Edited by PAUL U. ALI and GREG N. GREGORIOU

John Wiley & Sons, Inc.

International CorporateGovernance After

Sarbanes-Oxley

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International CorporateGovernance After

Sarbanes-Oxley

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Founded in 1807, John Wiley & Sons is the oldest independent publishingcompany in the United States. With offices in North America, Europe, Aus-tralia, and Asia, Wiley is globally committed to developing and marketingprint and electronic products and services for our customers professionaland personal knowledge and understanding.

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Edited by PAUL U. ALI and GREG N. GREGORIOU

John Wiley & Sons, Inc.

International CorporateGovernance After

Sarbanes-Oxley

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Copyright 2006 by Paul U. Ali and Greg N. Gregoriou. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

International corporate governance after Sarbanes-Oxley / edited by Paul U.Ali and Greg N. Gregoriou.

p. cm.(Wiley finance series)Published simultaneously in Canada.Includes bibliographical references and index.ISBN-13: 978-0-471-77592-8 (cloth)ISBN-10: 0-471-77592-4 (cloth)1. Corporate governance. 2. United States. Sarbanes-Oxley Act of 2002.

3. Corporate governanceLaw and legislation. I. Ali, Paul U. II.Gregoriou, Greg N., 1956- III. Series.

HD2741.I589 2006658.4dc22

2005026054

Printed in the United States of America.

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www.wiley.com

For my parents.PUA

In loving memory of my father, Nicholas, and to my mom, Evangelia.

GNG

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Contents

Preface xi

Acknowledgments xiii

About the Editors xv

About the Authors xvii

PART ONEFramework of Corporate Governance

CHAPTER 1The Ethics of Corporate Governance: What Would the Political Philosophers Say? 3

Colin Read

CHAPTER 2The Politics of Symbolism: Sarbanes-Oxley in Context 9

Justin OBrien

CHAPTER 3Governance and Performance Revisited 27

yvind Bhren and Bernt Arne degaard

CHAPTER 4Corporate Governance as a Process-Oriented Approach to Socially Responsible Organizations 65

Marijan Cingula

CHAPTER 5The Impact of the New Corporate Governance Code on the Belgian Stock Market 95

Albert Corhay, Andree Dighaye, and Pierre-Armand Michel

vii

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PART TWOCorporate Governance and the Global Financial Markets

CHAPTER 6Improving the Corporate Governance of Hedge Funds 129

Greg N. Gregoriou, William R. Kelting, and Robert Christopherson

CHAPTER 7Corporate Governance Reform in Australia: The Intersection of Investment Fiduciaries and Issuers 137

Martin Gold

CHAPTER 8Corporate Social Responsibility and Fiduciary Investment in Australia 161

Paul U. Ali

CHAPTER 9Issuers Liability for Financial Information as an Instrument of Corporate Governance Enforcement 173

Clemens Vlkl

CHAPTER 10Investing in Death/Speculating on Mortality: Some Thoughts on Life Insurance Securitization 185

Paul U. Ali

PART THREEShare Ownership and Shareholder Control Rights

CHAPTER 11Ownership Structure Metrics 197

Stefan Prigge and Sven Kehren

CHAPTER 12The Effectiveness of Shareholders Meetings: An Overview of Recent Developments 223

Gregory F. Maassen and Darrell Brown

viii CONTENTS

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CHAPTER 13The Market for Corporate Control and the Implications of the Takeover Directive (2004/25) 267

Blanaid Clarke

PART FOURAccountability of Directors and Executives

CHAPTER 14Board Power Relations and the Impact of the U.K.s Combined Code on Corporate Governance 299

Timothy J. Nichol

CHAPTER 15CEO Compensation in Australias Largest Companies 319

Geof Stapledon

CHAPTER 16Directors and Officers Liability in France 337

Alain-Xavier Briatte and Michael Julian

CHAPTER 17Independent Directorship Systems in Greater China 359

Margaret Wang

PART FIVEResponsibilities to Stakeholders and Other Emerging Trends inCorporate Governance

CHAPTER 18The Primary Stakeholder Relationships: Corporate Governance and Value Creation 379

Andrea Beretta Zanoni

CHAPTER 19Family Ownership and Corporate Governance 399

Mara Sacristn-Navarro and Silvia Gmez-Ansn

Contents ix

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CHAPTER 20The European Social Model of Corporate Governance: Prospects for Success in an Enlarged Europe 423

Irene Lynch Fannon

CHAPTER 21Contract Negotiation and Internal Regulation Mechanisms in a Firm 445

Hubert de La Bruslerie

CHAPTER 22Prospects and Limits of Corporate Governance Codes 467

Bjrn Fasterling

CHAPTER 23Assessing the Effectiveness of Boards of Directors and Individual Directors 485

Richard Leblanc

References 525

Index 565

x CONTENTS

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Preface

This reader comprises an edited series of papers on the latest develop-ments in corporate governance worldwide following the introduction ofthe Sarbanes-Oxley Act in the United States. That Act has transformed cor-porate governance practices in the United States and has strongly influ-enced the development of corporate governance in the Asia-Pacific andEuropean markets discussed in the reader. Corporate governance remains atopic of keen interest not only for the accounting, financial, and legal sec-tors but also for the broader business and investor communities due to themeasures taken by regulators around the world in response to the highlypublicized collapses of Enron, Parmalat, and WorldCom and other ac-counting scandals and corporate fraud at Adelphia, Global Crossing,Merck, and Tyco. This is evident in the recent development of corporategovernance standards by professional organizations and societies, thegrowing trend for institutional investors to involve themselves in the gover-nance of the corporations that they invest in, and the increased regulatoryscrutiny of risk management regimes and other internal controls imple-mented by corporations.

This reader brings together experts on corporate governance who haveeach contributed papers on the impact of the Sarbanes-Oxley Act and leg-islation influenced by it on corporate governance worldwide. The reader isdivided into five parts. Part One provides the context for the current de-bate on corporate governance. It discusses the ethical and political under-pinnings of corporate governance and examines the relationship betweencorporate governance and economic performance and stock markets. PartTwo looks at the corporate governance aspects of transactions in theglobal financial markets, including the governance of hedge funds, and therole of institutional and other investors in corporate governance. PartThree deals with sha