Showing papers on "Corporate group published in 1997"

Company Law: Theory, Structure and Operation

Abstract: Company Law: Theory, Structure and Operation is the first United Kingdom law text to use economic theory to provide insights into corporate law, an approach widely adopted in the United States. In this book, Brian Cheffins discusses the inner workings of companies, examines the impact of the legal system on corporate activities, and evaluates the merits of governmental regulatory strategies. The book covers core areas of the undergraduate company law syllabus in a stimulating and theoretically enlightening fashion and addresses important company law topics such as: * limited liability of shareholders * shareholders' remedies * corporate governance (including the Cadbury Report) * executive pay (including the Greenbury Report) * the role of self-regulation in United Kingdom securities markets * the impact of European Union Directives on company law in the UK Brian Cheffins also examines in detail a number of questions which have not been fully explored elsewhere. These include: * What are the justifications for legal regulation of company affairs? * What are the drawbacks associated with government intervention? * How can one ascertain the optimal format for company law rules?

Studies in international corporate finance and governance systems : a comparison of the U.S., Japan, and Europe

Abstract: The past decade has given rise to a growing debate over the relative efficiency of different national economic systems. There are two basic corporate finance and governance systems that predominate in todays developed economies. One is the Anglo-American market based model, with widely dispersed shareholders and a fairly vigorous corporate control market. The other is the Japanese and German relationship based system, with its large bank and intercorporate holdings (and conspicuous absence of takeovers). Given the increasing globalization of business, which of these two systems can be expected to prevail over time? Or will the most valuable aspects of each be blended into a single new system? The story now being told by economists and management experts -- one that this book attempts to present -- is a complicated one. Here is a sampling of the arguments: Corporate strategist Michael Porter states that the U.S. system of allocating capital both within and across companies appears to be failing because of both capital market and internal pressures on U.S. companies to underinvest in the relatively intangible assets that contribute to corporate capabilities. In contrast to Porter, financial economist Michael Jensen maintains that the most formidable challenge now facing the U.S. economy -- and, indeed, the economies of all industrialized nations -- is the corporate overinvestment problem, a problem that was addressed in the U.S. by the leveraged restructuring of the 1980s. Nobel-Prize economist Merton Miller answers both Porters concern about U.S. underinvestment and Jensens pessimism about U.S. control systems with a classic defense of the shareholder-value principle. Corporate strategist C.K. Prahalad, unconvinced by the arguments of both Miller and Jensen, challenges the wisdom of corporate Americas commitment to maximizing shareholder value. In a roundtable discussion, Prahalad debates with shareholder value advocate Bennett Stewart about the effects of shareholder primacy in the U.S. and its absence in Japan. Studies in International Corporate Finance and Governance Systems consists of 27 articles (and two roundtable discussions) written by academic and management experts in the fields of corporate finance and governance. Given its commitment to translating outstanding academic research into relatively plain English for practicing businessmen, this book should prove especially useful for corporate executives as well as students in MBA and executive development programs.

Pandora’s Box: Managerial Discretion and the Problem of Corporate Philanthropy

Abstract: Corporate giving to 501(c)(3) nonprofits (“charities”) is a more curious, varied and interesting phenomenon than commentators have recognized. Such “gifts” can be grouped generally into four categories. First, Giving to executives’ preferred charities represents an alternative form of compensation. Second, corporate philanthropy is often tied to the company’s commercial advertising, as a method of promoting consumer goodwill and sales. Thirdly, some corporate gifts may be motivated by their leaders’ desire to “give back” to the community, as an expression of corporate social responsibility. Finally, corporations may use contributions to politically enabled nonprofits, including think tanks and market-oriented/ “public interest” litigation boutiques, to influence regulation, and the political environment generally, in their favor. The paper’s seminal insight is that neither in corporate law nor elsewhere is there a regulatory regime that meaningfully constrains corporate executives’ discretion in employing corporate funds to these ends; nor is there even a meaningful disclosure requirement which would allow for public discussion and critique. Public corporations can give away many millions of dollars -- even to politically, ideologically, religiously “enabled” charities -- without leaving even a public record of so doing. From the perspective of corporate law, the darkness surrounding corporate giving is further problematic because it promotes the formation of nearly invisible networks of background social/professional ties (interlocking for-profit/nonprofit directorates) among corporate elites – affiliations which may compromise the executives’ good faith, independence in corporate decision making.

