Corporate Governance in BMW

Submitted by: Amitava Manna 11DCP007 Daksha Shukla 11DCP017 ANC Natarajan 11DCP028 Rohan Varma 11DCP0 Taranpreet Chabra 11DCP0

Objectives of the Case Study

Corporate Governance in BMW

Corporate Governance in USA

Sarbanes- Oxley Act

CEOs must vouch for firms published financial statement Audit committees from independent directors Companies to prohibit loans to company directors

promote efficiency through antitrust laws efficient proxy-voting mechanism prevent abuse of monopoly power

Affinity towards outside directors Emphasis is on accountability of directors to shareholders Membership on boards does not mirror a companys close commercial relationships

Porsche

Despite large ownership by financial institutions, almost none have representation on Boards of Directors. Hostile takeovers are the ultimate check on the management of American corporations

Unilever

Siemens

1 2 3 4 5 6 7 8 9 10 11 12

Board Leadership Board CEO Relationships Board Culture Board Effectiveness CEO Succession Strategic Planning and Oversight Financial Oversight/ Internal Controls CEO Evaluation Disclosure Corporate Performance and Valuation Federal and State Regulatory Compliance Director Recruitment Executive Talent Management and Leadership Development Director Nomination/ Succession CEO Compensations Risk and Crisis Oversight Board Meeting Process Relations with Shareholders/Owners information Management Mergers/Acquisitions Committee Structure Board and Director Evaluation Restructuring Director Education and Development Corporate Social Responsibility Director Compensation

9 7 11 21 2 1 17 4 15 8 3

Le ss Ef fe cti ve

13 14 15 16 17 18 19 20 21 22 23 24 25 26

26

20 18 19 23 22 14 16

12

10

5 25 13

M or e Ef fe ct iv e

24

Less Important

More Important

Corporate Governance in JAPAN

Keiretsu-affiliation of related companies, intercompany transfers, informal supply contracts, reciprocal equity ownership Business agreements are broad in nature, lack specifics, disputes resolved amicably prevent abuse of monopoly power Management nominates potential Directors rather than shareholders 20-25 members in Board of Directors includes "inside managers" & very few are "outside directors Membership on boards does not mirror a companys close commercial relationships 25% of the stock of keiretsumember companies are owned under crossshareholding arrangements within the group itself FACE is paramount in Japanese society, major industrial shareholders will take quick, decisive steps when non-performance becomes imminent.

Toyota

In many firms, including Toyota, family ties make challenging the boss all but impossible The lack of an outside perspective is particularly striking in the case of Toyotas board. It is composed of 29 Japanese men all of them Toyota insiders, none of them independent

report

Shareholders Meeting Appoint for one year Torishimariyaku-kai Integration of Supervisory and Management Function

Hosha-linkai
Remuneration committee

Shimei-linkai
Nominating committee

Kansa-linkei
Audit committee

President/ CEO appoint supervision

Control Annual audit

Auditor/annual accounts

report

Board of Directors = external

Corporate Governance in GERMANY

Corporate governance is carried out through a separate & distinct Supervisory Board and Management Board. Supervisory Board appoints a 5 to 15 member Management Board to run the company

The largest German shareholders business corporations, insurance companies, and banks have considerable representation on Supervisory Boards

Under German Law, labor representatives may hold up to half the seats on a German Supervisory Board

Shareholders Meeting inform Management Board report appoint Supervisory Board companies with < 2000 empl. > 2000 empl.

For 5 years
* Responsible for labor matters and HR (large companies)

Appointment, supervision , approval for certain transactions

Max.21 For 4 years

Max.20

control annual audit = representatives of employees (trade union)

* Chairman (qualifying vote in large companies)

report

= representatives of shareholders

Auditor/ annual accounts

The premium investors would pay for well governed company varies by country
Value of good governance
25% 20%

15%

10%

5%

0% Japan US Germany

Countries where Institutional investors see good governance as being scarce

Source: McKinsey Global Investor Opinion Survey on Corporate Governance,2002

Our Key findings

Governance remains important compared to financials, particularly in emerging markets
Corporate governance is at the heart of investment decisions

Financial disclosure is a pivotal concern

Reform priorities focus on rebuilding the integrity of the system

A significant majority of investors say they are willing to pay a premium for a wellgoverned company