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Corporate governance system. General principles of corporate management

In non-profit corporations and production cooperatives with more than one hundred members, the highest body may be a congress, conference or other representative (collegiate) body determined by their charters in accordance with the law. The competence of this body and the procedure for making decisions by it are determined by this Code, other laws and the charter of the corporation.

(see text in previous edition)

2. Unless otherwise provided by this Code or other law, the exclusive competence of the supreme body of a corporation includes:

determination of priority areas of the corporation's activities, principles of formation and use of its property;

approval and amendment of the charter of the corporation;

determining the procedure for admission to the membership of the corporation and exclusion from the number of its participants, unless such procedure is determined by law;

formation of other bodies of the corporation and early termination of their powers, if the charter of the corporation in accordance with the law does not refer this authority to the competence of other collegiate bodies of the corporation;

approval of annual reports and accounting (financial) statements of the corporation, if the charter of the corporation, in accordance with the law, this authority is not assigned to the competence of other collegial bodies of the corporation;

adoption of decisions on the creation by the corporation of other legal entities, on the participation of the corporation in other legal entities, on the establishment of branches and on the opening of representative offices of the corporation, except in cases where the charter of a business company in accordance with the laws on business companies, the adoption of such decisions on these issues is within the competence other collegiate bodies of the corporation;

making decisions on the reorganization and liquidation of the corporation, on the appointment of a liquidation commission (liquidator) and on the approval of the liquidation balance sheet;

Election of the audit commission (auditor) and appointment of an audit organization or an individual auditor of the corporation.

The law and the founding document of a corporation may include the resolution of other issues within the exclusive competence of its supreme body.

Issues referred by this Code and other laws to the exclusive competence of the supreme body of a corporation cannot be transferred by it for decision to other bodies of a corporation, unless otherwise provided by this Code or another law.

3. A sole executive body (director, general director, chairman, etc.) is formed in the corporation. The charter of a corporation may provide for the granting of the powers of a sole executive body to several persons acting jointly, or the formation of several sole executive bodies acting independently of each other (paragraph three of paragraph 1 of Article 53). Both an individual and a legal entity may act as the sole executive body of a corporation.

In the cases provided for by this Code, another law or the charter of a corporation, a collegial executive body (board, directorate, etc.) is formed in the corporation.

The competence of the bodies of the corporation specified in this paragraph shall include the resolution of issues that are not within the competence of its supreme body and the collegial management body established in accordance with paragraph 4 of this article.

4. Along with the executive bodies specified in paragraph 3 of this article, in the cases provided for by this Code, another law or the charter of the corporation, a collegial management body (supervisory or other board) that controls the activities of the executive bodies of the corporation and performs other functions assigned to it by law or by the charter of a corporation. Persons exercising the powers of the sole executive bodies of corporations and members of their collegial executive bodies cannot make up more than one quarter of the composition of the collegial management bodies of corporations and cannot be their chairmen.

Members of the collegiate management body of a corporation have the right to receive information about the activities of the corporation and get acquainted with its accounting and other documentation, demand compensation for losses caused to the corporation, dispute transactions made by the corporation on the grounds provided for in Article 174 of this Code or laws on corporations of certain organizational and legal forms, and demand the application of the consequences of their invalidity, as well as demand the application of the consequences of the invalidity of the corporation's void transactions in the manner prescribed by paragraph 2 of Article 65.2 of this Code.

Corporate History

For the first time corporate associations arose in ancient Rome. During the Republic, it was allowed to freely create new corporations. It was enough that the charter of the corporation did not contradict the laws. But in the days of the empire, in order to create a corporation, it was necessary to obtain a special agreement from the Senate. From among the members of the corporation, persons were elected who conducted its affairs. If the corporation ceased to exist, then its property was divided among the entire composition of its participants.

Today it is believed that the oldest corporation in the world is the Stora Kopparberget copper mine. It is located in Sweden in the city of Falun. In 1347, this corporation received a charter from King Magnus Eriksson. Many countries in Europe in the seventeenth century received the right to do business with the colonies. These organizations are considered to be the prototypes of modern corporations. Examples include the Dutch East India Company and the Hudson's Bay Company.

