Corporate governance matters a closer look at organizational choices and their consequences

Preface   xxiChapter 1  Introduction to Corporate Governance   1Self-Interested Executives   3Defining Corporate Governance   7Corporate Governance Standards   9Best Practice or Best Practices? Does "One Size Fit All"? 11Relationship between Corporate Governance and Firm Performance   12Chapter 2  International Corporate Governance   19Capital Market Efficiency   20Legal Tradition   22Accounting Standards   23Enforcement of Regulations   26Societal and Cultural Values   27Individual National Governance Structures   29United States   29United Kingdom   32Germany   37Japan   38South Korea   41China   .43India   44Brazil   45Russia   47Endnotes   49Interlude   55Chapter 3  Board of Directors: Duties and Liability   57Board Responsibilities   57Board Independence   58The Operations of the Board   59Board Committees   60Duration of Director Terms   64Director Elections   64Removal of Directors   66Legal Obligations of Directors   66Fiduciary Duty   67Disclosure Obligations under Securities Laws   70Legal Enforcement of State Corporate Law (Fiduciary Duties) 70Legal Enforcement of Federal Securities Laws   71Director Indemnification and D&O Insurance   72Endnotes   75Chapter 4  Board of Directors: Selection, Compensation, and Removal   79Market for Directors   79Active CEOs   82International Experience   83Special Expertise   84Diverse Directors   85Professional Directors   86Disclosure Requirements for Director Qualifications   87Director Recruitment Process   89Director Compensation   91Ownership Guidelines   96Board Evaluation   97Removal of Directors   99Endnotes   102Chapter 5  Board of Directors: Structure and Consequences   107Board Structure   108Chairman of the Board   112Lead Independent Director   116Outside Directors   119Board Independence   121Independent Committees   125Bankers on the Board   126Financial Experts on Board   127Politically Connected Boards   128Employee Representation   128Boards with "Busy" Directors   131Interlocked (or Connected) Boards   133Committee Overlap   135Board Size   136Board Diversity   137Female Directors   138Summary   141Endnotes   142Interlude   150Chapter 6  Strategy, Performance Measurement, and Risk Management   151Organizational Strategy   152Strategy Implementation Process   154Business Model Development and Testing   156Example 1: Fast-Food Chain and Employee Turnover   156Example 2: Financial Services Firm and Investment Advisor Retention   158Key Performance Measures   159How Well Are Boards Doing with Performance Measures and Business Models? 163Risk and Risk Management   164Risk and Risk Tolerance   165Risk to the Business Model   167Risk Management   169Oversight of Risk Management   171Assessing Board Performance on Risk Management   173Endnotes   175Chapter 7  Labor Market for Executives and CEO Succession Planning   181Labor Market for Chief Executive Officers   181Labor Pool of CEO Talent   184CEO Turnover   186Newly Appointed CEOs   189Models of CEO Succession   191External Candidate   191President and/or Chief Operating Officer   193Horse Race   194Inside-Outside Model   195The Succession Process   196How Well Are Boards Doing with Succession Planning? 200The External Search Process   .203Endnotes   206Chapter 8  Executive Compensation and Incentives   211The Controversy over Executive Compensation   212Components of Compensation   213Determining Compensation   217Compensation Consultants   220Compensation Levels   221Ratio of CEO Pay to Other Top Executive Pay   224Ratio of CEO Pay to Average Employee Pay   227Compensation Mix   228Short-Term Incentives   229Long-Term Incentives   232Benefits and Perquisites   234Compensation Disclosure   235Say-on-Pay   236Endnotes   240Chapter 9  Executive Equity Ownership   247Equity Ownership and Firm Performance   247Equity Ownership and Risk   250Equity Ownership and Agency Costs   256Accounting Manipulation   257Manipulation of Equity Grants   258Other Examples of Value Extraction through Timing   260Equity Sales and Insider Trading   261Rule 10b5-1   262Hedging   264Pledging   268Repricing and Exchange Offers   270Endnotes   273Chapter 10  Financial Reporting and External Audit   279The Audit Committee   280Accounting Quality, Transparency, and Controls   280Financial Reporting Quality   282Financial Restatements   284Models to Detect Accounting Manipulations   290The External Audit   292Audit Quality   296Structure of Audit Industry   296Impact of Sarbanes-Oxley   298External Auditor as CFO   301Auditor Rotation   .302Endnotes   304Chapter 11  The Market for Corporate Control   311The Market for Corporate Control   312Stock Market Assessment of Acquiring and Target Firms   316Who Gets Acquired? 316Who Gets the Value in a Takeover? 319Antitakeover Protections   322Antitakeover Actions   323Poison Pills   325Staggered Board   328State of Incorporation   330Dual-Class Shares   331Warding Off Unwanted Acquirers   334Endnotes   336Chapter 12  Institutional Shareholders and Activist Investors   343The Role of Shareholders   343Blockholders and Institutional Investors   346Institutional Investors and Proxy Voting   349Activist Investors   351Pension Funds   353Social Responsibility and Other Stakeholder Funds   355Activist Hedge Funds   357Shareholder Democracy and Corporate Engagement   360Majority Voting in Uncontested Director Elections   360Proxy Access   361Proxy Voting   362Corporate Engagement   363Proxy Advisory Firms   364Endnotes   369Chapter 13  Corporate Governance Ratings   375Third-Party Ratings   375Credit Ratings   376Commercial Corporate Governance Ratings   378ISS: Corporate Governance Quotient   378ISS: Governance Risk Indicators   380ISS: QuickScore   380GMI Ratings   381Testing the Predictability of Corporate Governance Ratings   382Governance Rating Systems by Academic Researchers   383The Viability of Governance Ratings   388Endnotes   389Chapter 14  Alternative Models of Governance   393Family-Controlled Corporations   393Venture-Backed Companies   396Private Equity-Owned Companies   399Nonprofit Organizations   402Endnotes   407Chapter 15  Summary and Conclusions   413Testing Remains Insufficient   414The Current Focus Is Misdirected   415Important Variables Are Clearly Missing   416Context Is Important   417Endnotes   418Index   419  Now fully updated: today's most objective, complete, and actionable guide to corporate governance for every board member, director, officer, investor, and stakeholder.