ECONOMICS OF CORPORATE GOVERNANCE REFORM

This paper develops three basic economic principles for effective corporate governance: (1) information accuracy and timeliness, (2) management accountability, and (3) auditor independence. Accuracy and timeliness of information is critical to providing market participants with the data necessary to monitor and evaluate managers. Management accountability focuses on strengthening the incentives of managers to act in shareholders' interests and on increasing the likelihood and magnitude of punishment for wrongdoing. Auditor independence reduces the incentives and likelihood that auditors would give managers more leeway to undertake fraudulent or questionable acts.
The author provides a preliminary assessment of how well legislative reforms, such as the Sarbanes-Oxley Act, regulatory changes at the SEC, and private sector responses such as those from self-regulatory organizations like the NYSE and NASDAQ, conform to these economic principles. The paper concludes by commenting on current proposals from the SEC on "shareholder democracy" and emphasizing the importance of balancing private and public regulatory responses.     

CORPORATE GOVERNANCE AND ACCOUNTING MODELS OF THE REPORTING ENTITY

The IASC’s Framework (1989) allows a choice of accounting models when measuring financial performance. However, subsequent reports by the G4+1 focus exclusively on the version of the Assets−Liabilities=Equity model pioneered by the[16], [17]. Sub-components of income, such as operating income, are acknowledged as important but these are treated as matters for display and are not conceptually defined. The issue of model choice has assumed increased importance following the decision of the EU to require the group accounts of listed companies to comply with International Accounting Standards by 2005. In this paper the emerging literature that links styles of corporate governance to financial and legal systems and then to economic performance is extended to consider the role of accounting model choice. The issue of accounting for non-reciprocal transfers, in particular, government grants, is used to illustrate the reduction in the relevance, reliability and comparability of financial statements that result from the failure to provide a conceptual definition of performance at the level of operating profit. Compliance with UK disclosure requirements for government grants following the 1981 Companies Act is investigated and differences in the corporate governance, financial, legal and accounting systems of Germany, a code law country, and the UK, a common law country, are reviewed. To serve the interests of investors in all jurisdictions and the information requirements of different styles of corporate governance it is recommended that different accounting models be applied to measure operating income and shareholder income in a single income statement.     

公司治理中的“激励不足”和“激励不到”

我国以建立现代企业制度为目标,逐步引入了一系列公司机制,取得了相当的成绩,但同时有一些机制尚未有效运转,从而影响了公司治理机制的效果。从制度的引入、制定到真正发挥作用,需要一定的时间,我们不能忽视现存的两个问题,那就是“激励不足”和“激励不到”。因为“激励不足”     

EXECUTIVE COMPENSATION STRUCTURE AND CORPORATE GOVERNANCE CHOICES

Using data that reflect the significant growth in incentive compensation during the last decade, we extend research in this area by specifying a more complete model that addresses both corporate governance and risk‐sharing factors that theory suggests should influence compensation policy. We find that the extent of incentive compensation is systematically related to other features of corporate governance, as well as to factors affecting managerial risk aversion. The results support the following conclusions: (a) the presence of outside directors and blockholders facilitates the use of incentive compensation, (b) incentive compensation is inversely related to use of leverage, and (c) the incentive pay component of compensation is lower for CEOs near or at retirement age and is decreasing in the percentage of firm stock already owned by the CEO. JEL classification: G34     

CORPORATE GOVERNANCE, ETHICS, AND ORGANIZATIONAL ARCHITECTURE

Effective corporate leadership involves more than developing a good strategic plan and setting high ethical standards. It also means coming up with an organizational design that encourages the company's managers and employees to carry out its business plan and maintain its ethical standards.
In this article, the authors use the term organizational architecture to refer to three key elements of a company's design:

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  the assignment of decision-making authority–who gets to make what decisions;

       
  
  

CORPORATE GOVERNANCE, EVA, AND SHAREHOLDER VALUE

Together with corporate governance expert Stuart Gillan, the managing partner of Stern Stewart discusses important issues of corporate financial management, including the fundamental objective of the public corporation and how boards of directors can achieve it. Whereas financial economists have long argued that the corporate goal is the maximization of firm value, Stern advocates a variation of the concept known as "Market Value Added"–one that is designed to discourage corporate growth and capital raising that does not end up adding value for shareholders. To accomplish this goal, he emphasizes the importance of incentive compensation systems tied not to accounting earnings, but to a measure of economic profit like EVA. And, as Stern argues in closing, EVA-based incentive systems are likely to be effective not only in the private sector, but in increasing the efficiency and value of state-owned enterprises. Indeed, such systems could bring about a new kind of employee capitalism that ESOPs promised, but have largely failed, to deliver.