Ownership and Value Creation: Strategic Corporate Governance in the New Economy - Hardcover

Über die Autorin bzw. den Autor

Rolf H. Carlsson is a Senior Advisor on issues of business strategy, value creation, organisation, and corporate governance. Since the early 1970s he has worked as an international management consultant for SIAR and SIAR Bossard, now part of the Cap Gemini Ernst Young. Before that he worked in an investment/venture capital company and a commerical bank.

He holds an MBA from the Stockholm School of Economics and he is a Senior Research Fellow of Scandinavian Institutes for Administrative Research, SIAR.

Rolf H. Carlsson has published several books on ownership in Swedish. He can be reached via e-mail: rc@crrc.se

Von der hinteren Coverseite

"Who owns the modern company? And how should owners behave? Rolf H. Carlsson brings a fresh eye and historical depth to the issue of ownership, management and value creation that every firm and its owners must consider."
Frances Cairncross, Management Editor, The Economist

"Rolf H. Carlsson gives a valuable historical review and illustrates with cases how active ownership has played an important role in company development...gives...interesting views on where corporate governance is heading and...advice on how to make it work well."
Percy Barnevik, Chairman of ABB, AstraZeneca, Investor, and Sandvik; Director (non-exec.) of GM

"The nuanced and rich analysis of ownership competence which can be found in Rolf H. Carlsson's book goes far beyond the traditional debate and provides truly interesting and valuable insights for investors, industrialists, entrepreneurs, and owners both in the private and the public sectors."
Richard Normann, Professor, Chairman of SMG

"Rolf H. Carlsson (analyses the) process...of (creating) long-term shareholder value...in which our model for corporate governance is key, and provides valuable insights into our approach to business."
Marcus Wallenberg, CEO, Investor AB

"Rolf H. Carlsson's...book on ownership (has been) eagerly awaited by the governance community. Carlsson is uniquely able to illumine those areas in which Swedish corporate structuring has been ahead of the world. It is a book that we all look forward to reading."
Robert A. G. Monks, Principal, Lens Investment Management

"Carlsson...outlines a powerful frame of reference and analytical tools to address issues of value creation and the role of active owners. This book is a significant contribution to the all-important issues of corporate governance. I was intrigued and pleased to read it."
Richard H. Koppes, Jones Day and Stanford Law School; former General Counsel, CalPERS

"...adds new perspectives by highlighting the demanding challenges of globalisation. A remarkable new book on the crucial issues of ownership and corporate governance."
Dr R. Marsch-Barner, Senior Counsel, Deutsche Bank AG

"This innovative book puts the spotlight on those who have the ultimate responsibility for corporate governance, the owners. It provides useful insight into the ways of effective ownership."
Professor Jay W. Lorsch, Harvard Business School

Aus dem Klappentext

Sustainable business success is ultimately dependent upon the quality of the ownership involved

The role of ownership is not only to supply risk capital and make management accountable reactively. Owners have a crucial value creation role to play in seeing to it that risks are reduced and eliminated through proactive initiatives and measures. This requires competence as well as the will and the position to exercise such ownership.

This book addresses these issues of ownership and value creation from three different perspectives:
* It reviews the advancement of the corporate governance movement by an anlysis of its emergence, driving forces, current status and future challenges in the five largest economies in the world: the USA, the UK, Germany, France, and Japan. In addition, it discusses the prospects of international convergence of corporate governance standards as well as the challenges for corporate governance and ownership in the new economy.
* An in-depth study of one of the most successful owners in the world - the Wallenberg sphere of Sweden. The Wallenberg dynasty has for almost 150 years been the proactive owner behind a number of successful international corporations such as ABB, AstraZeneca, Atlas Copco, Ericsson, Scania and many others. The case study provides crucial lessons to be learnt by proactive owners around the world.
* A conceptual framework and analytical tools illustrated by practical examples to address issues of value creation and the role of ownership. This includes a thorough analysis of different types of risks, risk logic and dynamics, as well as concepts for the reduction/elimination of risks. Finally, the empirical and conceptual analyses are synthesised into recommendations for how the function of ownership and corporate governance could be enhanced to achieve sustainable business prosperity.

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The CalPERS Story: Pioneering and Establishing Corporate Governance in the USA

'LIKE HELL!'

