Corporate governance and directors' independence / Yuan Zhao.
2011
K1328 .Z48 2011 (Map It)
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Details
Author
Title
Corporate governance and directors' independence / Yuan Zhao.
Published
Alphen aan den Rijn : Kluwer Law International, [2011]
Distributed
Frederick, MD : Sold and distributed in North, Central and South America by Aspen Pub.
Copyright
©2011
Call Number
K1328 .Z48 2011
ISBN
9789041136046 (hbk. : alk. paper)
9041136045 (hbk. : alk. paper)
9041136045 (hbk. : alk. paper)
Description
x, 223 pages ; 25 cm
System Control No.
(OCoLC)742506584
Bibliography, etc. Note
Includes bibliographical references (pages [201]-211) and index.
Record Appears in
Table of Contents
About the Author
v
Preface
xi
Acknowledgements
xiii
Introduction
1
1.
The Proposal of `Board Independence'
2
2.
A Note on the Credit Crunch
3
3.
Research Boundaries
4
4.
The Structure of the Thesis and Research Issues
5
5.
Research Methods
7
6.
Summary
8
ch. 1
Historical Review of Independence of Director
9
1.
The Origin of Directors -- Pre-1844
9
2.
The Popularity of the Company -- Until 1990
13
2.1.
The Popularity of the Company as a Business Form
13
2.2.
The Separation of Ownership and Management
15
2.3.
A Deviation from Legislative Purpose
16
3.
An Age that Directors Do Nothing; Evidence in the First Half of the Twentieth Century
17
4.
Independent Directors as Actors in Corporate Governance -- The Change in the Late-Twentieth-Century
20
4.1.
Continuation or Change?
20
4.1.1.
Arbitrary Management and Obedient Directors
20
4.1.2.
Changes in the Boardroom
22
4.1.3.
The Investment Company Act of 1940
23
4.2.
The Debate in the US
24
4.3.
The Development in the UK
29
4.3.1.
The Initiation of Non-Executive Directors
29
4.3.2.
Governmental Reports in the 1990s
31
4.3.3.
The Difference of Impetus
33
5.
Conclusion
35
ch. 2
The Regulation on Independent Directors -- Codification or Self-Regulation
37
1.
The Historical Background
38
2.
Is Codification the Only Choice?
42
2.1.
Is the Law Absent?
42
2.1.1.
General Duties on All Directors
42
2.1.2.
A Distinction of Scope of Duties
44
2.1.3.
A Vacuum in the Law
45
2.2.
Is the Benefit of Codification Evident?
47
2.2.1.
The Benefit of Further Clarification
47
2.2.2.
The Benefit of Compulsive Force
48
2.2.3.
The Limits of Codification
50
2.2.4.
Conclusion
53
3.
A Hybrid Model -- The Combination of Self-Regulation and Public Control
53
3.1.
`A Haven for Self-Regulation' to a Hybrid Model
53
3.2.
The Reasons for a Hybrid Model
56
3.3.
A Hybrid Model and Board Independence
57
4.
Conclusion
59
ch. 3
The Role of Independent Directors in Corporate Governance
61
1.
The Functions of the Board and its Independent Directors
62
1.1.
The Managerial Role -- A Myth for Modern Board
62
1.2.
The Oversight Role: An Undeniable Job of the Board and its Independent Directors
65
1.2.1.
Why is Monitoring Important in Corporate Governance?
66
1.2.2.
Why the Board is a Suitable Monitoring Body
67
1.2.3.
The Independent Directors as Supervisor
71
1.2.4.
`Strategic Monitoring' and `Management Monitoring'
73
1.2.5.
Monitoring in the Conflict of Interest
74
1.2.6.
Monitoring in the Audit Committee
75
1.2.7.
Conclusion and Caution
80
1.3.
The Advisory Role -- Can the Board and its Independent Directors Help Promote the Performance of the Management?
81
1.3.1.
The Independent Directors as Counsel
83
1.3.2.
Two-Level Advisory Process
85
1.3.3.
Independent Directors as Arbiters
87
1.4.
The Relational Role: A Bridge between the Company and Outside World
92
1.4.1.
Arguments about `Social Responsibility'
93
1.4.2.
Confusion between Shareholder and Stakeholder
96
1.4.3.
The Solution of Companies Act 2006
99
1.4.4.
The Independent Directors as Communication Link
101
1.4.5.
The Relationship with the Stock Market
102
1.4.6.
Authorities Using Independent Directors to Reach its Agenda
106
1.4.7.
Independent Directors and Legal Rules
108
2.
Conclusion
112
ch. 4
Competing Mechanisms in Corporate Governance
115
1.
Institutional Investors and Shareholder Activism
116
1.1.
The Rise of Institutional Investors
117
1.2.
Obstacles in the way of Shareholder Activism
119
1.3.
Shareholder Activism and Independent Directors
122
2.
Market Force as Discipline
124
2.1.
Market as a Monitoring Agent
124
2.1.1.
Motivation of Diligent Management
124
2.1.2.
The Limit of Self-Discipline
125
2.2.
Market for Control
127
2.2.1.
The Threat of Take-Over
127
2.2.2.
The Limit of `Market for Control'
127
2.3.
Independent Directors as Supplement
129
3.
Pure Independent Board
131
3.1.
Pure Independent Board and Two-Tier Board Structure
132
3.2.
The Value of Insiders
134
3.3.
The Effect on Mutual Relationships
136
4.
Conclusion
138
ch. 5
Factors in Relation to the Performance of Independent Directors: The Obstacles and Solutions
139
1.
The Independence of Directors
140
1.1.
The Definition of `Independence'
141
1.2.
The Mental Independence
144
1.3.
The Solutions
145
1.3.1.
From Listing to Disclosure
145
1.3.2.
The Nominating Power
148
2.
The Active Performance of Independent Directors
150
2.1.
Short of Working Time
150
2.2.
Shortage of Knowledge and Information
152
2.3.
Boardroom Dynamic
154
2.4.
`Groupthink'
155
2.5.
The Solutions
156
2.5.1.
Diversity of Directorships
156
2.5.2.
The Separation of Responsibilities of CEO and Chairman
160
2.5.3.
Working Model of the Board
161
2.5.4.
Full-time Independent Directors
162
2.5.5.
Remuneration of Independent Directors
163
3.
Conclusion
164
ch. 6
Independent Directors' Exposure to Legal Liability
165
1.
Independent Directors and Legal Risk
166
1.1.
The Traditional Generosity of the Law
166
1.2.
More Stringent Standards in Modern Law Development
168
1.3.
From Shareholder Litigation to Disqualification Charge
170
2.
Is the Legal Risk So Threatening?
172
2.1.
The Fears of Independent Directors
172
2.2.
The Lesson Learned From Empirical Studies
174
2.3.
Reconsidering the Legal Risks
176
3.
Why are there Problems (and what can be done)?
176
3.1.
The Weak Incentive of Shareholders to Bring Directors to Justice
176
3.2.
The Limited Feature of Disqualification
180
3.3.
The Mystery of Case Law on Independent Directors
184
3.3.1.
The Difficulty of Retaining Balance and Standard
185
3.3.2.
The Rationality of Collective Liability
186
3.3.3.
A Deviation from Collective Liability
187
3.3.4.
A Code of Conduct of Independent Directors
188
3.3.5.
The Emphasis on Proper Procedures
190
4.
Conclusion
194
4.
Conclusion
197
Bibliography
201
Index
213