Showing papers on "Corporate group published in 1999"

Corporate Ownership Around the World

Abstract: We use data on ownership structures of large corporations in 27 wealthy economies to identify the ultimate controlling shareholders of these firms. We find that, except in economies with very good shareholder protection, relatively few of these firms are widely held, in contrast to Berle and Means’s image of ownership of the modern corporation. Rather, these firms are typically controlled by families or the State. Equity control by financial institutions is far less common. The controlling shareholders typically have power over firms significantly in excess of their cash f low rights, primarily through the use of pyramids and participation in management.

Profiting from intellectual capital

Abstract: Intellectual capital (IC) is a significant resource for many companies This paper explains what IC is, the benefits IC can generate, how a firm can utilize those benefits, the different roles a portfolio of IC assets can play, how firms can extract value from these portfolios, and the risks to a company that does not manage its intellectual property portfolio The paper describes the steps for extracting value and outlines several ways to manage the firm’s IC assets It discusses how a firm determines the three major elements of context and different procedures firms may opt to follow internally to realize their intellectual value This paper also describes the ICM Gathering Group, the group of companies that have collectively created the knowledge the paper conveys The paper explains how the Gathering has defined intellectual capital and how its member companies use their knowledge to the benefit of their respective organizations

Corporate identity and corporate communications: creating a competitive advantage

Abstract: Recent environmental trends are forcing senior managers to give greater import to corporate identity and corporate communications. They are discovering that conventional methods of redressing identity problems are becoming progressively less effective because, in our opinion, the traditional focus has viewed corporate identity and corporate communication as functional rather than as strategic. We suggest a much broadened view that looks at corporate communication as a three‐part system process – primary, secondary and tertiary. In many companies these three are out of balance. Primary communication should present a positive image of the company and set the stage for a strong reputation. Secondary communication should be designed to support and reinforce primary communication. Tertiary communication should be positive and result in a superior reputation if the other two stages of corporate communication are properly conceived. The authors postulate that senior managers who implement this can invest their organisation with a competitive advantage.

Capturing the real value in high-tech acquisitions.

Abstract: Eager to stay ahead of fast-changing markets, more and more high-tech companies are going outside for competitive advantage. Last year in the United States alone, there were 5,000 high-tech acquisitions, but many of them yielded disappointing results. The reason, the authors contend, is that most managers have a shortsighted view of strategic acquisitions--they focus on the specific products or market share. That focus might make sense in some industries, where those assets can confer substantial advantages, but in high tech, full-fledged technological capabilities--tied to skilled people--are the key to long-term success. Instead of simply following the "buzz," successful acquires systematically assess their own capability needs. They create product road maps to identify holes in their product line. While the business group determines if it can do the work in-house, the business development office scouts for opportunities to buy it. Once business development locates a candidate, it conducts an expanded due diligence, which goes beyond strategic, financial, and legal checks. Successful acquires are focused on long-term capabilities, so they make sure that the target's products reflect a real expertise. They also look to see if key people would be comfortable in the new environment and if they have incentives to stay on board. The final stage of a successful acquisition focuses on retaining the new people--making sure their transition goes smoothly and their energies stay focused. Acquisitions can cause great uncertainty, and skilled people can always go elsewhere. In short, the authors argue, high-tech acquisitions need a new orientation around people, not products.

Advancing and enhancing corporate reputation

Abstract: This article describes corporate reputation as it pertains to corporate practice. Key areas treated are worldwide executive opinion on their ability to affect corporate reputation; three specific strategic benefits and goals of strong corporate reputation (preference in doing business with a company when products/services are similar, support for a company in time of controversy, and company value in the financial marketplace); the six key factors that drive corporate reputation; examples of how these drivers vary in importance in different countries, in different industries in the same country, and in the context of the three different goals; and illustrations of how company behaviour, relative to public expectations, can erode corporate reputation. Credibility is cited as the central link between company behaviour and public confidence, also encompassing the “promise/performance gap” between consumer expectations and product/service delivery.