That indignant outburst came from Jesse Unruh, a seasoned Kennedy politician in California and a powerful trustee of the state pension fund CalPERS in California. The indignant reaction was provoked by Texaco's management and board, which at that time was entirely dominated by members who were also in the executive management, who had seen off a hostile bid for Texaco by means of a so-called greenmail operation' in 1984. Bass Brothers, who were the ones considering a take-over, had acquired a significant minority holding in Texaco as the starting point for a bid for the whole company. The Texaco management saw this as a threat to its own position. By exploiting the American Companies Act whereby a company can buy back its own shares from existing owners, and in addition making their offer only to Bass Brothers, they were able to stave off the threat. Nor was there anything to prevent the management from using greenmail (referring to the colour of the dollar bill); in other words offering an exorbitant price - in this case US$55 per share compared with the market price which was around US$35 at that time (1984). What annoyed Jesse Unruh was not just that they were robbing the other shareholders, including CalPERS (the excess being paid in this case corresponded to a total of US$137 million, thus reducing the net value of the company by the same amount and hence the value of the remaining shareholders' stakes to a similar degree), but also that such goings on were possible at all.

Jesse Unruh was unable to do anything about this particular affair, but one could claim that this incident was the trigger for the whole American Corporate Governance movement.

An Important Resolution The CalPERS' board immediately adopted a resolution which stated that as long-term investors they would not accept behaviour similar to that of Texaco from companies they had invested in and that they expect these companies to follow practices that are not prejudicial to the shareholders. CalPERS decided to use its power as a shareholder at the general meetings to see through its resolution and also to work in other ways to get to grips with the unsatisfactory state of affairs on the American stock market and in American corporations. Apart from the greenmail abuse, which was one of the worst offences, there were a lot of other issues to tackle, for example the boards' dependence on the management, the competence and appointment of the boards, the boards'/managers' salaries, emoluments and incentive system, so-called poison pills (various arrangements to prevent or obstruct hostile takeovers).

The mission and investment policy of CalPERS Before getting on to what happened next, more background information is needed to understand the underlying motives and driving forces behind the actions.

CalPERS, which was among the inner circle of the largest public pension funds even in 1984, is now the largest in the USA, with total assets of more than US$160 billion.

Towards the end of the 1960s legal restrictions on pension funds' possibilities of investing in share were lifted. Increased requirements for growth in Texaco from companies they had invested in and that they expect these companies to follow practices that are not prejudicial to the shareholders. CalPERS decided to use its power as a shareholder at the general meetings to see through its resolution and also to work in other ways to get to grips with the unsatisfactory state of affairs on the American stock market and in American corporations. Apart from the greenmail abuse, which was one of the worst offences, there were a lot of other issues to tackle, for example the boards' dependence on the management, the competence and appointment of the boards, the boards'/managers' salaries, emoluments and incentive system, so-called poison pills (various arrangements to prevent or obstruct hostile takeovers).

The mission and investment policy of CalPERS Before getting on to what happened next, more background information is needed to understand the underlying motives and driving forces behind the actions.

CalPERS, which was among the inner circle of the largest public pension funds even in 1984, is now the largest in the USA, with total assets of more than US$160 billion.

Towards the end of the 1960s legal restrictions on pension funds' possibilities of investing in share were lifted. Increased requirements for growth in these pension funds, in order to guarantee civil servants' pensions, have meant that the proportion in shares has been increasing all the time. Table 2.1 shows CalPERS' total assets as of January 31, 2000 of which the dominant portion consists of shares.

The pension commitments are of the defined benefit type, in other words a certain pension is guaranteed to the beneficiary. With the increasingly tight finances in the state of California, there was increasing pressure on CalPERS to raise the return on its existing funds so the current budget was debited with the lowest possible charges so as to ensure the consolidation of the pension liability. In recent years, CalPERS' investments have generated a surplus return far above pension liabilities to the extent that it has been possible to raise pension benefits (compare that with the cumbersome state of affairs in most European countries where pension funds covering present and future pension benefits are minimal, if they exist at all).

Since the early 1970s, CalPERS investments in shares have predominantly been made on the basis of an index tracking strategy. This means that the total share portfolio reflects the whole stock market and that the yield is thus expected to follow the development of the general index. There are several reasons why this strategy was chosen. First of all, a pension fund is a long-term investor. It is the long-term yield, which is the decisive factor. It is not exposed to the competition, which unit trusts and personal pension insurance companies are, where the current yield is often an important factor in competition...