Corporate Governance

The new edition of this successful text offers an indispensable guide to the key concepts of corporate governance every student and business professional should know. It includes more exercises and student questions, penetrating analysis of the latest examples of corporate failure and controversy, and the lively "cases in point" which have characterized previous editions.



Features 16 case studies of corporations in crisis, including General Motors, American Express, Time Warner, IBM, and Premier Oil

Contains an invaluable web link to The Corporate Library, the leading independent research firm dedicated to corporate governance

Includes an Appendix with an overview of CG Guidelines and Codes of Best Practice in Emerging Markets

Robert A.G. Monks and Nell Minow are founders of The Corporate Library, the leading independent research firm dedicated to corporate governance. Formerly principals of the Lens Fund and officers of Institutional Shareholder Services, Monks & Minow have also collaborated on two other books: Power and Accountability and Watching the Watchers.

Acknowledgements.
Introduction.
1. What is a Corporation?.
Evolution of the Corporate Structure.
The Purpose of a Corporation.
Human satisfaction.
Social structure.
Efficiency and efficacy.
Ubiquity and flexibility.
Identity.
Metaphor #1: The Corporation as a “Person”.
Metaphor #2: The Corporation as a Complex Adaptive System.
Are Corporate Decisions “Moral?”.
Who can Hold Corporations Accountable?.
Two Key External Mechanisms for Directing Corporate Behavior.
Government: Legislation, Regulation, Enforcement.
What does “Within the Limits of the Law” Mean?.
The top 10 Corporate Criminals of the 1990’s.
Probation of corporations.
How can a corporation be sentenced to probation?.
Securities analyst settlement.
What is the role of shareholders in making this system work?.
Should shareholders pay the fine? Which ones?.
Co-opting the Market: Corporations and Government.
The Corporation and Elections.
The Corporation and the Law.
A Market Test: Measuring Performance.
Long-term vs. short-term.
Corporate Decision-Making: Whose Interests Does this.
“Person”/Adaptive Creature Serve?.
Measuring Value Enhancement.
GAAP.
Market value.
Earnings per share.
EVA: economic value added.
Human Capital: “It’s not what you own but what you know”.
The “Value Chain”.
Knowledge capital.
The value of cash.
Corporate “externalities”.
Equilibrium: The Cadbury Paradigm.
Quantifying Non-Traditional Assets and Liabilities.
Future Directions.
2. Shareholders: Ownership.
Definitions.
Early Concepts of Ownership.
Early Concepts of the Corporation.
A Dual Heritage: Individual and Corporate “Rights”.
The Reinvention of the Corporation: Eastern Europe in the 1990s.
Of Vouches and Values.
The Evolution of the American Corporation.
The Essential Elements of the Corporate Structure.
The Separation of Ownership and Control, Part 1: Berle and Means.
Fractionated Ownership.
The Separation of Ownership and Control, Part 2: The Takeover Era.
Waking the Sleeping Giant.
A Framework for Shareholder Monitoring and Response.
Ownership and Responsibility.
No innocent shareholder.
To Sell or Not to Sell: The Prisoner’s Dilemma.
Who the Institutional Investors Are.
Bank trusts.
Mutual funds.
Insurance companies.
Universities and foundations.
Pension plans.
The Biggest Pool of Money in the World.
Pension plans as investors.
Pension plans as owners.
Advantages.
Disadvantages.
Public Pension Funds.
Divestment initiatives.
Economically targeted investments.
AFSCME.
Proxy access.
Shareholder approval of summary compensation table.
Independent chairman.
Binding majority vote standard.
Solicitation expenses.
Board Declassification.
Equity compensation holding policy.
Performance-based restricted stock.
Climate change risk report.
Federal employee retirement system.
TIAA-CREF.
Private Pension Funds.
The Sleeping Giant Awakens: Shareholder Proxy Proposals on.
Governance Issues.
Focus on the Board.
Hedge Funds.
Synthesis: Hermes.
Investing in Activism.
New Models and New Paradigms.
The “Ideal Owner”.
Public Policy Submissions.
Pension Funds as “Ideal Owners”.
Is the “Ideal Owner” Enough?.
3. Directors: Monitoring.
A Brief History of Anglo-American Boards.
Today’s Typical Board.
Size.
Inside/Outside mix.
Diversity.
Meeting frequency/committees.
Audit committees.
Ownership/compensation.
Post S-Ox changes.
