner-managers (or by managers-owner) and reduce the risks of private benefits exploitation. The recent changes in Italian normative requirements goes in this direction and recommend the introduction of mechanisms like the presence of independent directors, the CEO duality, the audit and remuneration committee that are not in line with the traditional corporate governance systems of Italian company but might reinforce the level of protection for outside stakeholders.
Basing on the aforementioned considerations, the researchers intend to analyze if and how Italian listed companies have changed their governance model to incorporate the new corporate governance rules. A specific focus regards the interaction of insider owners and outsider directors that seem to be a critical factor for the effectiveness of the corporate governance system in Italian context where lots of listed companies are controlled by a family/individual.
The theoretical part of the research analyzes the institutional context in which Italian listed companies operate and how it has changed in the last decade and the main research streams that have investigated the interaction between the inside ownership and the outsider directors.
The empirical part of the research is based on the analysis of the data collected through an empirical survey of companies listed to Milan Stock Exchange. A total of 145 corporate governance reports (corresponding to about 60 % of the total non-financial listed companies) issued in the period 2006–2010 has been investigated.
Some features observed like ownership structure, insider ownership remained the same over the period analyzed while other variables like the percentage of outside shareholders (like hedge funds), the proportion of independent directors, the number of the audit committee meetings changed noticeable.
Overall, the results show that the increasing of monitoring mechanism (like a high proportion of independent directors) during the period observed could contribute to reduce the risk of insider opportunistic behaviour.
Giuseppe D’Onza, Giulio Greco, Silvia Ferramosca
Chapter 6. Good Governance in Customs: The Case of the Republic of Macedonia
The complexity of the economic and social global and regional impacts considerably influences not only the business sector, but the national governmental authorities, as well. As public service providers, governments should discover new methods and paths to manage their activities in national social developments. There are several concepts that elaborate public management. One of the most prominent concepts is the good governance, which was established in the early 1990’s. There is no generally accepted definition of good governance and usually it is defined mainly by emphasizing its core principles. Most governments present good governance as an important objective for reform of judicial systems, public administration reform, anti-corruption, decentralization, and public expenditure management. The Customs administrations are core governmental institutions directly involved in international economic relations. As a governmental institution mainly tasked to control and to facilitate trade, Customs administrations had to modernize their management structure and organization, complying with national and international trade and customs regulations. This paper is dedicated to the specifics of good governance in Customs, with a special emphasis on the Macedonian Customs Administration’s experience. Generally, the implementation of customs risk management and its usage in customs simplifications in the Macedonian Customs Administration (MCA) will be analyzed.
Jovanka A. Biljan
Chapter 7. Transparency and Disclosure: Public Company Reporting and Corporate Inputs
International capital markets seek to achieve investor confidence through corporate governance mechanisms. Transparency and disclosure is one of the most important aspects of corporate governance which becomes more important every single day as global business applications spread all over the world and information needs of owners, investors, creditors and other interest groups to businesses increase. In the first part of the study a framework for disclosures is provided by classifying public company reports into four main categories which are financial reports, annual reports, securities exchange commission filings and corporate social responsibility reports. Each report category is discussed in light of the attributes of disclosed information, recent regulations, reporting trends and practices. In the second part, the concepts of transparency and full disclosure are studied and analyzed through perspectives of board of directors, members of internal control (audit) committee and external auditing function. Through literature review, we note that having independent members on board and the audit committee seem to be the most important aspect promoting transparency and full disclosure practices. In addition, number of meetings held and financial literacy of the board and audit committee members are questioned and they seem to have some impact on transparency and full disclosure as well. However, having independent outsiders on corporate boards and audit committees seems to be the most important feature of sound corporate governance applications.
Ebru Esendemirli, Arikan Tarik Saygili

