Anglo-Saxon model of corporate governance
| Anglo-Saxon model of corporate governance |
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Anglo-Saxon model of corporate governance is a system of supervision and control over the corporation, functioning in the United States, Canada, Australia and the United Kingdom. The main feature of this model is to rely on the capital market, as the place of control over the corporation. Supervision is exercised mostly by investors who expressed theirs favour or disapproval for the actions of management by the buying/selling shares of the company and voting during the general meetings of shareholders. In this model, the management shall not be subject to the strict control within the organization due to the high liquidity of the market. The relationship between managers and shareholders are short-lived and official.
Resources for current investments are collected on the capital markets and over-the-counter (OTC) markets. Due to development of large and liquid capital markets, using this model, companies can be independent from investment banks. Investment banks are rarely used, for example, in a situation where there is planned takeover (MBO and LBO transactions).
Anglo-Saxon model implies a strong emphasis on the results achieved by the company and security of their shareholders. Less importance is put on long-term business development.
Key features of the Anglo-Saxon model of corporate governance
- ownership of shares is distributed,
- banks only slightly engage in the operations of the company,
- stringent requirements for accounting and transparency,
- numerous incentive forms for executives, manifested through high salaries, based on company's results,
- capital is raised on large and liquid capital markets,
- market is an active mechanism of control over the corporation,
- internal supervisory authority is the Board of directors,
- measure of success is the share price and dividend,
- capital markets are characterized by high transparency,
- takes into account the perspective of the increase value for the shareholder,
- growing strength of concentrated share ownership particularly pension funds and institutional investors,
- biggest role is assigned to the implementation of the goals and objectives of shareholders.
References
- Baysinger, B. D., & Butler, H. N. (1985). Corporate governance and the board of directors: Performance effects of changes in board composition. Journal of Law, Economics, & Organization, 1(1), 101-124.
- Berglöf, E., & Thadden, V. (1999, June). The changing corporate governance paradigm: implications for transition and developing countries. In Conference Paper, Annual World Bank Conference on Development Economics, Washington DC.
- Blair, M. M. (1996). Ownership and control: Rethinking corporate governance for the twenty-first century. Brookings Institution.
- Cernat, L. (2004). The emerging European corporate governance model: Anglo-Saxon, Continental, or still the century of diversity?. Journal of European Public Policy, 11(1), 147-166.
- Williamson, O. E. (1988). Corporate finance and corporate governance. The journal of finance, 43(3), 567-591.