Modern corporations

Currently, in industrialized countries where the market economy is well developed (United States of America, Japan, Canada), corporations are the key form of entrepreneurial activity. Under the control of corporate cross-industry groups is almost fifty percent of the industrial production and trade of these countries. The United States of America, Japan and Canada hold most of the patents and licenses for new equipment and technological developments (about eighty percent).

The existence of a corporation is not limited, because the share of capital (shares) can be transferred to other owners. The Corporation raises equity and debt capital on its own behalf. That is why the liability of shareholders for the debt obligations of the corporation is limited. Their biggest loss can only be the money that was invested in stocks. In the event that a corporation needs additional equity capital, it has the right to issue a new block of shares and attract outside investors. Among other things, a corporation may be a general or limited partner in a partnership. The corporation may also own shares of other joint-stock companies. For these reasons, establishing a corporation is more difficult than organizing other forms of business.



There are several types of corporate associations. These types are determined by the legislation of the state. Corporate associations may vary from country to country.

The most common types of corporate associations in most countries are:

Limited Liability Company;

Closed Joint Stock Company;

Joint stock company of open type;

Cartel;

Syndicate;

Holding;

transnational corporations;

Concern;

Financial and industrial group.

The legislation of each country determines the rights and responsibilities of all types of corporate associations. The legislation of most countries of the world defines restrictions on the composition of corporate associations and forms of their activities. In addition, there are special measures that prevent the transformation of a corporation into a monopoly. If a corporate association violates the restrictions, the state and regional authorities will put forward certain sanctions. Also, the case will be considered in court, and as a result, the corporate association may be disbanded into smaller organizations.

Almost always, enterprises that are part of a corporation are economically dependent on it. One happens that enterprises that are part of a corporation have their own shareholders. Of course, these shareholders expect to receive dividends on their invested capital. The board of shareholders of the enterprise and the management of the corporation interact in accordance with the legislation of the country. From this it becomes obvious that economic relations in corporate associations are very diverse and quite complex.

The most common cases of relations between an enterprise and a corporation are:

1.Absorption. In this case, the company becomes economically dependent. On all matters of management and functioning, it is subordinate to the management of the corporation.

2. The corporation begins to carry out financial management of the enterprise. In this case, the company can independently resolve other issues. It is obligatory only to fulfill the approved budget of the corporation in the part that concerns it.

3. Acquisition of an organization or part of it. In this case, the corporation simply acquires an enterprise that was put up for auction for sale due to inefficient functioning or in the process of privatization.

4. A joint venture is created with another corporation.

5. By restructuring the enterprise, which is carried out according to the plan of the corporation and during its sale. The structure of the enterprise and the type of its main activity are changing in order to increase economic efficiency.

6. By selling enterprises (parts thereof) that belong to the corporation.

7.Some enterprises transform into branches. The corporation determines the main activity of the branches and controls it. The location of the branch determines the area of ​​its operation, i.e. a particular branch is a representative office of a corporation in a certain territory.

8. By creating a consortium. A consortium is a temporary association of enterprises, firms, concerns in order to solve an important industrial, scientific and technical problem.

Management in a corporation

The charter of a corporate association is determined by its governing bodies. For example, in LLCs and CJSCs, the supreme governing body is the general meeting of shareholders. Cartels, syndicates, pools, trusts, holdings, concerns, financial groups most often have a management apparatus, which is formed in the form of two main bodies. The first is the Board of Directors, which carries out strategic management. The second is the executive body, which consists of the president and vice presidents. They carry out operational management with the help of special bodies.

Capital owners can influence the economic policy of corporate associations with the help of the Board of Directors. But hired employees (presidents, vice presidents, general directors, managers by types of management) carry out direct management. This separation of ownership and management functions has a positive effect on the management apparatus.

O main management structures:

1. Highly centralized vertical functional structure.

2. Decentralized (divisional) structure with high coordination of horizontal links between units of the same level.

Summing up, we note the main thing. A corporation, in other words, is nothing more than a joint-stock company. The share of capital invested in the business grants and limits the right of ownership. To achieve a high concentration of capital, a corporation may issue more shares. Also, a corporation may have a complex management organization. American business is dominated by corporations. Corporations control significant capital flows and have a huge number of employees. Corporations provide the population with a wide range of goods and services and have a huge impact on the social and political life of the country.

