Comparison between Corporate Governance Models

Objective

Anglo American
Maximize the shareholders
profit

Continental European
Maximize shareholders profit

Oriented towards
Interest party

Stock Market
Shareholder

Banking Market
Shareholders

Shareholder Concentration

Low, shareholders group hold

small percentage of total
shares
Most are agents of financial
institutions

High, shareholders group hold

large percentages of total
number of shares
Most are private companies
(20%-40%), followed by
financial institutions (10%30%) and then private persons
(15%-35%)
Fewer companies are publicly
traded. People mostly invest
on an individual basis.

Shareholder Identity

Liquidity of Market

Discipline Mechanism
Management
Control

Agency Problem

Many companies are listed

and their shares publicly
traded. Pension plan provides
financial resources for the
stock market
External discipline
mechanism.
Executive directors and nonexecutive directors
Control is concentrated in the
hands of a small number of
investors with a variety of
interests
Interest between managers
and dispersed shareholders

Japanese
Ensuring firms are run by
using societys resources
efficiently and taking into
account a range of
stakeholders.
Banking Market
Shareholders, employees,
suppliers and customers.
High, majority of the
companies are founded and
ran by families
Mostly are private persons
who founded and ran the
company and financial
institutions
Fewer companies are publicly
traded. People mostly invest
on an individual basis.

Internal discipline mechanisms

Internal discipline mechanisms

Supervisor Board and Board

of Directors
Control is concentrated in
large number of anonymous
investors

Board of Directors and

revision commission
Control is concentrated in
majority shareholders

Interest between controlling

shareholders and powerless
minority shareholders.

Interest between managers

and firm

Insider/Outsider System
Decision Making
Long term/ short term
oriented
Corporate Control
Financial resources

Dual structure of CEO

Majority of the board

Compensation

Anglo American
Outsider system
Management
Short term
Hostile Takeover
Over investments, decision
making will be the
managements interest.
Authority pressures to
separate function of CEO and
Chairman. However, most of
the CEOs in US companies
are also the chairman of the
board in 1991.
External directors
Wages based on the nature of
job done, no

Continental European
Insider system
Shareholders with large
percentages of shares
Long term

Limited, ownership is
concentrated, only few owners
are equity suppliers
Separate function of CEO and
Chairman.

Internal directors
Wages and allowance for
personal circumstances.

Japanese
Insider system
Subject to the influence of
employees and owners
Long term
Cross-shareholdings
Limited, ownership is
concentrated
Separate function of CEO and
Chairman

Accounting System
Employees Mobility
Influences

GAAP
High
Foreign influences

Focus

Role of free market based on it

to exercise a control over the
companies owners

Evaluation of governance
efficiency
Issues covered by
governance
Ethical Principal

Financial performance

Return on social capital

Internal directors
Wages based on the stock
prices and allowance for
personal circumstances.
GAAP and IFRS
Low
Government or familial control
and local control
Business network acting in an
interdependent way and on
the own interests of all
involved parties.
Return on human capital

Capital market

Transactions

Corporations network

Utilitarianism

Deontological

Deontological

IFRS
Low
Government or familial control
and local control
Produces richness and being
the engine of national wealth

Corporate Governance Framework in Malaysia

According to Bursa Malaysia, the corporate governance framework in Malaysia has adopted a Hybrid Approach which consist of
mandatory and voluntary guideline as shown in the figure below:

Acts and Guidelines for Corporate Governance in Malaysia:

1. The Companies Act 1965
2. Capital Market and Services Act 2012
3. Securities Commission Act 1993
4. Security Industries (Central Depositories) Act 1991
5. Security Industry Act 1983
6. Futures Industry Act 1993
7. Demutualisation (Kuala Lumpur Stock Exchange) Act 2003
8. Bursa Malaysia Listing Requirements
9. Asset Valuations guideline
10. Financial Reporting Act 1997
11. Malaysia Code on Corporate Governance 2012
12. Bursa Malaysia Corporate Governance Guide
13.Bursa Malaysia Sustainability Guide for Directors