Über die Autorin bzw. den Autor

SANJAY ANAND, CFE, CCD, is Chairperson of SOX Institute, the provider of Sarbanes-Oxley training and certification programs. He is a globally recognized expert in the fields of corporate governance, risk management, and regulatory compliance. He has consulted, trained, or worked with hundreds of companies, including domestic, global, not-for-profit, and even government. He has been published in magazines and journals of finance, audit, and IT, and his books are read and used by xecutives, professionals, academics, and students at companies and colleges around the world. For more information, see www.grcinstitute.org.

Von der hinteren Coverseite

• Corporate Governance for the Twenty-First Century
• Directors' Rights and Obligations
• Ensuring Board Effectiveness
• Monitoring Management Performance
• Legal and Ethical Challenges for the Board
• International Corporate Governance

Praise for ESSENTIALS OF CORPORATE GOVERNANCE

"Mr. Anand's book is a practical study of the complicated issues surrounding the world of corporate governance. He includes excellent case studies and best practice solutions for improving governance programs within all types of organizations."
Chrisan Herrod, V.P. Marketing and Business Development, Compliance Spectrum

"This book is a highly practical, accessible guide to post-Enron reforms and an essential resource for managers who want more than just to comply with SOX; this book will help them benefit from it."
Nell Minow, Editor and cofounder, The Corporate Library

Written by Sanjay Anand, one of the world's leading corporate governance, risk management, and regulatory compliance experts, this simple-to-use book is designed with appreciation for demanding professional obligations, with information easy to find and at your fingertips. This guide's nuts-and-bolts presentation xamines why corporate governance is important, to put you in a better position to understand its successful implementation for your organization.

Essentials of Corporate Governance will challenge your concept of corporate governance and provide you with an understanding of:

• The concept of governance
• The competing goals that corporations may have
• Why there is a call for corporations to be more ethical
• The various forms of corporate structure
• Corporate governance in emerging markets
• Corporate governance within nonprofit organizations

Communicating the idea of corporate governance as a process and an ideal rather than a set of criteria, this accessible and relevant book is the resource and reference guide you will turn to time and again for the knowledge you need to make corporate governance work for your corporation.

The Wiley Essentials Series because the business world is always changing...and so should you.

Aus dem Klappentext

• Corporate Governance for the Twenty-First Century
• Directors' Rights and Obligations
• Ensuring Board Effectiveness
• Monitoring Management Performance
• Legal and Ethical Challenges for the Board
• International Corporate Governance

Praise for ESSENTIALS OF CORPORATE GOVERNANCE

"Mr. Anand's book is a practical study of the complicated issues surrounding the world of corporate governance. He includes excellent case studies and best practice solutions for improving governance programs within all types of organizations."
—Chrisan Herrod, V.P. Marketing and Business Development, Compliance Spectrum

"This book is a highly practical, accessible guide to post-Enron reforms and an essential resource for managers who want more than just to comply with SOX; this book will help them benefit from it."
—Nell Minow, Editor and cofounder, The Corporate Library

Written by Sanjay Anand, one of the world's leading corporate governance, risk management, and regulatory compliance experts, this simple-to-use book is designed with appreciation for demanding professional obligations, with information easy to find and at your fingertips. This guide's nuts-and-bolts presentation xamines why corporate governance is important, to put you in a better position to understand its successful implementation for your organization.

Essentials of Corporate Governance will challenge your concept of corporate governance and provide you with an understanding of:

• The concept of governance
• The competing goals that corporations may have
• Why there is a call for corporations to be more ethical
• The various forms of corporate structure
• Corporate governance in emerging markets
• Corporate governance within nonprofit organizations

Communicating the idea of corporate governance as a process and an ideal rather than a set of criteria, this accessible and relevant book is the resource and reference guide you will turn to time and again for the knowledge you need to make corporate governance work for your corporation.

The Wiley Essentials Series—because the business world is always changing...and so should you.

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Essentials of Corporate Governance

John Wiley & Sons

Chapter One

After reading this chapter, you will be able to

Understand what a corporation is Understand how corporations are organized Understand the concept of capital structure Understand the concept of governance Understand the competing goals that corporations may have Understand why there is a call for corporations to be more ethical

Before moving directly into a discussion of good Corporate Governance, it is important to create a foundation based on the initial concepts of the corporation, its role in society, and its organization.

The corporation, like no other fictional entity, has created an unprecedented volume of debate and discussion. There are those who argue for its existence, its reform, and its abolishment. There are groups that study the corporation in terms of its sociological impact on individuals and those who study the corporation in terms of its impact on itself.