The concept of corporate governance

Currently, there are many approaches to determining the essence of corporate governance (CG). Most often, it is customary to identify it with a special form of relationships that arise between managers and owners (shareholders) of corporate organizations, which includes a set of norms, rules, traditions and measures that allow the latter to exercise control over the activities of the company's management and fairly distribute its results.

Definition 1

A corporation is a special form of business organization that involves the concentration of ownership in the hands of shareholders. Most often, corporations take the form of joint-stock companies (public and non-public).

Corporate governance is directly related to the organization of managing the relationship between the corporation and its stakeholders.

Stakeholders should be understood as persons interested in the activities of the corporation. As a rule, they are:

  • shareholders (owners);
  • management (managers);
  • employees (personnel);
  • clients (consumers);
  • suppliers;
  • state;
  • local community.

The corporate governance system involves building effective relationships between them.

In itself, corporate governance is usually considered in three basic aspects (Figure 1).

Figure 1. Main approaches to defining the essence of corporate governance. Author24 - online exchange of student papers

In the first case, it is customary to identify corporate governance as an independent system of knowledge, that is, to consider it as a science.

In the second case, the essence of corporate governance will be determined from the standpoint of a systematic approach. Then it is fair to speak of it as a set of managerial relations.

In the third case, the definition of the essence of corporate governance is based on the process approach. It is a kind of managerial impact, through which the corporation represents and serves the multidirectional interests of stakeholders, while ensuring a balance between the goals of the economic and social order.

In relation to the actual practice of the functioning of economic systems, corporate governance involves building a system of its organization.

Essence and composition of the corporate governance system

The corporate governance system is the organizational model by which a corporation represents and protects the interests of its investors and shareholders. It can also be defined as a set of principles and mechanisms for making corporate decisions and monitoring their implementation.

The CG system is based on a number of principles and rules that define the relationship between owners, hired managers and other groups of stakeholders.

It is believed that the corporate governance system should be based on universal human values, such as:

  • honesty;
  • transparency and openness;
  • a responsibility;
  • dialogue with stakeholders;
  • cooperation with society, etc.

Remark 1

The corporate governance system is based on the interaction and mutual reporting of stakeholders. Its main goal is to increase the corporation's profits and ensure the sustainability of its development, subject to compliance with current legislation, taking into account international standards.

In general terms, the model of the corporate governance system is shown in Figure 2.

Figure 2. Scheme of the corporate governance system. Author24 - online exchange of student papers

Figure 2 shows that the CG system is inextricably linked with the distribution of information flows and coordinating interaction between shareholders, management and the board of directors. One way or another, it is aimed at regulating the relationship between managers and owners and is designed not only to minimize agency costs, but also to ensure the consistency of the goals of all stakeholder groups in order to ensure the effective functioning of the corporation.

Ultimately, the CG system is designed to encourage participants in corporate relations to develop such company development strategies, the implementation of which can lead to an increase in business value.

Features of building corporate management systems

Building an effective CG system is a complex multi-stage process. Its main steps are:

  • development of uniform principles for the work of a corporation, which may be reflected in the form of a mission, philosophy or other fundamental document;
  • determining the fundamental goals of the company, as well as isolating ways to motivate its owners;
  • selection of an organizational structure that would be adequate to the goals.

Building a corporate governance system is associated with a number of problems, the totality of which can be divided into two groups. The first comes down to the definition of what exactly the corporation should build, and the second to the quality of its construction.

The primary role is given to the formation of the basic parameters of the elements of the system, which should be directly related to the four blocks of corporate governance, affecting the rights of shareholders, management bodies, social responsibility of business and disclosure of information. All of them should be built in such a way as to ensure the sustainability of the corporation's development, while minimizing the conflict of interests of the main groups of stakeholders and maximizing the satisfaction of their interests, as well as individual corporate goals, while maintaining the congruence of goals.

Most often, building a corporate governance system takes the following form (Figure 3). This nose approach is simplistic.

Figure 3. Corporate governance bodies. Author24 - online exchange of student papers

As part of a broader approach to building a corporate governance system, it also includes such elements as CG participants (at the micro and macro levels), objects and mechanisms of its impact, as well as information support for its functioning.