Corporate Governance in Africa

Chapter 8. Corporate Governance Reform in Egypt: Achievements and Challenges Ahead
In the recent years, Egypt has committed itself to reform corporate governance, this was urged to increase investors’ confidence in the Egyptian business environment and accordingly attract more foreign investment. So far many developments have taken place regarding corporate governance reform but still many challenges do exist. This paper offers an analytical account of evolution of corporate governance in Egypt, and identifies the main deriving forces of this reform and the challenges ahead. Overall, this paper contributes to literature on international corporate governance, and offers policy makers the understanding that can better guide corporate governance reform in the future.
M. Karim Sorour
Chapter 9. Corporate Governance in Tanzania
Interests in corporate governance have been stimulated by a number of factors, among which include the collapse of major corporations such as the Bank of Credit and Commerce International (BCCI), the Maxwell Empire, Ferranti, Coloroll, British & Commonwealth Holdings in the UK; Enron, WorldCom and other major corporations in the US in 2002 as well as the Asian economic crisis. In Tanzania, corporate governance practices have been debated in the context of state ownership as well as corporate scandals such as EPA, MEREMETA, DOWANS and RICHMOND from 2000 to 2008. These have raised the profile of corporate governance both nationally and internationally. The chapter aims at exploring corporate governance in Tanzania. The study employs cross-sectional literature review to explore corporate governance current status both in the public and the private sector. The findings reveal that in Tanzania there is corruption (embezzlement, nepotism) managerial incompetence, political interference and government subsidisation of failing enterprises. Despite the fact that, the government has gone through several reforms to establish an effective system of corporate governance. The development of Tanzanian’s own national code of corporate governance, CSMA, and bank corporate governance guidelines marked an important milestone in the commitment towards sorting out and rescuing the situation. By accumulating knowledge of, and recommending continuous improvements in corporate governance, this study hopefully will be of interest in the attempt to create awareness amongst Practitioners, Researchers, Academics, Politcians, Investors and the nation at large which in turn will help to improve the country’s competitiveness in attracting foreign investments, as well as encouraging local entrepreneurs to invest.
Samuel E. Fulgence
Chapter 10. Corporate Governance Breach: An Overview of the Owner-Manager Agency Problem in the Nigerian Banking Industry
The effects of a breakdown in the principal/agent relationship in the Nigerian financial services industry, especially in the banking sector, cannot be overemphasized. The required alert is due to the fact that this type of industry requires that there must be trust between the principal and the agent who is making decisions on behalf of the principal’s financial investment in the business environment. This paper analyses the agency problem that surfaced in the Nigerian banking sector, following the recapitalization exercise that took place in the industry in 2006. The study found that, to a large extent, the breakdown in the corporate governance code was a major cause of the crisis. The paper also examines the various ways the regulatory agencies responded to the problem and the measures that are being instituted to forestall a reoccurrence.
Abubakar Sadiq Kasum, Oyebola Fatima Etudaiye-Muthar