Board Duties: The Legal Framework.
The Board-Management Relationship.
Information Flow.
The Years of the Corporate Scandals.
Director Information Checklist.
The CEO-Chairman.
Catch 22: The Ex-CEO as Director.
CEO Succession.
Director Nomination.
Director Compensation.
Interlocks.
Time and Money.
The Director’s Role in Crisis.
“Independent” Outside Directors.
Director Election.
Staggered boards.
Confidential voting.
Impact of the Takeover Era on the Role of the Board.
The Fiduciary Standard and the Delaware Factor.
How did boards respond?.
Greenmail.
“Poison pills”.
Other anti-takeover devices.
Future Directions.
Majority voting and proxy access.
Improving director compensation.
Increasing the authority of independent directors.
“A market for independent directors”.
“Designated director”.
Board evaluation.
Executive session meetings.
Succession planning and strategic planning.
Market directors genuinely “independent”.
Involvement by the federal government.
Involvement by shareholders.
4. Management: Performance.
Introduction.
What Do We Want from the CEO?.
The Biggest Challenge.
Executive Compensation.
Stock Options.
Restricted Stock.
Shareholder Concerns: Several Ways to Pay Day.
The “guaranteed bonus” – the ultimate oxymoron.
Deliberate obfuscation.
The Christmas tree.
Compensation plans that are all upside and no downside.
Loans.
Accelerated vesting of options.
Manipulation of earnings to support bonuses.
Huge disparity between CEO and other top executives.
Imputed years of service.
Excessive departure packages.
Backdating, bullet-dodging and spring-loading options.
Phony cuts.
Golden hellos.
Transaction bonuses.
Gross-ups and other perquisites.
Retirement benefits.
Obstacles to restitution when CEOs are overpaid.
Future Directions for Executive Compensation.
CEO Employment Contracts.
Cause.
Change of control.
Half now, half later.
CEO Succession Planning.
Sarbanes-Oxley.
Creation of the public company accounting oversight board.
Section 404.
Other changes.
Employees: Compensation and Ownership.
Four reasons for employee ownership.
Employee Stock Ownership Plans.
Mondragon and Symmetry: Integration of Employees,.
Owners and Directors.
Conclusion.
5. International Corporate Governance.
Capital Restructuring and Ownership Structure.
Corporate Governance Improvements.
The Results.
The Institutional Investor as Proxy for the Public Interest.
Norway in the Driver’s Seat.
The International Corporate Governance Network.
The Global Corporate Governance Forum.
Sweden.
Canada.
Singapore.
Enhanced value engagement: Isetan.
Company profile.
Relevant corporate governance features of Singapore.
The importance of the Isetan Singapore engagement.
Issues at Isetan.
Actions.
Outcomes.
Russia.
Germany.
China.
Japan.
GMI.
Developed Markets Not Immune to Governance Weaknesses.
Ratings Changes and Stock Performance.
Management Processes.
World Bank and G7 Response.
Azerbaijan.
Slovakia.
Jordan.
Thailand.
Poland.
Key Recommendations.
The GCP.
A Common Framework for Sustainability Reporting.
2006 Results.
Looking Ahead.
Relative Sector Performance.
Background.
Towards a Common Language.
Vision.
6. Case Studies: Corporations in Crisis.
General Motors.
General Motors and Pierre de Pont.
General Motors: What Went Wrong?.
General Motors and Ross Perot.
General Motors after Perot: Smith and Stempel.
General Motors: A Postscript.
American Express.
Time Warner.
Sears, Roebuck & Co.
Diversification Strategy: The Fate of Retail.
Sears: A Postscript.
Armand Hammer and Occidental Petroleum.
Polaroid.
Polaroid’s ESOP: Delaware Sits in Judgment.
Carter Hawley Hale.
Hostile Takeover.
After the Restructuring.
Eastman Kodak.
Waste Management Corp.
Gold into Garbage.
Lens and Soros.
The Soros Effect.
Restructuring.
What Went Wrong?.
Waste Management: A Postscript.
Stone & Webster.
Stone & Webster: The Company that Built America.
Postscript.
Mirror Group/Trinity Mirror.
January 1999.
July 1999.
September 2000.
June 2001.
February 2002.
September 2002.
Adelphia.
What happened?.
Arthur Andersen.
Andersen Consulting.
A Conformist Culture.
Who Watches the Watchers?.
Corporate Governance.
Hubris.
Tyco (by Robert A.G. Monks).
WorldCom (by Beth Young).
Growth by Acquisition.
WorldCom’s Board of Directors.
WorldCom’s Auditor.
Gerstner’s Pay Package at IBM.
The Anatomy of a Contract.
Premier Oil – Shareholder Value, Governance and Social Issues.
Index.
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