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level: W10 Corporate governance across countries

Questions and Answers List

level questions: W10 Corporate governance across countries

Question	Answer
Managers, Employees and shareholders	Which are the three stakeholders that corporate governance circulates around?
Institutional investors, families, the state, other corporations, banks, employees, VCs etc	Name the different types of ownership
Is a company or organization. Usually invests in many companies with a diversified portfolio. Many are short term oriented and passive about influencing the company. Hedge funds, mutual funds, and endowments are examples of institutional investors. There are many institutional investors in the US.	"Institutional investors"
Long term oriented wealthy families that invest in companies. Conflict interest are less likely to happen because of the family relationship.	"Family ownership"
It is not unusal that they have other goals than profitability. State ownership varies a lot around the world with China and Russia having major ownership of all the publicly traded companies.	"State ownership"
Profit maximization is key. Several directors in the board that represents the corporation owners. Usual in Japan and South Korea.	"Ownership by other corporations"
The principals are the owners of a company. Principal=owner=shareholder	Conflict of interest may arise between the stakholders. Who is considered to be the "principal" in that dilemma?
The agent is the one representing the principals in managerial decisions. Agent=Manager(CEO)	Conflict of interest may arise between the stakholders. Who is considered to be the "agent" in that dilemma?
Agency problems	What is the term that defines conflict of interests between "agents" and "principals" called?
Managers need compensation (salary & bonus) for their work in order to sustain motivation towards shareholder goals. In Asia however where collectivism is in favor of individualism, media would make a big deal if a CEO received a substantial amount as a bonus.	How can agency problems be solved?
Since shareholders often are heterogeneous many different opinions coexist. The board members serves as representatives of each big shareholder so that their voices are heard. They should monitor the operations and be independent of each other.	What are the benefits with having a board of directors?
When another company aquires shares in the targeted company resulting in a majority ownership of the shares which grants the control of the company and its assets.	"Corporate takeovers"