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CORPORATE GOVERNANCE - Coggle Diagram

- - - - delegated the authority to the agent to perform different tasks
    - - attempt to take advantage of the principal, as he possesses specialized knowledge that the principal lacks
  - - - absent
      - present
    - - absent
      - present
    - - matrix
  - - - the agent task
        
        manage the company on behalf of the principal
        
        he must be accountable to the principal
        
        because he may not act in the principal's best interest
- - - - how does the board of directors work?
    - - how does financial markets evolves and the main regulations affecting assets and credits
    - - not considering other people
    - - taking stakeholders into consideration
- - - - it is a system by which companies are controlled and directed
  - - - it is defined by two principles
        
        principle of performances
        
        top managers should have the freedom to run the company and pursue financial performance
        
        there should be a balance between these two
        
        principle of accountability
        
        managers should be accountable for their actions and should report them
- - - - complies?
        
        no further justification needed
      - does not comply?
        
        it must publicly explain why
    - - market pressure for legitimacy
      - mandatory disclosure
        
        since they have to explain if they do not comply
        
        is it effortless adhere to the code recommendations
    - - non mandatory
        
        but
  - - - it includes
        
        representatives from listed companies
        
        institutional investors
        
        professional associations
    - - more time for implementation
    - - comply or explain
      - substance over form
      - flexibility and proportionality
      - tiered application
      - adaption for concentrated ownership
        
        the code adapts itself to protect minority shareholders
    - - F
        
        functioning of the board directors and the role of chair
        
        regulates BoD operations day-to-day
        
        chairperson
        
        the one who schedules meetings and ensure all direcotrs receive high-quality information on time
      - A
        
        appointment of directors
        
        transparent and fair + board evaluation
      - B
        
        board role
        
        guide the company toward sustainable, long-term success
      - R
        
        remuneration
        
        this sets the rules for executive pay
      - I
        
        internal control and risk management
        
        the board is responsible for setting up a system of internal checks and balances to safeguard corporate assets
      - C
        
        Composition of the board of directors
        
        balance between executive directors and non-executive directors
    - - someone who does not currently maintain any directo or indirect business relationships with the firm
      - how many?
        
        large companies with concentrated ownership
        
        at least one-third of the board
        
        other large companies
        
        at least 50% of the board
        
        minimum requirement
        
        at least two independent directors (excluding the Chair)
- - - - financial model
        
        based on two assumptions
        
        the capital and managerial labor market are efficient
        
        the observable market price is a reliable proxy for firm performance
        
        solutions
        
        internal
        
        CEO dismissal
        
        executive remuneration
        
        to align CEO's interests to company's ones
        
        external
        
        capital and takehover market
        
        danage of professional reputation
      - Mypic Market Model
        
        markets are not perfect, they are myopic
        
        shareholders usually wants immediate results, leading managers to focusing in strategic decisions with a short-term perspective
        
        solution
        
        stimulate active shareholders (blockholders) to have a long-term perspective
      - Abuse of executive power model
        
        there is an imbalance between powers
        
        strong managers, weak owners
      - stakeholder model
        
        we need a wider focus
        
        advocates accountability to all stakeholders, not just shareholders