Mubashir Hussain ID: 18504 Submitted to : Dr.

Khurram Mughal Date: Wednesday, December 18, 2013

Summary: Corporate Governance

Savings of individual are the basis of capital. How these savings will be allocated for the production of goods and services in an economy, how these production institutions will be owned and governed falls under the study of capitalism. Capitalism has different meanings in different parts of the world. In United States, there exists a relatively free economy. Monopolies are hard to create and courts are responsible to prevent them from coming into being. Corporations in US and UK are owned by a large number of small and medium shareholders and unlike the rest of the world, highly influential families are rare. In most of developing and a few developed countries economies are controlled by few highly influential families who control the whole economy by creating pyramidal structures. In this kind of structure, the apex family directly controls a major holding company; that in turn controls other firms in the next step of hierarchy and this process continues till they get hold of the lowest level they desire. According to the nature of Capitalism we may classify it into different categories: e.g. in UK and US, common people invest in stocks, so we may call it Shareholders Capitalism. On the other hand, in countries like Germany, Japan and Korea, investment is directed towards the firms

through banking channels, so we can name it as Bank Capitalism. In these countries, banks not only function as financial intermediaries but they play a more vital role they act as a monitor, consultant or advisor. They stop advancing credit to firms that are being governed badly and are not ready to pay heed to the advice of the bank. Careless and more risky lending or misgovernance in banks themselves can cause serious problem in such a system. Yet there is another type of capitalism where government collects taxes and provides capital to businesses. Government officials play the roles of monitors and regulators and have the right to intervene into the management matters of corporations if they fail to perform. But role of governments in accumulation and allocation of capital remained also present in so-called freemarket-economies historically by the name of Industrial Policies. Government intervention or control, in extreme form, leads to socialism. Fact of the matter is that no single country could be found as practicing purely any of the three forms of Shareholders, Banks or State Capitalism. Each form of Capitalism has emerged from unique socio-political circumstances and has its own benefits and challenges. Variants of Capitalism Like democracy, capitalism has different forms and shapes in different countries. Some of them are as under: Canada: Shape of capitalism in Canada is affected by it history first being French and the British colony. Pyramidal groups gained and lost control in Canadian history. Netherlands: It has the oldest stock market in the world and Joint Stock Companies originated here. Dutch East Indies Companies is believed to be the first widely held Joint Stock Company which was formed in 1602.

China: Late nineteenth-century Chinas first generation of industrial firms floated equity yet remained under state control. Modeled on the imperial salt monopoly, these ventures were financed and operated by private merchants, but ultimately controlled by imperial bureaucrats.

France: Before 1789, due to religious prohibition of interest, there was no formal concept of debt in France. Stream of revenues had to be separated from investment ownership. But in 1789, the revolutionary government changed the usury laws and formal debt became available to corporations.