Corporate identity and corporate communications: the antidote to merger madness

Abstract: This article examines the potential relevance of corporate identity and corporate communication to the merger and acquisition process. Recent studies indicate that around 50 per cent of all mergers failed to produce the synergistic benefits that were expected of them. The authors argue that this failure rate may be attributable to the neglect of corporate identity and corporate communication issues and have identified nine reasons why mergers fail, chief among which are: the undue attention that is given to short‐term financial and legal issues to the detriment of long‐term identity and communication issues; inadequate recognition of the impact of leadership issues on identity and communication; and failure to secure the goodwill of a wide range of stakeholder groups common to both companies. The authors offer a template pertaining to corporate identity and corporate communication issues in the merger and acquisition process which they call the merger mix.

Innovation systems in regions of Europe—a comparative perspective

Abstract: The understanding of the innovation process has changed considerably in the past years. Models have shifted from linear and firm‐based conceptions towards interdependent and systemic approaches. Both national and regional innovation systems have been discussed in recent literature. The present paper investigates on the basis of data for several European regions, collected in the course of a European project, to which extent companies engage in networks in their innovation process. Also, the types of partners, their respective locations as well as differences between the regions are explored. Results show that for many firms innovation is still a rather internal process. Reliance on internal competence and lack of trust to other firms are among the reasons for this. Nevertheless, for another group of companies networks are much more relevant. They draw on ideas, know‐how and complementary assets from customers, suppliers, consultants, universities, funding and training institutions. These networks...

Equity ownership structure, risk taking, and performance : an empirical investigation in Turkish listed companies

Abstract: The paper describes the main characteristics of ownership structure of the Turkish nonfinancial firms listed on the Istanbul Stock Exchange (ISE) and examines the impact of ownership structure on performance and risk-taking behavior of Turkish firms. Turkish corporations can be characterized as highly concentrated, family owned firms attached to a group of companies generally owned by the same family or a group of families. Ownership structure is defined along two attributes: concentration and identity of the owner(s). We conclude that there is a significant impact of ownership structure -ownership concentration and ownership mix- on both performance and risk-taking behavior of Turkish firms. Higher concentration leads to better market performance. Family owned firms seem to have lower performance with lower risk. While firms with foreign ownership display better performance, government owned firms have lower accounting, but higher market performance with high risk.

Corporate Law and Social Norms

Abstract: Corporate law serves both tofacilitate and to regulate the conduct ofthe corporate enterprise. Insofar as corporate law is regulatory, it provides incen? tives and disincentives to the major actors in the corporate enterprise?direc? tors, officers, and significant shareholders?through the threat of liability. In significant part, however, these actors are motivated not by the desire to avoid liability, but by the prospect of financial gain, on the one hand, and by social norms, on the other. Much work has been done on the way in which these actors are motivated by the threat of liability and the prospect of finan? cial gain, but relatively little work has been done on the operation of social norms. The purpose ofthis Article is to illuminate both corporate law specifi? cally, and the interrelation of law and social norms generally, by studying the ways in which that interrelation operates in the field of corporate law. The Article begins by describing three kinds of social norms?behavioral pat? terns, practices, and obligational norms?and considering the origins and effects of social norms. It then examines the critical role of social norms in several central areas of corporate law: fiduciary duties (specifically, care and loyalty), corporate governance (specifically, board composition and the role of institutional investors), and takeovers.

Company law and corporate finance

Abstract: PART I. THE FRAMEWORK OF CORPORATE ACTIVITY 1. The Company and the Corporate Group 2. Corporate Finance Structure: Basic Legal, Accounting and Financing Considerations 3. The Company as a Business Operator PART II. CORPORATE GOVERNANCE 4. Management of Companies 5. Controlling Management: Duties of Honesty, Propriety and Loyalty 6. Controlling Management: Duties of Care and Skill Non Executive Directors 7. Controlling Management: Corporate Democracy and the Role of Institutional Investors PART III. SHARE CAPITAL 8. Shares and Share Capital 9. Rights Attaching to Shares 10. Maintenance and Reduction of Capital 11. Financial Assistance 12. Distributions to Shareholders 13. Share Buy Backs and Redeemable Shares PART IV. LOAN CAPITAL 14. Loan Capital - General Considerations 15. Secured Debt 16. Subordinated Debt PART V. RAISING FINANCE FROM CAPITAL MARKETS 17. Initial Public Offers of Securities 18. Secondary Offers of Securities

