Boards and Shareholders in European Listed Companies: Facts, by Massimo Belcredi, Guido Ferrarini

By Massimo Belcredi, Guido Ferrarini

With contributions by way of extraordinary students from felony and fiscal backgrounds, this choice of essays analyses 4 major subject matters within the company governance of ecu indexed organizations: (i) board constitution, composition and functioning and their interplay with possession constitution; (ii) board remuneration; (iii) shareholder activism and (iv) company governance disclosure in line with the 'comply or clarify' strategy. The authors offer new comparative facts and examine its implications for the coverage debate. They problem the normal knowledge that company governance in ecu businesses used to be systematically dysfunctional. whereas proposals aimed toward expanding disclosure and responsibility are typically well-grounded, warning is advised while bringing ahead regulatory alterations with appreciate to proposals focusing on particular governance preparations, particularly within the fields of board composition and shareholder activism. They argue that the 'comply or clarify' precept could be retained and additional efforts might be exercised to reinforce disclosure.

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Additional resources for Boards and Shareholders in European Listed Companies: Facts, Context and Post-Crisis Reforms

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The agency costs which trouble the dispersed ownership company are reduced, as block-holding shareholders have both incentives and resources to monitor managers effectively (Garrido and Rojo 2003). As a result, there is less need for an incentive contract to control the conflict between management and shareholder interests, which is remedied by executive pay. There is also less probability of an agency problem deriving from executive pay contracts. In concentrated ownership conditions, however, different profiles arise, which have varying implications for executive pay and the management of conflicts of interest.

The Principles cover four main compensation areas: governance, structure, disclosure and supervision. As to compensation governance, they incorporate well-known best practices concerning the strategic and supervisory role of the board. In addition, they reflect post-crisis emphasis on bank risk management and monitoring by the board of directors, who should determine the risk appetite of the firm. They reiterate the role of the remuneration committee, also requiring its liaison with the risk committee to ensure compliance with the relevant requirements.

E. 20 Therefore, the optimal solution to the ‘common agency’ problem may be country-specific, when not specific to the individual firm. In all cases, ownership structure decisions involve a choice between alternative sets of agency problems. The same is true for institutions aimed at keeping these problems under control. A given mechanism may mitigate one type of agency problem, but reinforce another: for instance, entitling shareholders to remove the managers may mitigate the agency problems of shareholders as a class, but reinforce those of minority shareholders (ECLE 2011).

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