At the core of all meaningful discussions of the corporation is the concept of Corporate Governance.

This chapter discusses corporations in terms of defining what they are and how they are organized. This chapter also introduces the concept of corporate ownership, a theme that is carried throughout each part of this book.

In addition, readers will learn about theories suggesting the possible purposes of the corporate structure and the concept of corporate ethics. Finally, this chapter closes with an introduction into the concept of Corporate Governance as a nonnormative descriptive term used to express the method by which corporations are governed rather than the way in which they should be governed.

Corporate Structure

It is sometimes helpful to think about corporations as imaginary people. In many ways they do have the same rights and powers that the average citizen does; they are able to open bank accounts, file taxes, make purchases, and own property.

Unlike nonincorporated businesses that do these things under their company name, the corporation's assets are not directly owned by the company owner or partners. Specifically, when a nonincorporated business purchases property, the deed is held by the company owner. However, when a corporation does the same, the deed is held by the corporation itself.

Corporate Organization

Corporations are owned by stockholders who purchase shares and therefore own a percentage of the sum of the corporation's assets.

The stockholders elect a board of directors to represent their interests and govern the running of the corporation. The directors then appoint an executive to oversee the operations of the corporation. It is the role of the directors to govern the actions of the executive and ensure that the interests of the shareholders remain forefront in all decisions.

Corporate Ownership

Shareholders are the legal owners of the corporation. However, this concept of ownership carries roles and rights different from those commonly associated with the concept of private ownership.

In corporations, the roles of ownership and operation are separated. Shareholders may be the legal owners of the company, but they do not have control over its operations. As a result, they have no claim to the assets of the corporation, except in terms of dividend payment and asset division at dissolution. Beneficially speaking, this also means that shareholders are not personally liable for the debts of the corporation except to the extent that their stock value will be lost.

Benefits of Incorporating

Although companies all have unique reasons for seeking incorporation, one of the principal advantages is that assets of the corporation are not linked to the assets of the owners (shareholders).

Because the corporation is its own entity under the law, if it is sued or files for bankruptcy, the corporation is solely liable. This means that the corporation's assets can be redistributed through legal procedures, but the shareholders' personal assets are not assessed.

This is contrary to the situation of a nonincorporated business in which the business owner's personal assets can be seized in situations of civil or criminal litigation and bankruptcy.

Purpose of Corporations

There are many debates about the purpose of the corporation. These debates include questions about whose needs the corporation is designed to fulfill. Some believe that the corporation's sole purpose is to meet the needs of the shareholders, and that in doing so, everyone will be better off. Milton Friedman, author and economist, was one of the most notable proponents of this belief.

Others argue that the corporations should be accountable to not just the shareholders, but also their employees, the market members, and the community as a whole. Those who subscribe to this belief promote the ideology that corporations can create value for several factions that include, but are not limited to, the shareholders.

These two positions do not seem wholly irreconcilable. To meet the needs of the shareholder would mean that the corporation maximizes its share value. This would be done by building the most successful business possible, which could very well entail meeting the needs of other parties.

On the whole, there are several groups to which the corporation could be obligated, as shown in Exhibits 1.1 and 1.2. It is arguable that companies have duties to themselves, their shareholders, the economy, employees, and society as a whole.

Some of these duties include: Needs of the corporation. A duty to itself would entail the corporation's responsibility to sustain its own existence. This duty would include adherence to fiscal responsibility, the establishment of highly functioning boards and executives, and possibly avoidance of takeovers. Needs of the shareholder. That corporations have a duty to shareholders is not often disputed. Instead, debate arises regarding the extent to which this duty should be fulfilled. Corporations, their boards, and their executives must respect the corporate owners and work in favor of their interests. Needs of the economy. As embedded members of the economy, corporations may have a responsibility to the economy as a whole and others in its membership. Compliance with regulations that promote market health, such as the Sarbanes-Oxley Act and U.S. Securities and Exchange Commission guidelines, works toward fulfilling this potential duty. Needs of the employees. Outside of the American corporate structure, there are those corporations that consider the interests of the stakeholders rather than simply the shareholders. Within these corporate frameworks, the corporation has at a least a limited duty to provide for the interests of its employees.

Needs of society. Discussions of corporations and their ethical responsibility all hinge on the question of whether they have a duty to society. Issues that would fall under this duty include considerations of the environment and activities in less regulated, emerging markets.

Irrespective of what a corporation believes that its duties are, or where its allegiances lie, it is clear that the existence of a corporation is inherently dependent on shareholders and their...