Shareholding Cascades: The Separation of Ownership and Control in Belgium

Abstract: This paper analyses the control of Belgian listed companies. The analysis reveals that control of listed companies in Belgium is highly concentrated. Business groups, holding companies, and voting pacts, play an important role in bringing about this concentration. The main characteristics of the Belgian corporate ownership and equity market can be summarised as follows: (i) few - merely 140 - Belgian companies are listed on the Brussels stock exchange, (ii) there is a high degree of ownership concentration with an average largest direct shareholding of 45%, (iii) holding companies and families, and to a lesser extent industrial companies, are the main investor categories whose share stakes are concentrated into powerful control blocks through business group structures and voting pacts, (iv) control is levered by pyramidal and complex ownership structures and (v) there is a market for share stakes.

Corporate Governance And Corporate Performance

Abstract: National corporate-governance traditions are distinctive, deeply rooted, and difficult to change. Recent research points to a country's legal traditions and its stage of economic development as important determinants of corporate-governance institutions. Common-law countries tend to provide more explicit investor protections than civil-law countries. Richer countries tend to enforce corporate law more strictly. Broader and deeper financial markets emerge in the presence of strong investor protections, fostering more outside financing and better corporate financial performance. Corporate-governance systems also influence resident firms' capital structures and ownership structures. A broader perspective on corporate performance suggests that no country's system of corporate governance is without shortcomings, however.

The dynamics of corporate culture: conception and theory

Abstract: This paper analyzes and explains the dynamics of corporate evolution in the context of anthropologist conception of culture The multinational corporate characterizing the Galbraithian world, as The New Industrial State, dominates the current economic landscape The conception of corporate culture and its dynamics lays bare the locus of corporate power which resides in the control of corporate technology Granting this dynamic, the question then arises concerning the agency which controls the application and use of this cumulated corporate power Corporate power and policy in the USA are currently directed by a social institution in the form of profits without social responsibility This policy is manifest in a “low road” of cost reduction Such a policy direction exacerbates rather than ameliorates the current economic malaise now characterizing the US economy

The figure in the landscape: a comparative sketch of directors' self-interested transactions

Abstract: DEBORAH A. DEMOTT [*] I INTRODUCTION A central question that underlies many analyses of corporate governance is whether the law and legal institutions have a constituent role in shaping governance practices, or whether the law, as well as governance practices, are best viewed as the inevitable results of market forces, centered upon capital markets. A separate, but related question is the degree to which mechanisms of governance--such as shareholder voting, take-over bids, independent directors, mandatory disclosure, and shareholder litigation--can function adequately as substitutes for one another. The perspective I offer on these questions is based on a comparison between the United States and the United Kingdom, which are sufficiently similar in relevant respects that their divergences are illuminating. The Law Commissions of England and Scotland recently released a Consultation Paper surveying U.K. law on directors' duties with a particular focus on Part X of the Companies Act 1985, which addresses specific types of self-dealing by directors. [1] Reading the Consultation Paper is an instructive experience for one familiar with corporate law in the United States because it confounds conventional wisdom about the degree of similarity between corporate law in the two countries. The descriptive as well as the evaluative portions of the Paper suggest that underlying principles diverge more between the United States and the United Kingdom than often is assumed. In particular, each country's body of law reflects different assumptions about the appropriate role of specific institutions in shaping the conduct of corporate directors and managers. The degree of some of the substantive contrasts is striking. For example, the U.K. statute criminalizes particular transactions that, in the United States, would be well within the discretion of financially disinterested directors. As legislation, moreover, Part X of the Companies Act 1985 has a style and feel that is distinctly different from counterpart provisions in U.S. corporation statutes. Finally, the Consultation Paper illustrates the difficulty of rethinking settled doctrines and statutory structures within the law, so pervasive and inescapable is the force of underlying assumptions. Even analyses grounded in economics may reflect starting assumptions drawn not from economic principles of general applicability, but from a specific legal context. In this article, I focus on the subject of Part X--transactions involving self-interested directors--drawing contrasts with corporate law in the United States. I focus primarily on public companies and on the law of Delaware, the leading situs of incorporation in the United States for public companies. [2] I examine several types of conflict scenarios: self-dealing between the corporation itself and the director; indemnification; directors' pursuit of business opportunities related to the corporation; and defenses to hostile take-over bids. The legal treatment of self-interested transactions diverges more between the United States and the United Kingdom than one might predict, given common starting points. The United States and the United Kingdom share a legal heritage encompassing the common law and principles of equity. Corporation statutes in both countries do not supplant these principles. [3] In both countries, corporation law is grounded in a necessary formalism that treats the corporation itself as a distinct legal entity that may incur obligations and possess rights separate from its owners. Likewise, although directors owe duties to the corporation itself, corporate law accords primacy to shareholders' interests. In both countries, moreover, much business financing and investment is intermediated by capital markets, in contrast with financial systems predominantly organized around relatively activist financial institutions that themselves make and hold loans to business borrowers, and buy and hold equity investments in businesses. …

