The corporate governance in United States, Japan and South Korea is experiencing some drastic changes in how they handle their stakeholders such as suppliers, customers and shareholders. The paper compares how the three models of corporate governance make their strategic decisions based on the shareholder values. However, there is a big difference in how these companies are implemented based on the countries (Larcker & Tayan, 2).
There are some new improvements in the models of USA and the global corporate governance over time. For instance, the OECD Principles of Corporate Governance of 2004 were revised in 2014. The new, updated texts have some improvements compared to the 2004 version. The 2014 version contains five chapters that govern shareholder rights, supervisory framework, institutional investments and markets, transparency and disclosure, stakeholders and board of directors. The most important improvement is addition of chapter three on governance of ‘Institutional Investors, Stock Markets, and Other Intermediaries’. The 2014 revised copy as well has the advantage of recognizing the role of the board level employee representatives. This is made possible by integration of the existing texts originating from the 2005 Guidelines for corporate governance of the state-owned companies (Hopt, 17).
Another significant improvement in corporate governance models is the ‘2014 Principles’ on Guidelines on Corporate governance principles for enhancing corporate governance. This is a revision of ‘the 2010 Principles’- Principles for enhancing corporate governance. Here, the committee reflected a lot on the lessons that national bank supervisors and many central banks learnt from the 2008-2009 global financial crisis. In particular, much emphasis was put on the supervisory oversight at the banks and risk governance practices. In addition, the 2014 Principles incorporate corporate governance developments witnessed in the financial services industry from the 2010 Principles and peer reviews and peer review recommendations of the 2013 Financial Stability Board (Ahmadjian & Jaeyong, 23).
The greater shareholder accountability is also a trend in ensuring that the major shareholders are involved in decisions concerning value creation, pay and risk analysis. The investors and boards focus on the performance of the company. The independent governance auditors are also used to ensure that the reasonable point of view on the performance of the enterprise (Hopt, 22).
The corporate governance in Japan mainly gathers for other stakeholders such as employees and suppliers as well as the shareholders. The corporate governance in Japan is, therefore, structured in a way that the resources in the society are used in an efficient manner by the company. The company is obligated to provide services to the stakeholders (Ahmadjian & Jaeyong, 15).
It is the requirement for the Japanese companies to make sure that the managers and the directors are responsible for board stakeholders. In fact, they have a legal obligation to be liable in case of any negligence of duties such as inadequate supervision. It is their interest to pursue good deeds to the stakeholders ((Larcker & Tayan, 15).
Over the past few years, there are new ways of operating the companies. This include hostile takeovers, friendly mergers and proxy contests. Hostile takeovers involve the acquiree and acquirers to get some important payments that help to resolve the conflict of management. The friendly mergers occurs when companies agrees to combine for the mutual benefits. Stock exchange may occur between the firms.
The advantage of Japanese model is that when the companies pursue the interest of all the stakeholders in the market, then the tremendous allocation of the resources is achieved in the process. However, the disadvantage of the Japanese model is that most of the Japanese companies do not create wealth for the shareholders but instead focuses on other parties such as suppliers (Hopt, 46).
South Korean model of governance is similar to the Japanese model that operates as one large corporation with more of similar subsidiaries. The control of other companies is in the group of headquarters or rather a family. These families run major corporations and work closely with the government.
The government makes sure that there are regulations that govern the companies run a subsidiary business as independent units. These subsidiaries become self -sufficient financially though they operate under one headquarter. The advantage of the South Korean model is that the economic stability and confidence of the investors is guaranteed. Nevertheless, there is a disadvantage of existing barriers that prevents most of the companies from foreign ownership (Larcker & Tayan, 25)
Japanese and South Korean models of governance are similar regarding legal forms of running the corporations. This influence was because of US forces in the other countries after the Second World War. The shareholders have some legal rights in both models but of because the US models gives more emphasis on the shareholder value. The shareholders in Japan have more right to vote (Hopt, 26).
One of the significant difference between US model of corporate governance and other models is that there is a great difference in compensation and level structure. The executives in the US receive more compensation than those in Japan and South Korea. The nature of compensation is performance based. Most of the company executives in Japan are not tied to the stock value of the enterprise (Ahmadjian & Jaeyong, 55).
In conclusion, among the existing models of corporate governance, Anglo- American model is best suited to be adopted by our businesses. This is because the model is based on the narrow view and the role of a company in the economy. The companies hence focus on creating the wealth for shareholders. It, therefore, facilitates efficient resource allocation thus companies become competitive and developed.
Works Cited
Ahmadjian, Christina Linn., and Jaeyong Song. Corporate Governance in Japan and South Korea: Two Paths of Globalization. New York: Center on Japanese Economy and Business, Columbia Business School, 2004. Print.
David Larcker, Brian Tayan. Models of Corporate Governance. Who's the Fairest of Them All?. Stanford Graduate School of Business. 2008. Print.
Hopt, Klaus J. Corporate Governance in Context: Corporations, States, and Markets in Europe, Japan, and the US. Oxford: Oxford UP, 2009. Print.