In today's rapidly developing world, companies and corporations are beginning to play an increasingly important role. They have broad financial and economic opportunities to influence the economy of one particular country and the world as a whole. Corporate governance is the key to their successful development and, as a result, an increase in capital inflows, as well as macroeconomic growth.

The concept of corporate governance in modern economic and legal spheres

Despite the wide applicability of this term in practice, there is no single interpretation of the concept that would include all aspects and directions in the labor sphere. In the legal and economic literature, corporate governance is a set of systemic principles and mechanisms through which shareholders exercise their rights to own property. The institution of corporate control itself is presented in the form of a pyramid with three interconnected subordination cells.

Corporate governance by its nature is not comparable to the systems of operational and tactical management of the company, however, the trends of recent years indicate its strategic importance. The object of corporate governance is the monitoring of actions that are performed during the management of the corporation.

Relevance and Specifics of Corporate Governance in Russia

In many sectors of the domestic economy, the leading positions are gradually being taken by corporations, which play a very important role in its development. In this regard, there is an increase in the interest of experts in the problems of the institution of corporate governance in Russia. It touches upon issues related to the formation of corporations as an independent unit and a member of the global economic community. Corporate governance significantly affects the investment climate, therefore, it correlates with the following global processes:

  • in the context of the widespread globalization of the economy, the entry of corporations into a single world economic and financial space causes an increasing resonance;
  • the growth of the influence of corporations on world processes and the gradual monopolization of the market;
  • creation of favorable conditions in the company to attract foreign capital and improve the investment climate for investors;
  • all assets belonging to the corporation are transferred under a common management mechanism, the development of which is being developed by an increasing number of specialists;
  • shareholders of the corporation participate equally in the functioning of the organization, thus maintaining a financial balance between all parties to the relationship;
  • for more effective corporate management and control, there is a distribution of responsibilities within the organization;
  • active participation of corporations in the issues of establishing lost contacts between industrial economic entities;
  • investing large amounts of funds to create and develop a modern Internet economy, cryptocurrencies, blockchains, which will allow the corporation to increase the amount of profit received and modernize standards by modern standards.

Methods of corporate governance of a legal entity

A legal entity in Russia, in accordance with Article 53 of the Civil Code of the Russian Federation, is endowed with a special list of civil rights and obligations. They carry out their legal activities within the framework of the current legislation, special constituent documents and other legal acts. Thus, there is a transfer of rights and obligations from the state to a legal entity through its bodies.

Management methods are designed to classify the features of corporate governance of a business entity and are divided into:

  • administrative;
  • economic;
  • legislative and regulatory legal;
  • organizational.

It should be borne in mind that the above management methods are also divided into three levels:

  • corporate;
  • the level where the main activity of the corporation is the business area;
  • a separate class of some enterprises and their subsidiaries.

Corporate governance provides for the combined management of all types of entities in one single prescribed field of governance.

Maneuvering in this control cycle can occur and change only when taking into account the special conditions of the objects to which it is directed, as well as to increase production volumes.

An important aspect of the whole process of corporate governance is the fact that the assets of the corporation are localized in the hands of monopoly owners or investors, and the creation of such substructures in it as a board of directors, a board of trustees or management is conditioned by the transfer of property management rights in order to avoid a ban on market monopolization. The end result is the emergence of inconsistencies in the information supplied, disagreements between management and owners.

Features of corporate governance and its participants

It is not a fact that reasonable decisions made in the process of corporate governance will necessarily bring the corporation an increase in financial profit and a stable growth of shares in the world market. There are many examples when fairly large "family" organizations that do not have a certificate of compliance with corporate governance standards are quite competitive in the product market.

One of the main features of CG is considered to be its invulnerability in the context of management abuse, but it leads to less flexibility in company policy.

However, companies that have been tested for compliance with corporate governance standards have a list of advantages over their competitors.

With the help of a modern IPO system, they more often establish contacts with foreign investors, which has a better effect on their financial reserves.

Investors are inclined to cooperate with such organizations, as they believe that an effective approach to the implementation of corporate governance by its management does not give reason to doubt the honesty and transparency of the policy pursued by the company.

