2017 OECD Corporate Governance Factbook

”Global and Regional Trends in Corporate Governance for 2017” by Russell Reynolds Associates

”Russell Reynolds Associates recently interviewed numerous institutional and activist investors, pension fund managers, public company directors and other governance professionals about the trends and challenges that public company boards will face in 2017. Our conversations yielded a wide array of perspectives about the forces that are driving change in the corporate governance landscape.

”Boards in Europe – Accountability and Convergence” by Paul L. Davies Klaus J. Hopt

Abstract: Corporate boards play a central role in corporate governance and therefore are regulated in the corporate law and corporate governance codes of all industrialized countries. Yet while there is a common core of rules on the boards, considerable differences remain, not only in detail, but sometimes also as to main issues. These differences depend partly on shareholder structure (dispersed or blockholding), partly on path dependent historical, political and social developments, especially employee representation on the board. More recently, in particular with the rise of the international corporate governance code movement there is a clear tendency towards convergence, at least in terms of the formal provisions of the codes. This article analyses the corporate boards, their regulation in law and codes and their actual functioning in nine European countries (Belgium, France, Germany, Italy, the Netherlands, Poland, Sweden, Switzerland and the United Kingdom) in a functional and comparative method. Issues dealt with are inter alia board structure, composition and functioning (one tier v. two tier, independent directors, expertise and diversity, separating the chair and the CEO functions, information streams, committees, voting and employee representation) and enforcement by liability rules (in particular conflicts of interest), incentive structures (remuneration) and shareholder activism. The article finds convergence in these European countries due to the pressures of competition, a pro-shareholder change supported by government and institutional investors and, to a certain degree, the impact of the EU. This convergence shows more in the codes and the ensuing practice than in the statutes. On the other side considerable differences remain, in particular as a result of the failure to adopt a mandatory „no frustration“ rule for takeovers at EU level and diverging systems of labor codetermination. The result is an unstable balance between convergence and divergence, shareholder and stakeholder influence and European v. national rulemaking.

Read full working paper here.

Study by Prof. Hiroshi Uemura: ”The Attributes of Japanese Corporate Governance Influencing the Quality of Internal Controls”

”Abstract: This study examines the corporate governance characteristics that influence the improvement in the quality of internal controls. Previous studies suggest that corporate governance independence and expertise affect the quality of internal controls (Krishnan et al. 2005; Hoitash et al. 2009). In Japan, however, any company that discloses significant deficiencies (SD) in internal controls has the motive to increase the independence of corporate governance to mitigate any subsequent negative consequences. As a result, independent directors are made the scapegoats, rather than allowing them to fulfill the expectation of improvement in the quality of internal controls. On the other hand, directors with financial expertise that have a high status in a company do influence the improvement in SD in internal controls. This suggests that in Japan it is important to provide financial experts with the power and authority to improve the quality of internal controls in the short term, due to the difference in the provisions between the Financial Instruments and Exchange Act (J-SOX) and the Sarbanes–Oxley Act (SOX). The requirements in Japanese Corporate Law (JCL) for independent directors are not as strict as those within SOX. Therefore, companies in which the boards are able to promote expert directors to important positions improve the quality of internal controls more often than those that are not. It is thus revealed that auditors should be able to discuss with the financial experts as to what is required to improve any significant deficiencies that are detected in the process of internal control audits……..”

Research Paper by Rahman & Marc: ”Accounting Irregularities at Toshiba: An Inquiry into the Nature and Causes of the Problem and Its Impact on Corporate Governance in Japan”

”Abstract: This research describes the largest financial scandal in recent Japanese corporate history. It explains how the Toshiba scandal expanded from a relatively simple case of accounting fraud to a company-wide deceit that involved dozens of managers and three generations of top executives. There are five main causes: domineering top management, compliant middle-managers who embody the worst of the salaryman mentality, duplicitous auditors, percentage-of-completion method accounting abuse, and the secular decline in several of the company’s business lines. The research links the scandal to broader issues with corporate culture, governance, and accounting in Japan and suggests ways to improve the situation……………….”