Corporate Transformation to the Multilayered Subsidiary Form: Changing Economic Conditions and State Business Policy

Abstract: Despite the prevalence of corporate change in the last decade, researchers have not examined whether a change occurred in the corporate form. The analysis here presents a historical case study of a large U.S. corporation and quantitative data on the largest 100 U.S. industrial corporations. The case study examines the effects of changing economic conditions and state business policy on the corporate form. This study demonstrates that the corporation changed to a multilayered subsidiary form (MLSF): a corporation with a hierarchy of two or more levels of subsidiary corporations with a parent company at the top of the hierarchy operating as a management company. Whereas rising debt and increasing competition in the 1970s and 1980s undermined corporations' capacity to accumulate capital, changes in state business policy in the mid-1980s provided the political-legal structure for corporations to restructure their assets as subsidiary corporations tax free. Changes in state business policy also provided a means for corporations to merge, acquire, and spin-off subsidiary corporations tax free. Quantitative data on the 100 largest U.S. industrial corporations show that while the multidivisional form decreased, the MLSF increased between 1981 and 1993. Findings support a capital dependence framework. The MLSF constructs liability firewalls among corporate entities and creates internal capital markets, reducing dependence on external capital markets.

The Production of Corporate Law

Abstract: The production of corporate law has been seen as a competition among the states. This paper takes an interest group view of the production of law, and argues that changes in corporate laws in the United States are driven primarily by lawyers and corporate managers. The benefits to lawyers from modern corporate laws include retention of corporate clients as local corporations, thus excluding the competition of out-of-state lawyers with expertise in Delaware law. But because the production of law is a public good, lawyers find initiating legal change costly, and innovations proceed slowly. Managers, on the other hand, are not generally experts on corporate law, but focus on particular issues that affect them directly, such as antitakeover laws and laws affecting their personal liability. The paper examines the degree of uniformity resulting from this competition, and finds a high degree of correspondence with the norms set in the Model Business Corporation Act. Deviations from this uniformity are explained in large part by innovations, many of which originate in the Model Act. The paper then examines how the collective action problems of the sponsoring interest groups influence the diffusion of innovations in corporate law. Innovations sponsored by lawyers have relatively slow rates of adoption, reflecting their collective action problems. When these costs are reduced through introduction of changes in the Model Act, the rate of diffusion increases. Managers appear to suffer from fewer collective action problems, and have a more intense interest in certain subjects because of the more direct benefits they obtain, and management-sponsored innovations are adopted much more rapidly. Possible inefficiencies from rent-seeking by interest groups appear to be constrained by competitive forces, suggesting that alternative solutions, such as federalizing corporate law, would not solve the rent-seeking problem as well, and would sacrifice the innovations obtained through the present competitive system.

Part I: Corporate Reputation as a Strategic Asset: Corporate Reputation and the Bottom Line

Abstract: The conference began with a brief statement by Conference Chair Charles Fombrun of New York University's Stern School of Business. Professor Fombrun welcomed the 120 international participants to the Stern School and invited Clive Chajet, the former Chairman of Lippincott & Margulies - the identity consulting firm - to examine why corporate reputations have become a topic of critical concern to companies. Mr Chajet highlighted some of the global forces shaping industrial change, and hence the growing importance of reputations as competitive weapons in major companies. Following Mr Chajet's presentation, Dr Fombrun welcomed Karen de Segundo, a senior executive in charge of Public Affairs for the Royal Dutch/Shell group of companies, the official sponsors of the conference. He thanked Ms de Segundo on behalf of the conference participants, as well as other key executives from Royal Dutch/Shell who were in attendance. Ms de Segundo addressed the assembly on the importance of corporate reputation to large companies like Royal Dutch/Shell, and reflected in particular on some of the company's recent efforts to examine society's changing expectations of multinational companies.

Explaining the shape of corporate law: the role of competition

Abstract: This paper reviews the effects of competition among jurisdictions for corporate chartering business on the shape of corporate law in the USA. It finds that competition has led to substantial uniformity, tempered by a dynamic process that introduces innovations from multiple jurisdictions. The speed with which changes are adopted depends on the identity of the sponsoring interest group. Corporate lawyers play a major role in the US corporate law production, but are hampered by collective action problems that are somewhat ameliorated by sponsorship of model legislation by the American Bar Association. Corporate managers appear to be the most effective sponsors, because changes they sponsor are adopted at a more rapid rate. The paper concludes that this competition for charters, influenced both by efficient capital markets and a desire to retain local chartering business, tends to compete away special interest benefits in corporate law. A comparison of the shape of corporate laws in Europe, where no competition exists, with US laws shows that groups such as management, labor and creditors have obtained significantly more benefits than in the USA. © 1997 John Wiley & Sons, Ltd.

