Corporate governance is not limited exclusively to relations between investors and managers but also involves consideration of interests and active cooperation with persons who are interested in the company’s activities (employees, consumers, creditors, the state, etc.). Corporate governance is one of the determining factors in making investment decisions. More than 80% of investors say they are willing to pay more for shares of companies with good corporate governance compared to companies with poor governance. Corporate governance increases investment attractiveness, helps attract long-term investors, lowers the cost of lending, and increases the company’s market value.
The Purpose of Corporate Governance
Corporate governance is a system of organizing and controlling the activities of a financial institution, which provides for the distribution of powers between the supervisory and executive bodies of the financial institution, the transparency of decision-making procedures and control over their implementation, the proper exchange of information between the supervisory and executive bodies of the financial institution, and ensures a balance of the interests of consumers of financial services, shareholders (participants), members of the supervisory and executive bodies of the financial institution, other interested parties. The main purpose of corporate governance is to ensure honest and transparent activities in the provision of financial services, the responsibility of members of the supervisory and executive bodies of a financial institution, owners of significant participation, and controllers of a financial institution for their actions and their accountability.
Models of Corporate Governance
In world practice, there are two main models of the board of directors – the American (unitary) model and the German (double board system). Germany – shareholders – supervisory board – executive board. American – shareholders – board of directors.
The formal structure of the board of directors in Japan is an exact copy of the American one. That is, it corresponds to the unitary model. But unlike the unitary model, almost 80% of Japanese open joint-stock companies do not have independent directors on their boards at all, but the boards themselves, as in Germany, are leaders of the interests of the company and their main co-participants. In Sweden, there is a system of unitary boards (that is, without the selection of the supervisory board as a separate structure), but unlike its American version, the participation in the boards of directors of representatives of the lower level of company workers is legally enshrined here, while the participation of company management is reduced to presidents In Holland, a system of dual boards is widespread, but, unlike in Germany, employees are not allowed on the supervisory board, which consists exclusively of independent directors. In Italy, boards of directors, although unitary, operate within the framework of the industrial structure and the system of share ownership, which is more reminiscent of the situation in Germany than in the United States. Even very large Italian companies are often owned by families, so the largest shareholders here are almost always managers and directors. Depending on the needs of the joint-stock company and the number of Shareholders in JSC, there may be four management models:
- general meeting of shareholders – supervisory board – collegial executive body (for example, board, directorate) – audit commission;
- general meeting of shareholders – supervisory board – one-person executive body (for example, the director) – audit commission;
- general meeting of shareholders – collegial executive body – audit commission; – general meeting of shareholders – one-person executive body – audit commission.