Thus, the probability that an investor may lose the funds invested in projects is approaching a minimum.

Corporations that represent the interests of developing countries in the global financial market have a special interest in moving under corporate governance.

The results of research by numerous experts in the field of economics show that corporations with a corporate governance system have a large amount of capital compared to the average established mark in the market. This trend is typical for the Arab countries, states from the Latin American region (with the exception of Chile), the Russian Federation, Indonesia, Turkey and Malaysia.

The efficiency of operations and the constant growth of companies is the result of a commonality of subjects of corporate relations who are interested in the following:

Labor functions and interests of subjects of corporate governance

The main financial reward for employees, in particular, managers of companies, is the payment in full of the amounts of wages prescribed in their employment contracts.

Their main interest is to feel comfortable and be sure of the stability of their position. They also want to protect themselves from certain situations, such as funding the company from retained earnings rather than from the company's external debt.

The priority direction for the growth of companies in the market is the creation of an equilibrium risk-reward ratio.

Managers are one of the main components of the overall pyramid of subordination.

They depend on the actions of the shareholders represented by the board of directors, and are most interested in extending their existing labor contracts for a longer period.

Their primary task in the corporation is constant interaction with representatives of other groups who are directly related to the company itself or wish to cooperate with it. Among them: employees, shareholders, official state structures, clients, investors, importers.

However, there are a number of aspects in which company managers become hostages of their position. So, they cannot influence the decision to expand the scope of the company and its structure, to participate in various charitable events in order to increase corporate prestige and status.

Another subjects of labor relations in the system of corporate governance of the company are shareholders, whose income from its activities is expressed in the receipt of dividends or those funds that were received on the account after the sale of shares on the market.

Often, the owners of the company's shares express their support for the management and board of directors of the organization in making decisions aimed at a possible increase in profits, even if they are very risky.

Therefore, they, no less than managers, strive to contribute to the development of the company. But for them, there are also several situations with an increased level of risk, for example:

  • their personal income will not increase if the goods and services that the company sells on the market are not in demand among buyers, and, accordingly, the organization does not receive stable high profits;
  • if the company declares itself bankrupt, the shareholders will be able to receive all their compensation payments only as a last resort.

Shareholders have some advantages in investing and holding shares in several companies at the same time, so if they lose funds in one, they always have a fallback option. In addition, they can exert some pressure on the board of directors:

  1. in the course of regular meetings of holders of shareholdings, a certain composition of management is elected and shareholders, based on their own interests, vote or not vote for a particular decision;
  2. the transaction for the sale of shares that they own affects the quotes of these securities on the market for goods and services, thereby becoming a possible lever for putting pressure on the current composition of the board of directors that is unfavorable to them.

There is a third group of subjects of corporate relations - accomplices or interested persons. These include:

  • Lenders. Their profit is stated in the contract concluded as a result of negotiations between them and the company. They oppose the adoption of decisions in the implementation of which there is a certain risk, insist that the profit received in the future be able to cover the amount of the loan provided in time and in full, own a block of shares in several companies at the same time.
  • Employees and staff of the company. They show a primary interest in decent wages, their timely payment, good working conditions, job retention and sustainable development of the organization. Unlike shareholders, they are in constant contact with the composition of the board of directors, are completely subordinate to its decisions and have no leverage to put pressure on its activities.
  • Partners of the company (customers, importers, etc.). They are in constant contact with the board of directors to obtain information on the state of the company's functioning.
  • State official structures. They regularly monitor the activities of the company, check the implementation of safety regulations, the availability of all certificates and accreditations, monitor the timely payment of taxes, the creation of jobs and the provision of various benefits to employees of the organization. They can influence the company by increasing taxes and changing accounting documentation.

Principles and mechanisms of corporate governance

At regular meetings with the participation of shareholders, questions and proposals may be put forward regarding:

  • reforming the organization;
  • disposal of assets owned by the company;
  • conducting transactions for the purchase and sale of shares;
  • disclosure of reporting information on profits received;
  • changes in the composition of the management and the main constituent bodies of the corporation, etc.