Corporate Grouping, Resource Allocation Processes, and Protection of Minority Shareholders

Abstract: This paper analyzes the influence of ownership structure on investment allocation decisions in a hierarchical corporate group. Such a group is characterized by an inbuilt conflict of interests since the controlling shareholder's objectives do not necessarily coincide with those of minority shareholders, the latter being only interested in the maximization of the value of the firm in which they have invested. The purpose of this paper is to derive a formal theoretical model to explain the intuitive fact that the actions of the controlling shareholder, taken in the interest of the entire group, may sometimes damage some of the subsidiaries. Resource allocation processes in both a group and a multidivisional firm are analyzed and compared. Conditions on the (integrated) group's ownership are established which make the multidivisional form preferable for minority shareholders. The effects of changes in ownership structure on both the underlying and market values of the group's member firms are also analyzed. The analysis here developed provides a simple analytical framework to investigate how the decisions of groups' controlling investors affect the investment of minority shareholders, and is intended as a first step toward a proper understanding of business groups' internal functioning.

Part I: Corporate Reputation as a Strategic Asset: Meeting Society's Changing Expectations

Abstract: The conference began with a brief statement by Conference Chair Charles Fombrun of New York University's Stern School of Business. Professor Fombrun welcomed the 120 international participants to the Stern School and invited Clive Chajet, the former Chairman of Lippincott & Margulies - the identity consulting firm - to examine why corporate reputations have become a topic of critical concern to companies. Mr Chajet highlighted some of the global forces shaping industrial change, and hence the growing importance of reputations as competitive weapons in major companies. Following Mr Chajet's presentation, Dr Fombrun welcomed Karen de Segundo, a senior executive in charge of Public Affairs for the Royal Dutch/Shell group of companies, the official sponsors of the conference. He thanked Ms de Segundo on behalf of the conference participants, as well as other key executives from Royal Dutch/Shell who were in attendance. Ms de Segundo addressed the assembly on the importance of corporate reputation to large companies like Royal Dutch/Shell, and reflected in particular on some of the company's recent efforts to examine society's changing expectations of multinational companies.

The Rise and Progress of John Brown Engineering, 1966–97: US Technology, Scottish Expertise and English Capital

Abstract: This article undertakes an interdisciplinary examination of the 30-year history of John Brown Engineering Ltd, which was formed out of the engine works of John Brown's shipyard at Clydebank. It seeks to identify the reasons for its creation and survival. The principal factors identified relate to its membership of an English-based group of companies and the way in which it was managed by the group, together with its almost complete dependency on commercial/technological agreements with General Electric of the United States.

The Subsidization of Emperor Mines Limited

Abstract: The relationship existing between the Emperor group of companies and the government of Fiji is examined over a forty-year period. During a substantial part of this time the company has been subsidized by the state. Focus is on one particular period, beginning in the early 1980s when the company received taxfree status for its gold-mining operations in Fiji. The study attempts to quantify the value of subsidies offered to Emperor Mines Limited under the terms of the Vatukoula tax agreement between the state and the mining company. The authors argue that by the standards of gold-mining taxation agreements in developing as well as developed countries an extraordinary, if not unique, tax arrangement has been possible in Fiji. The tax arrangement with Emperor will also have implications for other possible mining operations in Fiji.

Japanese-Style Inter-Organizational Relationships: Theory and Historical Review

Abstract: In the past, the Japanese company was regarded as a single entity. But a new way of thinking is to regard it from the viewpoint of inter-organizational relationships. For instance, while General Motors Corporation (GM) has 700,000 employees, Toyota Motor Corporation has only 80,000 employees. But the business group of Toyota as a whole employs 300,000 workers (of which 210,000 are members of Toyota labor unions affiliated with the Toyota Federation of Unions). Considering the 300,000 employees of the Toyota business group, we can easily see that it is not Toyota Motor Corporation, but the Toyota group, which corresponds to GM.