Group Assignment:
Corporate Governance Practices of Boeing, Honda & Daimler
Melbourne, May 2014
TABLE OF CONTENTS
I. INTRODUCTION
Characterised by nation-specific features and different regulatory systems, the use of corporate governance mechanisms varies across different countries in the world. This paper will help investigate those differences by examining the current corporate governance practices of three different companies representing for three powerful countries namely Japan,
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Most of them have been working and responsible for different departments in Daimler (Daimler AG 2013). The Supervisory Board which monitors and advises the Board of Management with regard to its management of the Company has twelve out of twenty outside directors, who are accountable for focal positions in big corporations such as Deutsche Bank Foundation, Nokia Corporation, Nestle, Avon, IG Metall, etc.
The size of the board of directors: Hermalin and Weisbach (2003) supposed that the board size is negatively related to both general firm performance and the quality of decision making. However, complex firms such as those that are diversified across industries, large in size, or have high leverage are more likely to benefit from a larger board of directors, particularly from outside directors who possess relevant experience and expertise (Jeffrey L. et al. 2008). Therefore, the board size of Boeing with eleven directors in which ten is independent and one is non-independent seems to be the optimum size. Honda has followed the same pattern with Boeing when it announced plans to downsize from twenty to twelve board members in 2011 so that its decision making process will be shortened. Accordingly, the number of board members of Honda is thirteen in 2013 (Honda 2013). Daimler, however, owns a big size of board members because it follows the two-tier board system. The Board of
1. Member Board of Directors – Each Director serves for three-year terms and may be reelected. There are 21 members currently serving on the Board.
The Board of Directors consisted primarily of Gerry Wiegert, John Pope, and Barry Rosengrant. Gerry was the President, so it was typical for him to be a part of the board. John Pope was a financial consultant; therefore, he was adequate to be the financially literate person on the board. Barry was in real estate, but he was a consultant of Vector Car which gave him some knowledge of the company. Dan Harnett and George Fencl were also a part of the board for some point of time; they also had adequate knowledge to be capable additions to the board with their knowledge of law and
Corporate governance in itself has no single definition but common principles which it should follow. For example in 1994 the most agreed term for corporate governance was “the process of supervision and control intended to ensure that the company’s management acts in accordance with the interest of shareholders” (Parkinson, 1994)1. Corporate governance code is not a direct set of rules but a self-regulated framework which businesses choose to follow. This code has continued to change in the past 20 years in accordance with what is happening in the business world. For example the Enron scandal caused reform in corporate governance with the Higgs Report which corrected the issues which were necessary. Although it does not quickly fix problems, it gives a better framework to
Because the Board of Directors only meets four times a year, the day-to-day operations are managed by a Chief Executive Officer. The CEO has appointed five Chiefs as his
Farrar, J. (2008). Corporate Governance: theories, principles and practice. 2nd ed. South Melbourne, Vic: Oxford University Press
Apart from the company president,which is the head,the company still has a Board of Directors with the chairman of the board.And also an advisory board,elected by the workers are generally valued by the employees.
The study conducted by Hardjo and Alireza (2012, p. 4) represented that the independent directors have a few understandings of the company’s circumstances, and make decisions depends on what the management provides (Hardjo & Alireza, 2012, p. 4). Although Gallagher and Bennie (2015, p. 20) contended that the independent directors are likely to express their individual opinions and focus on the interest of the company. Thus, the formation of the directors’ board with a significant number of independent directors might not prevent DSE from the downfall due to reliance on filter information which is not adequate to make decisions (Rankin et al., 2012, p.
Selecting board members with varying backgrounds will complement the skills of others of the group. Professionals such as attorneys and CPA’s provide diversity to board configuration. In addition, the board of directors is often responsible for reviewing financial statements and contracts. Legal opinions and an accountant’s insight and suggestions assist management in making decisions relating to their occupation.
The article is written to help readers gain a solid understanding the roles of corporate governance, both inside and outside the company. Its goal is simply to impart information, not make claims or arguments on its own. I will be judging it mainly on the sources gathered, numerous examples and explanations given and the overall effectiveness it possesses in effectively communicating its ideas.
Joshua Kennon (2007), stated that “The board of directors is the highest governing authority within the management structure at any publicly traded company and is usually made up of the directors who are elected for a specific number of years by the shareholders”. According to Wikipedia,” A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization”.
Genentech Roche 28 Corporate Governance in Three Economies: Germany, Japan, and the United States C441 10,12 1,3,11 N/A N/A 29 United Technologies Corporation: Running a Global Ethics and Compliance Program C447 11,12
The Board of the Company consists of 11 (eleven) Independent Directors and 2 (two) Inside Directors. They have expertise in the areas of business, finance, law, audit and public companies.
Japanese AAR figures. Although NPV and IRR methods directly maximizes shareholders wealth, in understanding Japanese corporate governance, we understand that the NPV and IRR method may not fit with the Japanese management decision making culture. Accordingly, the case mentions that Japanese managers are often less “numbers driven” than their “western” counterparts and would need to balance serving the interests of stakeholders (rather than shareholders only) as well looking after the company’s long term wealth.
The Chairman and four other directors are independent non-executives, and the CEO and one director are non- executives.
Companies better understand how good corporate governance contributes to their competitiveness. Investors – especially collective investment institutions and pension funds acting in a fiduciary capacity – realise they have a role to play in ensuring good corporate governance practices, thereby underpinning the value of their investments. In today’s economies, interest in corporate governance goes beyond that of shareholders in the performance of individual companies. As companies play a pivotal role in our economies and we rely increasingly on private sector institutions to manage personal savings and secure retirement incomes, good corporate governance is important to broad and growing segments of the population. The review of the Principles was undertaken by the OECD Steering Group on Corporate Governance under a mandate from OECD Ministers in 2002. The review was supported by a comprehensive survey of how member countries addressed the different corporate governance challenges they faced. It also drew on experiences in economies outside the OECD area where the OECD, in co-operation with the World Bank and other sponsors,