The main principle of corporate governance provides for the establishment of the responsibility of the board of directors to the shareholders. Minority shareholders have unequal rights among themselves, and, consequently, a different number of votes that they have the right to dispose of, since they are directly correlated with the amount of shares in the company.

The norms of Russian legislation provide for the following division of rights, according to the share held:

Such an imbalance leads to the infringement of the economic rights of shareholders by withdrawing the company's profits in non-dividend ways, after which it is distributed among members of the board of directors and shareholders owning controlling stakes.

This shortcoming of the corporate governance system can be compensated for by establishing a market for corporate control. With its help, holders of small shares in the company can sell their shares if they do not agree with the policy pursued by the company's management.

Main models of corporate governance

For a long time, such fundamental models of corporate governance forms have been formed that are used in different countries of the world:

  • The Anglo-American (outsider) model provides for the management of a corporation based on the use of external or market levers of management control, or monitoring by a collegial body of a corporation, organized in accordance with all requirements. Its defining link is the presence of a large number of independent small investors who represent the interests of minority shareholders. In such a system of relations, the influence of the stock market sharply increases, which serves as a tool for controlling the activities of the corporation's management;
  • The German or insider model - takes as a basis the control of the corporation from the inside. The basis for the successful functioning of the corporation is multilateral cooperation between all entities that have any relation to it. Unlike the Anglo-American model, the stock market does not affect the company's activities and the value of its shares. This is due to the fact that independent monitoring of the results of products and the situation in the common market of goods and services is carried out;
  • Japan's corporate governance model was designed to raise the country's economy from the ruins after its defeat in World War II. Thanks to its application, the state managed to perform an “economic miracle” in the 1960s, associated with annual economic growth rates of 10%;
  • Family model of corporate governance - can be applied in almost every country. Full control of the corporation belongs to one family, and a controlling stake, as a rule, passes from generation to generation. The most striking example of this model is the American oil company Standard Oil, which has been under the control of the Rockefeller family for more than 130 years.

The formation and application of the corporate governance model depends on the specifics and is focused on the domestic economic situation in each country. Three main factors influence this:

  • a system for protecting the rights of minority shareholders;
  • functions and tasks of management;
  • the level of information provided.

The corporate governance system in Russia is not implemented in accordance with any of the presented models, as it is focused on their symbiosis and the use of the best features and advantages of each.

Corporate governance characterizes the system of the highest level of management of a joint-stock company. In 1932, the book "Modern Corporation and Private Property" by A. Burley and G. Minza was published, where for the first time the issues of separation from management and control from ownership in joint-stock companies are considered. This led to the emergence of a new layer of professional managers and development, since in 200 large companies 58% of the assets were controlled.

Corporate governance system- This is an organizational model that is designed, on the one hand, to regulate the relationship between company managers and their owners, on the other hand, to coordinate the goals of various stakeholders, ensuring the effective functioning of companies. There are several models of corporate governance.

Main models of corporate governance

The variety of national forms of corporate governance can be conditionally divided into groups that gravitate towards two opposite models:

  • American, or outsider, model;
  • German, or insider, model.

American, or outsider, the model is a management model based on a high level of use of external in relation to the joint-stock company, or market, corporate control mechanisms, or control over the management of the joint-stock company.

The Anglo-American model is typical for the USA, Great Britain, Australia, Canada, New Zealand. The interests of shareholders are represented by a large number of small investors isolated from each other, who are dependent on the management of the corporation. The role of the stock market is increasing, through which control over the management of the corporation is exercised.

German, or insider, the model is a model of management of joint-stock companies, based mainly on the use of internal methods of corporate control, or methods of self-control.

The German corporate governance model is typical for the countries of Central Europe, the Scandinavian countries, less typical for Belgium and France. It is based on the principle of social interaction: all parties interested in the activities of the corporation have the right to participate in the decision-making process (shareholders, managers, staff, banks, public organizations). The German model is characterized by a weak focus on stock markets and shareholder value in management, as the company itself controls its competitiveness and performance.

The American and German models of corporate governance are two opposite systems, between which there are many options with the predominant dominance of one or another system and reflecting the national characteristics of a particular country. The development of a certain corporate governance model within the framework depends mainly on three factors:

  • mechanism;
  • functions and tasks;
  • level of information disclosure.

