11/29/21, 1:04 PM Chapter 10. Mini-Case Governance And Activist Inve… | Chegg.com
Answer 1) Many countries adopting “western” governance systems similar to those found in the United States and the United Kingdom that are more shareholder friendly because-
Various activist shareholders put pressure on management. There has been a move towards activist shareholding owing to the many instances of management misconduct, insider trading,and general mega frauds. Activist shareholders push for both financial and nonfinancial policychanges for better management of a firm.For instance, they would influence management with campaigns that target environment-friendly policies disinvestment, procurement, cost-cutting, financing structure, and corporate policy among others.
Therefore, countries across the globe are adopting activist shareholding since it ensures prudent management practices
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ANSWER 2) Insider trading is one area where governance hinders prudent management systems.
Sovereign funds are helping good governance in these countries that are changing their governance systems. These funds often focus to support government strategies, such as in China’s energy sector, where the Chinese government is seeking to acquire more energy assets and natural resources to support its economy. Sometimes these sovereign funds also support government positions, such as Norway, which is using assets to emphasize sustainability, an important social and political movement.
answer 3) sovereign wealth funds, many from emerging economies, are playing a dominant role by investing in developed economies as well as other emerging economies. In their own way, they are playing an activist role. For example, since the global financial crisis, many German firms have sought investment from sovereign wealth firms from Gulf States in the Mideast. In particular, many German major automobile firms have recruited Gulf Cooperation Council (GCC) sovereign wealth fund investments during the stresses of financial restructuring spurred by the financial crisis. These sovereign wealth funds are long- term investors and reduce the possibility of a hostile takeover, which has become a more prominent feature in the German corporate governance landscape. Sovereign wealth funds are also taking active roles in climate change. For instance, the Norwegian sovereign wealth fund is divesting its assets in coal and other fossil fuels. Its strategy is to focus its wealth to have an influence on salient sustainability issues, such as climate change. Another example is the acquisition activity of Brazilian multinationals, which have been supported by its sovereign wealth fund, the Brazilian Development Bank (BNDES). BNDES has been “involved in several large-scale operations and helped orchestrate mergers and acquisitions to build large ‘national champions’ in several industries.” For example, “BNDES helped rescue Brazilian meatpacker JBS-Friboi, which aggressively expanded internationally by acquiring large U.S. producers Swift and Pilgrim’s Pride, among others.
Sovereign funds often focus to support government strategies, such as in China’s energy sector, where the Chinese government is seeking to acquire more energy assets and natural resources to support its economy. Sometimes these sovereign funds also support government positions, such as Norway, which is using assets to emphasize sustainability, an important social and political movement.
answer 4) Japan china & Germany should strictly follow following steps inorder to improve theri governance system-
1. Legislate to Improve Minority Shareholders Protection and Make Preparations for the Setting up of the Investor Protection Centre.
2. Adopt More International Accounting Rules. 3. Strengthen Disclosure Requirement. 4. Issue the “ SSE Guidelines for Corporate Governance” 5. Strengthen Legal Rules and Enforcement 6. Diversify the Ownership 7. Maintain the Independence of Board of Directors 8. Introduce other Forms of Sizeable Outside Shareholders Including Closed-End & Open-End Mutual
Funds,Insurance Companies,Pension Funds and Other Institutional Investors 9. Establish Audit Committee,Nominate Committee etc.to Curb the Power of Blockholders/Executives
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