The international competitiveness of the Costa Rican clothing industry

Abstract: Costa Rica has become a new centre of international competitiveness in Latin America and the Caribbean. Its share in the imports of the member countries of the Organization for Economic Co-operation and Development (OECD); has gone up from 0.07% to 0.09% (0.15% to 0.23% of the North American market); and in the market for manufactures from 0.01% to 0.04% (0.03% to 0.16% in North America);. Costa Rica's pattern of exports to those markets has varied, with the slow-growing natural resource sector, which accounted for 91.2% of total exports in 1980 (85.2%);, losing ground to fast-growing manufacturing sectors, which made up 38.5% of the total in 1995 (56.6%);. The share of the 10 main export products (at three digits of the Standard International Trade Classification); in total exports came to over 78% (72%);, while clothing become the most important category of the new line of exports, with a 24.5% (37.7%); share of the total. The striking success of the garment industry, however, is threatened by two factors. First, clothing manufacturers in the Caribbean Basin cannot hope to match the advantages Mexico enjoys as a signatory of the North American Free Trade Agreement (NAFTA);. With regard to tariffs, Mexico has a six-point advantage in the United States; many garments it produce are no longer subject to import quotas; and, even more importantly, in order to fulfil minimum content requirements, inputs of Mexican origin are considered as produced within NAFTA. Second, other countries in the Caribbean Basin -such as El Salvador, Guatemala and Honduras- have begun to compete with Costa Rica, on the strength of their lower wages. Together, these two factors have precipitated a drop in garment exports and a decline in the share of some articles in United States imports. In order to study the experiences and competitive situation of garment assemblers in Costa Rica, a total of 16 such firms (12 foreign and 4 local); were surveyed. Particularly revealing and significant were the findings with respect to the interrelationship between the three groups of factors associated with international competitiveness: the global market, corporate strategies and national policy. It has possible to identify the main features of three distinct groups in the sample. As becomes clear, each competitive situation has a certain logic. Group I, consisting of large United States underwear manufacturers, operates in a well-defined competitive situation. In terms of the global market, over a decade ago the parent companies faced a strong challenge from Asian competitors in their domestic market. They responded by setting up manufacturing operations in Latin American countries, which offered them cheap labour and specific incentives (chiefly duty-free import facilities and tax breaks); and preferential access to the United States market (through the HTS 9802 mechanism);. This enabled them to face down the Asian challenge. Underwear exports from the Caribbean Basin, especially Mexico, the Dominican Republic and Costa Rica, increased exponentially, and as a result United States producers were better able to defend their shares in their own market. It is interesting to note that these companies have tended to create more extensive networks by establishing assembly plants in several Caribbean Basin countries, a strategy that gives them the ability to respond to changes in the competitive situation of each cost centre. Each assembly plant is a small part of the overall organization, and with similar operations in various countries the companies can add production lines depending on the efficiency of each individual plant, without having to abandon any particular site, except in extreme circumstances. For these firms, international competitiveness becomes to a large extent an internal matter at the corporate level, and most consider that their main competitors are other United States companies rather than Asian firms. These strategic factors confer security on the integrated production systems of parent firms. They have, in fact, managed to deal successfully with the Asian challenge. This situation is generating significant results in Costa Rica. The underwear industry has become the leading source of garment exports from Costa Rica to the United States. This industry is comprised of three firms established before 1982, along with two others set up in the late 1980s; together, they make up Group I. This group of firms accounts for close to 60% of exports and total employment in the sample. In terms of the number of employees, their operations doubled from 1985 to 1989, and again from 1990 to 1995. Their expansionary corporate strategies were extremely successful. The competitive situation of the four local firms that make up Group III represents the other extreme of the sample. This is a homogeneous group of small and long-established producers of men's and boys' outer garments (SITC 842); and other garments; they operate primarily via export contracts to the United States market, with several categories subject to quotas. These firms were set up as part of the import-substitution industrialization strategy, and, with the policy shift of the 1980s, they lost local market share as a result of import penetration. This forced them to adapt to obtain contracts from foreign buyers, chiefly large department stores or manufacturers of name-brand clothing. They compete with the rest of the world for relatively short contracts, the main determinant of which is price. This group of companies does not enjoy the advantages of the transnational garments firms that assemble in Costa Rica. Unlike foreign companies, the corporate strategies of these firms are based on their competitiveness, rather than global market factors. They tend to adopt defensive positions and have shown mixed results. One of the local firms went bankrupt in 1996. The third competitive situation typifies the remaining foreign firms in the sample. They make up Group II, which is less homogeneous, as it includes new small foreign firms (five from the United States and two from Asia); that produce men's and boys' outer garments (SITC 842); as well as other garments for export to the United States under EPZ or temporary admission arrangements or the Harmonized Tariff Schedule (HTS); 9802 mechanism. Many of the products they export are subject to quotas. Firms in this group are in an intermediate situation that includes elements of both Group I and Group III. As with Group I, firms in this group have a corporate network with many advantages; generally speaking, however, their networks are thinner and more widely extended, and feature larger but less specialized components. They identify their competitors and their competitive situation as the local firms do, i.e., their competitors are other assemblers located in the Caribbean Basin and competition is based either on competitive pricing or defence of their parent companies market share. Their strategies are more focused on cost centres. Five of the seven firms surveyed stressed that the main motive that would induce them to leave Costa Rica would be to reduce labour costs. In addition, an Asian firm that started out by supplying its corporate network in the United States has begun to compete for contracts with large buyers not related to its parent company. Firms in this group are important and account for about 30% of exports and employment in the sample. They did not show the same sort of job growth as firms in Group I; they increased employment by only 50% in the period 1990-1995; however, this was considerably better than in the case of the Group III firms. Three of the seven firms increased their share of the global market in 1990-1995. The export categories that lost the most momentum in 1995 were suits, men's and boys' pants and women's pants. In conclusion, analysis of the successes and challenges of Costa Rica's garment industry was facilitated by the study of the three competitive situations of the different groups of firms operating in that country.

