Corporate form of business is generally managed by the Board of Directors and the board members are elected by shareholders. The board in turn appoints the professional managers to manage the business. Different countries have different regulations and corporate governance models differ based on these differences.
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The Corporate governance models are broadly classified into following categories:
Under the Anglo-American Model of corporate governance, the shareholder rights are recognised and given importance. They have the right to elect all the members of the Board and the Board directs the management of the company. Some of the features of this model are:
This is also called European Model. It is believed that workers are one of the key stakeholders in the company and they should have the right to participate in the management of the company. The corporate governance is carried out through two boards, therefore it is also known as two-tier board model. These two boards are:
Japanese companies raise significant part of capital through banking and other financial institutions. Since the banks and other institutions stakes are very high in businesses, they also work closely with the management of the company. The shareholders and main banks together appoint the Board of Directors and the President. In this model, along with the shareholders, the interest of lenders is recognised.
Social Control Model of corporate governance argues for full-fledged stakeholder representation in the board. According to this model, creation of Stakeholders Board over and above the shareholders determined Board of Directors would improve the internal control systems of the corporate governance. The Stakeholders Board consists of representation from shareholders, employees, major consumers, major suppliers, lenders etc.
In India there are mainly three types of companies’ viz. private companies, public companies and public sector undertakings. Each of these companies has distinct kind of shareholding pattern. Thus the corporate governance model in India is a mix of Anglo-American and German Models.
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Tags: models of corporate governance, governance model, indian model of corporate governance, japanese model of corporate governance, german model of corporate governance
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