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• Contents
• Cases in Point
• Preface
• Acknowledgments
• Introduction – How to Use this Book
• 1. What is a Corporation?
• Defining the Corporate Structure, Purpose, and Powers
• Evolution of the Corporate Structure
• The Purpose of a Corporation
• Satisfying the human need for ambition, creativity, and meaning
• Social structure
• Efficiency and efficacy
• Ubiquity and flexibility
• Identity
• Metaphor 1: The Corporation as a “Person”
• Metaphor 2: The Corporation as a Complex Adaptive System
• Are Corporate Decisions “Moral”?
• Are Corporations Accountable?
• Three Key External Mechanisms for Directing Corporate Behavior: Law, the Market, and Performance Mea
• Government: legislation, regulation, enforcement
• What Does “Within the Limits of the Law” Mean?
• When and how do you punish a corporation?
• Probation of corporations
• The problem of serial offenders
• Securities analyst settlement
• What is the role of shareholders in making this system work?
• The market: too big to fail
• The corporation and elections
• Citizens united
• The corporation and the law
• A Market Test: Measuring Performance
• Long term versus short term
• Corporate decision making: whose interests does this “person”/adaptive creature serve?
• Another (failed) market test: NGOs
• Measuring value enhancement
• GAAP
• Market value
• Earnings per share
• EVA®: economic value added
• Human capital: “It’s not what you own but what you know”
• The “value chain”
• Knowledge capital
• The value of cash
• Corporate “externalities”
• Equilibrium: The Cadbury Paradigm
• ESG: Environment, Social Governance – A New Way to Analyze Investment Risk and Value
• Quantifying Nontraditional Assets and Liabilities
• Future Directions
• Summary and Discussion Questions
• Notes
• 2. Shareholders: Ownership
• Definitions
• Early Concepts of Ownership
• Early Concepts of the Corporation
• A Dual Heritage: Individual and Corporate “Rights”
• The Reinvention of the Corporation: Eastern Europe in the 1990s
• The Evolution of the American Corporation
• The Essential Elements of the Corporate Structure
• The Mechanics of Shareholder Rights
• The Separation of Ownership and Control, Part 1: Berle and Means
• Fractionated Ownership
• The Separation of Ownership and Control, Part 2: The Takeover Era
• Waking the Sleeping Giant
• A Framework for Shareholder Monitoring and Response
• Ownership and Responsibility
• No innocent shareholder
• To Sell or Not to Sell: The Prisoner’s Dilemma
• Who the Institutional Investors Are
• Bank trusts
• Mutual funds
• Insurance companies
• Universities and foundations
• Executive pay from the consumer side – a leading indicator of risk
• Pension plans
• The Biggest Pool of Money in the World
• Pension plans as investors
• Pension plans as owners
• Public Pension Funds
• Divestment initiatives
• Economically targeted investments
• AFSCME
• Federal Employees’ Retirement System
• TIAA–CREF
• Private Pension Funds
• The Sleeping Giant Awakens: Shareholder Proxy Proposals on Governance Issues
• Focus on the Board
• Hedge Funds
• Synthesis: Hermes
• Investing in Activism
• New Models and New Paradigms
• The “Ideal Owner”
• Pension Funds as “Ideal Owners”
• Is the “Ideal Owner” Enough?
• Summary and Discussion Questions
• Notes
• 3. Directors: Monitoring
• A Brief History of Anglo-American Boards
• Who Are They?
• Size
• Term
• Inside/outside mix
• Qualifications
• Who Leads the Board? Splitting the Chairman and CEO and the Rise of the Lead Director
• Agenda
• Minutes
• Diversity
• Meetings
• Communicating with Shareholders
• Special Obligations of Audit Committees
• Ownership/Compensation
• Post-Sarbanes–Oxley Changes
• Board Duties: The Legal Framework
• The Board’s Agenda
• The Evolution of Board Responsibilities: The Takeover Era
• The Fiduciary Standard and the Delaware Factor
• How did boards respond?
• Greenmail
• “Poison pills”
• Other anti-takeover devices
• The Director’s Role in Crisis
• Limits and Obstacles to Board Oversight of Managers
• Information Flow
• Practical Limits: Time and Money
• The Years of Corporate Scandals – Boards Begin to Ask for More
• Director Information Checklist
• Who Runs the Board?
• Catch 22: The Ex-CEO as Director
• Director Resignation
• CEO Succession
• Director Nomination
• Limits and Obstacles to Effective Board Oversight by Shareholders
• Carrots: Director Compensation and Incentives
• Sticks, Part 1: Can Investors Ensure or Improve Board Independence by Replacing Directors who Perfor
• Can Directors be Held Accountable through the Election Process?
• Staggered boards
• Confidential voting
• Sticks, Part 2: Suing for Failure to Protect the Interests of Shareholders – Are the Duties of Car
• Future Directions
• Majority voting and proxy access
• Improving director compensation
• Increasing the authority of independent directors
• “A market for independent directors”
• “Designated director”
• Board evaluation
• Executive session meetings
• Succession planning and strategic planning
• Making directors genuinely “independent”
• Involvement by the federal government
• Involvement by shareholders
• Summary and Discussion Questions
• Notes
• 4. Management: Performance
• Introduction
• What Do We Want from the CEO?
• The Biggest Challenge
• Risk Management
• Executive Compensation
• The pay Czar
• Post-meltdown pay
• The Council of Institutional Investors
• Stock Options
• Restricted Stock
• Yes, We Have Good Examples
• Shareholder Concerns: Several Ways to Pay Day
• The “guaranteed bonus” – the ultimate oxymoron
• Deliberate obfuscation
• The Christmas tree
• Compensation plans that are all upside and no downside
• Loans
• Accelerated vesting of options
• Manipulation of earnings to support bonuses
• Manipulation of peer groups
• Huge disparity between CEO and other top executives
• Imputed years of service
• Excessive departure packages
• Backdating, bullet-dodging, and spring-loading options
• Phony cuts
• Golden hellos
• Transaction bonuses
• Gross-ups and other perquisites
• Retirement benefits
• Obstacles to restitution when CEOs are overpaid
• Future Directions for Executive Compensation
• CEO Employment Contracts
• Cause
• Change of control
• Half now, half later
• CEO Succession Planning
• Sarbanes–Oxley
• Creation of the Public Company Accounting Oversight Board
• Section 404
• Other changes
• Dodd–Frank
• Employees: Compensation and Ownership
• Employee Stock Ownership Plans
• Mondragón and Symmetry: Integration of Employees, Owners, and Directors
• Conclusion
• Summary and Discussion Questions
• Notes
• 5. International Corporate Governance
• The Institutional Investor as Proxy for the Public Interest
• Norway in the driver’s seat
• The International Corporate Governance Network
• ICGN: Statement of Principles on Institutional Shareholder Responsibilities
• The Global Corporate Governance Forum
• Sweden
• Canada
• Singapore
• Russia
• Germany
• China
• Japan
• GovernanceMetrics International (GMI)
• World Bank and G7 Response
• Azerbaijan
• Slovakia
• Jordan
• Thailand
• Poland
• The Global Carbon Project (GCP)
• A Common Framework for Sustainability Reporting
• Towards a Common Language
• Vision
• Summary And Discussion Questions
• Notes
• 6. Afterword: Final Thoughts and Future Directions
• Beyond the Nation State
• Government as Shareholder: The Institutional Investor as Proxy for the Public Interest
• Notes
• Index