Corporate Groups and Minority Shareholder Wealth: A Role for Private Benefits?

Abstract: This paper aims at developing a theoretical framework to address the issue of internal resource allocation within corporate groups, representing an extension of the internal capital market approach developed for Anglo-Saxon type multidivisional enterprises. In particular, the paper investigates how private benefits from control affect investment decision processes in a capital constrained business group. We consider a group of n listed companies controlled by one main shareholder (i.e., a hierarchical group), and suppose that the group as a whole is endowed with an exogenous and limited amount of capital for investment. We analyze the effects of private benefits on the investment allocative efficiency and on the wealth of the group';s various claimants. Under reasonable assumptions, we show that the controlling shareholder always finds preferable to secure private benefits. Moreover, and surprisingly enough, we find that the appropriation of control benefits may give rise to an increase in the market value of the group as well as in the portfolio wealth of the set of minority shareholders. In particular, the positive effect of control benefits on minority interests increases with the capital rationing of the group. Therefore, the effects of private benefits can be different in different markets, depending on the degree of development and the credit capacity of the single market. The findings of this paper challenge the largely accepted view that private benefits from control are always harmful to minority shareholders.

Shareholding Cascades: The Separation of Ownership and Control in Belgium

Abstract: This paper analyses the control of Belgian listed companies. The analysis reveals that control of listed companies in Belgium is highly concentrated. Business groups, holding companies, and voting pacts, play an important role in bringing about this concentration. The main characteristics of the Belgian corporate ownership and equity market can be summarised as follows : (i) few - merely 140 - Belgian companies are listed on the Brussels stock exchange, (ii) there is a high degree of ownership concentration with an average largest direct shareholding of 45%, (iii)holding companies and families, and to a lesser extent industrial companies, are the main investor categories whose share stakes are concentrated into powerful control blocks through business group structures and voting pacts, (iv) control is levered by pyramidal and complex ownership structures and (v) there is a market for share stakes.