Japanese model of corporate governance was formed in the post-war period on the basis of financial and industrial groups (keiretsu) and is characterized as completely closed, based on bank control, which reduces the problem of managerial control.

Family model of corporate governance spread throughout the world. Corporations are managed by members of the same family.

In the emerging in Russia corporate governance models the principle of separation of ownership and control rights is not recognized. The system of corporate governance in Russia does not correspond to any of these models; further business development will be focused on several models of corporate governance at once.

Conditions for applying the American model of corporate governance

The American system of corporate governance is directly related to the features of national joint stock ownership, which are:

  • the highest degree of dispersal of the capital of American corporations, as a result, as a rule, none of the groups of shareholders claims special representation in the corporation;
  • the highest level of liquidity of shares, the presence of highly developed, which allows any shareholder to quickly and easily sell their shares, and the investor - to buy them.

The key forms of market control for the US market are numerous mergers, acquisitions and buyouts of companies, which provides effective market control over the activities of managers through the corporate control market.

Reasons for using the German corporate governance model

The German model stems from factors directly opposite to those that give rise to the American model. These factors are:

  • the concentration of equity capital among various types of institutional investors and the comparatively lower degree of its dispersal among private investors;
  • relatively weak development of the stock market.

American model of corporate governance

Typical management structure of an American corporation

The supreme governing body of the corporation is the general meeting of shareholders held regularly, at least once a year. Shareholders take part in the management of the corporation by participating in voting on issues of introducing amendments and additions to the charter of the corporation, electing or removing directors, as well as on other decisions that are most important for the corporation's activities, such as reorganization and liquidation of the corporation, etc.

At the same time, meetings of shareholders are largely formal in nature, since shareholders have rather limited opportunities to participate in the management of the corporation, since the main burden of the real management of the corporation falls on the board of directors, which is usually entrusted with the following main tasks:

  • solution of the most important corporate issues;
  • appointment and control over the activities of the administration;
  • control of financial activity;
  • ensuring the compliance of the corporation's activities with the current legal norms.

The main responsibility of the board of directors is to protect the interests of shareholders and maximize their wealth. He must provide a level of management that guarantees the growth of the value of the corporation. In recent years, there has been an increasingly noticeable trend towards an increase in the role of the board of directors in the management of a corporation. This is manifested primarily in the control over the financial state of affairs. The financial results of the corporation's work are considered at meetings of the board of directors, as a rule, at least once a quarter.

Members of the board of directors, being representatives of shareholders, are responsible for the state of affairs in the corporation. They may be subject to administrative and criminal liability in the event of the bankruptcy of the corporation or the commission of actions aimed at obtaining their own benefit to the detriment of the interests of the shareholders of the corporation.

The quantitative composition of the board of directors is determined based on the needs of effective management, and its minimum number in accordance with state laws can be from one to three.

The Board of Directors is elected from internal and external (independent) members of the joint-stock company. Most of the board of directors are independent directors.

Internal members are selected from among the corporate administration and serve as both executive directors and managers of the company. Independent directors are persons who have no interests in the company. They are representatives of banks, other companies with close technological or financial ties, well-known lawyers and scientists.

Both groups of directors, or, in other words, all directors are equally responsible for the affairs of the company.

Structurally, the board of directors of American corporations is divided into standing committees. The number of committees and the direction of their activities in each corporation is different. Their task is to develop recommendations on issues adopted by the board of directors. In the boards of directors, the most common committees are management and wages, an audit committee (auditing committee), a financial committee, an election committee, a committee on operational issues, in large corporations - public relations committees, etc. At the request of the American Commission on The Securities and Exchange Commission must have audit and remuneration committees in every corporation.

The executive body of the corporation is its directorate. The board of directors selects and appoints the president, vice-presidents, treasurer, secretary and other heads of the corporation, as provided for by its charter. The appointed head of the corporation has very great powers and is accountable only to the board of directors and shareholders.

German model of corporate governance

Typical management structure of a German corporation

The typical management structure of a German company is also three-level and is represented by a general meeting of shareholders, a supervisory board and a management board. The supreme governing body is the general meeting of shareholders. His competence includes the solution of issues typical for all models of management of joint-stock companies:

  • election and dismissal of members of the supervisory board and the board;
  • the procedure for using the company's profits;
  • appointment of an auditor;
  • amendments and additions to the charter of the company;
  • change in the value of the company's capital;
  • company liquidation, etc.