Corporate Governance in Asia

Chapter 11. Governance Structure and Practice in Malaysia: Board of Directors’ Role and Responsibilities
The Malaysian government has established a strong regulatory framework that underpins the national corporate governance (CG) ecosystem through local rules, regulation and best practices. Following that, this paper seeks to explore the CG compliance – governance structure and practices – of public listed companies in Malaysia. Particularly, this paper investigates the Board-related structure and practice which comprise of board size, board composition, board committee, CEO duality, multiple directorships, board meeting and the age limit for director. Content analysis was used to collect the CG related information of the top 100 companies via their annual reports. The information disclosed was then analyzed against the four key Malaysian CG-related requirements, namely; Companies Act 1965, BM CGG, MCCG and the CG Blueprint 2011. It was found that the board size of the Malaysian companies is appropriate and manageable, with majority of the companies complying with the requirements pertaining to the appointments of INED. Additionally, many companies favor for the separation between CEO and Chairman of the Board in governing their businesses. The companies also regard multiple directorships as a ‘healthy’ practice; and that their practices in conducting board meeting also in comply with the referred requirements. This study also found that all companies had appointed some of their BODs with the age ranging between 50 and 69. Overall, these findings put forward an insight that majority of the Malaysian companies studied complied beyond the minimal requirement of CG.
Normahiran Yatim, Haslinda Yusoff
Chapter 12. Corporate Reputation: A Definitional Landscape
Corporate reputation in recent times has continued to become very important in business and it, today, plays more decisive role in sustaining the growing presence of organizations in their many markets in terms of their future survival. The reputation of a company is shaped, developed or lost during its operations in its community and market. The reputation of a corporate entity, affects that entity’s activities and many other organizations it interacts with. Therefore, to gain a sustainable reputation over time and avoid the loss of reputation, maintaining good reputation should be considered as an important factor which will contribute to the organisation’s value creation ability. In contrast to the popular belief, any of loss of reputation by an entity will not be easy to gain back or compensate for. This study presents a discussion of corporate reputation, fundamental concepts that are found in the literature and the rising importance of reputation in today’s corporate changing environment.
Melisa Erdilek Karabay
Chapter 13. Ethical Dilemmas and Decision Making in Accounting
Accountants have a crucial role to play in today’s global business life as they are key providers of financial information to investors, lenders and other stakeholders of companies. They are expected to maintain records of reliable and trustworthy information and also to behave in responsibly while carrying out their professional duties. On another hand, the recent financial reporting scandals indicate that like other professions, accountants also can face ethical dilemmas and behave unethically (which has resulted in the loss of reputation for some accountants and almost damaged the profession to a serious extent). Another issue is decision making in accounting which has some ethical dilemmas, a situation requiring more than just technical competence. For this reason, an understanding of the ethical decision making environment in which accountants function is important. In this study, the importance of ethics in the area of accounting, the ethical dilemmas and ethical decision making process which accountants confront are discussed extensively in order to enable our readers to understand the issues and suggest responsible solutions for dealing with them.
Arzu Ozsozgun Caliskan, Halil Emre Akbas, Emel Esen
Chapter 14. The Impact of Corporate Characteristics on Social Responsibility and Environmental Disclosures in Turkish Listed Companies
Corporate social reporting proposes several advantages to corporate entities of our time, for instance; it enhances an entity’s image and position, and it strengthens community relations, and legitimizes the entities of activities. This study seeks to explore the nature and extent of the corporate social and environmental reporting (CSER) practices of manufacturing companies listed on the Istanbul Stock Exchange. The study also examines the impact of the corporate characteristics on the CSER disclosures of these listed companies. The sample of the study consists of manufacturing companies listed on the Istanbul Stock Exchange (ISE) in 2010. The related data was collected by adopting content analysis of annual reports of the constituent companies. The relationship between the CSER disclosures with corporate characteristics was investigated with multiple regression analysis. The model includes a dependent variable (i.e. corporate social and environmental reporting index) and eight independent variables (i.e. firm size, profitability, leverage, auditor size, ownership structure, proportion of independent directors on board, listing age, and industry). The contribution of this paper to the literature is of great importance, because there is no prior study in Turkey that has dealt with the relationship between the firm characteristics and corporate social responsibility and environmental reporting disclosure level to this extent.
Merve Kılıç, Ali Uyar
Chapter 15. Corporate Governance and Earnings Management: Quarterly Evidence from Turkey
In 2003, following other developed and developing economies, the Capital Markets Board of Turkey (CMB) issued Corporate Governance Principles, in order to improve the board structure, increase shareholders rights, and enhance financial reporting quality through public disclosure and transparency in order to raise public confidence in, and restructure the Turkish capital market. One of the central issues in corporate governance is that there is no unique definition of good corporate governance practices that fit with the needs of all jurisdictions or firms. Considering Turkey’s legal environment, the effectiveness of corporate governance principles in the country is of utmost importance. The CG principles developed in the country were adapted from Corporate Governance Principles of the OECD, which is a subject of debate in terms of enhancing the firm value. Therefore, this chapter aims to present the role of corporate governance on the quality of reported earnings of the ISE listed firms. Overall, the results indicate that the role of the board on quarterly earnings management in Turkey is highly contradictory and it is related to the direction of earnings management and external audit conducted by the Big-4 accountancy firms. Therefore, as a further policy implication, the corporate governance structure of Turkish firms should be strengthened by new regulations taking into account the needs of Turkish firms and the nature of the business culture in the country.
Yasemin Zengin Karaibrahimoğlu
Chapter 16. Current Board of Directors’ Practices in Saudi Corporate Governance: A Case for Reform
This chapter examines the current board of directors’ practices in Saudi corporate governance. It highlights a variety of significant aspects of boards of directors, as internal institutions of the corporate governance system. For example, the chapter contains details of the board members’ duties, the boards’ responsibilities and creation of standards, the separation of the board members’ powers, board membership categories, board meetings, board sub-committees (such as audit committees and nomination and remuneration committees) and board members’ compensations. All these aspects are referenced from the Corporate Governance Code (hereafter CGC), the Company Law (hereafter CL) and the case law connected to them. The paper’s methodology is analytical and adopted a comparative approach with the successful international corporate governance codes, such as the OECD principles of corporate governance, the UK Companies Act, the Cadbury report and the Greenbury report, in order to reform the board of directors’ practices in the Saudi corporate governance framework.
Faleh Salem Al Kahtani
Chapter 17. Heading Towards Good Governance: A Case Study of the Chinese Commercial Banks
Chinese banking industry has experienced significant improvements over the last few years. These developments not only reflect on the industrial structure as a whole, but also on the level of performance of individual banks. Examining the development of the Chinese banking industry; corporate governance, as a major concern, has simultaneously evolved. Given the rapid development of the financial system, and the lack of relevant laws and regulations, corporate governance of the Chinese banking industry still needs to be further enhanced; in particular, further improvements of corporate governance have been hindered by various existing problems in this area; for instance, the incomplete legal framework, inefficient enforcement structure and a weak corporate disclosure regime. This Chapter, taking Chinese commercial banks as the example, aims to examine the relevant issues of corporate governance. Firstly the Chinese banking industry is studied. Following that, the regulatory frameworks for commercial banks and the banking regulators are introduced. Thirdly, approaches adopted by the Chinese banking sector to enhance corporate governance are examined in detail. Finally, a conclusion is drawn based on the observation of this research.
Jing Bian

Final Words

Chapter 18. Corporate Governance: An International Perspective the Summing Up
Putting in place a good system of governance is part of the actions taken by modern corporate entities to ensure a culture which encourages sustainable business. The issue of a good system of governance has become extremely important globally over last 20 or so years simply because of the incidence of some socially unacceptable practices which were going to totally erode investors’ confidence in financial reporting, for example financial fraud, economic crises, false accounting etc. which has resulted in the need for shareholders’ rights and interests to be protected. Since any failure in taken responsible actions in this regard would undoubtedly make it impossible for businesses to expand and grow, understandably investors would be wary to invest in the global capital markets and listed companies run and managed by non-owner directors.
Kiymet Tunca Caliyurt, Samuel O. Idowu
Corporate Governance
herausgegeben von
Samuel O Idowu
Kiymet Tunca Çaliyurt
Springer Berlin Heidelberg
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