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Matched Legal Cases: ['Art. 6', 'Art. 6', 'Art. 9', 'Art. 4', 'Art. 5', 'Art. 7', 'Art. 8', 'Art. 12']

The long-term profit maximization norm and the current by liwenting
21228195
THE LONG-TERM PROFIT MAXIMIZATION NORM AND THE CURRENT DEVELOPMENTS IN CORPORATE GOVERNANCE
Center for Banking Law, Jagiellonian University Cracow
IQPC Corporate Governance Summit Dubai - February 9-10, 2009
Re-focusing corporations on long-term objectives – the key issues
What are the binding corporate goals for the corporate decision-making? The recent developments in corporate governance mechanisms to ensure the long-term success of the corporation
I. The key corporate decision-makers
II. The increasing role of shareholders in corporate governance III. Other CG actors: auditors, rating agencies
I. The Corporate Decision-Makers
Corporate agents’ (Management/directors/key shareholders) duty to pursue corporate goals Decision-making in a multi-stakeholder environment
Short-term v. long-term objectives
1. Corporate Agents’ Duties
Centralized management and the duty to pursue the corporate goals:
common goal of shareholders?  The multiple goals of all stakeholders?
Corporate law protections against mismanagement?
 Stealing
2. Decision-making in a multistakeholder environment
investors as shareholders
Creditors Clients Employees Environment Public interest - new: financial stability concerns Giving back to the society: charitable donations
3. Short-term v. long-term objectives
Reconciling the conflict:
success and forgoing of long-term objectives  Indefiniteness of „long-term” and the managerial risk averseness
 Short-term
Maximizing profits v maximizing the market value
Designing the decision-making process, including the board’s involvement in:
Setting appropriate long-term objectives and interim milestones Continuous assessment of the management’s performance
management  Executive compensation
Alignment with long-term objectives
II. The increasing role of shareholders in corporate governance
Enhancing shareholder rights Facilitating the exercise of the existing shareholder rights
Growing institutional ownership  Internationalization of shareholdings  Shareholder passivity/Shareholder activism
The alignment between the economic interest and voting rights
Infrastructural barriers and integration processes
1. Enhancing Shareholder Rights
European Union: Shareholder Rights Directive 2007/36/EC
Adding items to the GM agenda (Art. 6.1a) Shareholder Proposals (Art. 6.1b) Rights to ask questions (Art. 9)
Shareholder approval and communication requirements
Board Appointment/Compensation  Directors’ remuneration
European Union: EU Commission’s Recommendation 2004/913/EC
European Union: Takeovers Directive 2004/25/EC
2. Facilitating the exercise of shareholder rights
The Shareholder Rights Directive 2007/36/EC
The EU initiatives to remove barriers to clearing and settlement of securities transactions
Shareholder Rights Directive removes some barriers…
Equal treatment (Art. 4) Easier access to GM-relevant information (Art. 5, 14) Easier access to the GM (Art. 7) Striking down the personal presence requirement
Exercise of voting rights through proxies and nominees (Artt. 10-11, 13) Electronic voting (Art. 8) Voting per mail (Art. 12)
… but the key barriers in cross-border voting in Europe are related to securities infrastucture
Longer chains of intermediaries
Late or missing GM-relevant information
Fragmentation of the securities clearing and settlement infrastructure: non-recognition of cross-border intermediary chains
The last intermediary in the local chain considered the shareholder
Property-system-driven fragmentation Regulation-driven fragmentation
Uncertainty as to the role of the intermediary Some consequences:
Application of mandatory bid thresholds to the holdings of the intermediary Split Voting and Partial Voting not permitted Non-recognition of proof of shareholdings issued by a foreign intermediary
Intermediated holding systems
The modified relations between the issuer and investor
The intermediary system substitutes the “evidentiary system” of certificated securities. The effect: the investor enters into a legal agreement with its intermediary/account provider to purchase and manage securities. The issuer – investor relationship is substituted by a set of legal relationships, with various rights and obligations related to the administration of this evidentiary system by the account provider, which:
Facilitate and streamline the process of mass turnover of securities / can channel certain communication between the issuer and the investor,
Are more complex from the legal point of view: the relationships between the issuer and account providers, and between the account providers and the investors /account holders.
Fragmentation and complexity of account provider chains – a simplified scheme
The EU works on cross-border securities clearing and settlement
The EU identified the fragmentation of the securities clearing and settlement infrastructure as a key barrier to the capital markets integration in Europe The Giovannini Reports - Barriers: technological, legal and tax Three expert groups: CESAME, Legal Certainty Group and FISCO Private sector best practices as the primary solution, subsidiarity of the harmonisation through legislation – the private sector work is still ongoing
III. Other external monitors in CG
The key factors of a long-term focus in corporate governance:
The corporate governance tools for re-focusing on the long-term success of the corporation:
Corporate Decision-Makers
Focus on the long-term corporate goals and prevent conflict of values/interests
Focus of shareholder interest within the limitations of the multi-stakeholder framework Ensure a decision making process for the realization of long-term objectives – board cooperation
Growing importance of shareholders as corporate governance actors Enhancing and facilitating shareholder involvement in key corporate decisions Identifying and resolving conflicts of interest
The alignment of the economic interests and voting rights
Other corporate governance actors
Auditors, rating agencies: Improving assessment criteria and tools
Agata Waclawik-Wejman agata at wejman.pl Center for Banking Law Jagiellonian University Cracow ul. Bracka 12 31-005 Cracow, Poland Tel./Fax. +48 12 422 09 08
"The long-term profit maximization norm and the current "
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Shareholder & Stock Agreement
Demand for Inspection of Corporate Books and Records
Shareholders Agreement for Close Corporation