The frequency of holding meetings of shareholders is determined by law and the charter of the company. The meeting is held at the initiative of the management bodies or shareholders, owners of at least 5% of the shares. The process of preparing the meeting includes the obligation to publish in advance the agenda of the meeting of shareholders and the options proposed by the Supervisory Board and the Management Board for each issue. Any shareholder within a week after the publication of the agenda may propose their own version of the solution of a particular issue. Decisions at the meeting are made by a simple majority of votes, the most important - by three-quarters of the votes of the shareholders present at the meeting. Decisions made at the meeting come into force only after they are notarized or certified by the court.

Supervisory Board performs the functions of control over the economic activities of the company. It is formed from representatives of shareholders and employees of the company. In addition to these two groups, the supervisory board may also include representatives of banks and enterprises that have close business ties with the company. The high representation of company employees on the Supervisory Board, with a share of up to 50% of the seats, is a hallmark of the German Supervisory Board formation system. To avoid conflicts of interest between shareholders and employees represented on the Supervisory Board, each of these parties has the right to veto the election of representatives of the opposite group.

The main task of the supervisory board is the selection of company managers and control over their work. The scope of resolving issues of strategic importance within the competence of the Supervisory Board is clearly defined and includes the acquisition of other companies, the sale of part of the assets or the liquidation of an enterprise, the consideration and approval of annual balance sheets and reports, major transactions and the amount of dividends.

Decisions of the Supervisory Board are taken by a three-quarters majority vote.

The size of the supervisory board depends on the size of the company. The minimum membership must be at least three members. German law prescribes large supervisory boards.

Members of the Supervisory Board are elected by shareholders for a period of four business years after the commencement of operations. Prior to the expiration of their terms of office, members of the Supervisory Board may be re-elected by the General Meeting of Shareholders by a three-quarters majority. The Supervisory Board elects a chairman and a deputy chairman from among its members.

The board is formed from the management of the company. The Board may consist of one or more persons. The management is entrusted with the task of direct economic management of the company and responsibility for the results of its activities. Members of the Management Board are appointed by the Supervisory Board for a term of up to five years. Members of the board are prohibited from engaging in any commercial activity outside of their main job, as well as participating in the management bodies of other companies without the consent of the supervisory board. The work of the board is built on a collegiate basis, when decisions are made on the basis of consensus. In difficult situations, when consensus cannot be reached, decisions are made by voting. Each member of the board has one vote, the decision is considered adopted if the majority of the board members voted for it.

The main differences between the American model and the German one

The main differences between the considered models of corporate governance are as follows:

  • in the American model, the interests of shareholders are, for the most part, the interests of small private investors isolated from each other, who, due to their disunity, are highly dependent on the management of corporations. As a counterweight to this situation, the role of the market is increasing, which exercises control over the management of joint-stock companies through the corporate control market;
  • In the German model, shareholders are a set of fairly large shareholders, and therefore they can unite with each other to pursue their common interests and, on this basis, have firm control over the management of a joint-stock company. In such a situation, the role of the market as an external controller of the activities of society is sharply reduced, because the corporation itself controls its competitiveness and its performance;

From what has been said, there is a difference in the functions of the board of directors. In the American model, this is the board of directors as a board of governors, which in fact manages all the activities of the joint-stock company and is responsible for it to the meeting of shareholders and the state control bodies.

In the German management model, there is a strict separation of management and control functions. In it, the board of directors has a supervisory board, more precisely, a controlling body, and not a body that exercises full control of the joint-stock company. Its control functions are directly related to the ability to quickly change the current management of the corporation in the event that its activities cease to satisfy the interests of shareholders. Participation in the supervisory boards of representatives of other corporations makes it possible to take into account in the activities of the corporation not only the interests of its shareholders, but also the interests of other corporations, one way or another connected with its activities. As a result, the interests of individual groups of shareholders of a German corporation are usually not prevailing, since the interests of the company as a whole are put forward in the first place.