Corporate Law Reform in the People's Republic of China

Abstract: This paper traces the development of corporate law in the People's Republic of China (PRC) that began with the post-1978 economic reforms. With the jettison of the "iron-rice bowl" in favour of the contract responsibility system, enterprises gained autonomy and gradually became self-managed entities responsible for their own profit and loss. Ownership structure, however, became blurred when these entities amass wealth and establish a network of businesses through self-accumulation. The Enterprise Law, 1988 propounded the 'separation of ownership from management' concept as a way to clarify the ownership structure. At the same time, it unwittingly heralded the beginnings of corporate identity in Chinese enterprises. Such a concept easily springboards the shareholding system in many Chinese enterprises and the practice was legitimized by the PRC Company Law of 1993. The PRC Company Law welded Western corporate models with traditional concepts of Chinese law to produce a unique Company Law with distinctly Chinese characteristics. The form, capital structure and internal governance of Chinese companies are examined in depth and comparisons are made with Western corporate models in Part IV of this paper. Despite the efforts of Chinese legislators to aligned Chinese companies with international norms, critical problems abound. Part V addresses these problems which are rooted in the lack of a corporate governance culture in Chinese companies and a weak banking system and capital markets which failed to be effective monitoring devices to instill market discipline in these companies.

Role of Inter-organizational Networks: The Case of Japanese Corporate Groups

Abstract: The existence and functioning of inter-organizational or corporate groups has long been a focus of economic research on Japan. Their specific features have been understood to differ substantially from a more market-oriented behaviour displayed by Western, especially US firms. However, in the wake of the collapse of the bubble economy, these networks have come under increasing criticism for their allegedly closed and non-innovative character. On the basis of a survey conducted among large Japanese manufacturers key restructuring issues for corporate groups are identified and explained. Strategies that support mutual learning, clearer performance criteria and greater decision autonomy for group members are given relatively more weight than before. An indepth case study reveals in more detail that in the future corporate group success in Japan will depend to an even greater extent than before on finding the crucial balance between the ‘centrifugal’ and ‘centripetal’ forces underlying the actual functioning of these networks.

Externalization of Organizations and the Dual Governance Structure

Abstract: Japanese corporations have developed organizational structures that differ from their Western counterparts. One important difference lies in the externalization of organizational units as legally independent firms, rendering the typical large Japanese firm a collection of inside divisions and outside subsidiaries (corporate group). This arrangement has a number of positive effects on firms’ performance due to a blend of external and HQ evaluation, a reduction of governance costs and dysfunctional control functions, and the facilitation of organizational learning through the exchange of (‘uncomfortable’) information across companies. Based on an indepth case study (Matsushita Electric Industrial), the paper argues for the successful implementation of ‘dual governance structures’.

Shareholding Cascades : The Separation of Ownership and Control in Belgium

Abstract: This paper analyses the control of Belgian listed companies. The analysis reveals that control of listed companies in Belgium is highly concentrated. Business groups, holding companies, and voting pacts, play an important role in bringing about this concentration. The main characteristics of the Belgian corporate ownership and equity market can be summarised as follows : (i) few - merely 140 - Belgian companies are listed on the Brussels stock exchange, (ii) there is a high degree of ownership concentration with an average largest direct shareholding of 45%, (iii)holding companies and families, and to a lesser extent industrial companies, are the main investor categories whose share stakes are concentrated into powerful control blocks through business group structures and voting pacts, (iv) control is levered by pyramidal and complex ownership structures and (v) there is a market for share stakes.

Comparative Privatization Experience: Employee and Private Ownership

Abstract: Does privatization lead to greater economic efficiency? Is privatization inevitably regressive? Do employee-owned firms represent a way of ameliorating the regressive social impact of privatization without compromising economic efficiency? These issues are empirically investigated in this chapter by comparing the performance of employee-owned privatized units with those conventionally transferred to an individual or a corporate group by comparing the before and after privatization performance of both kinds of units.