Corporate governance, along with a set of principles also needs certain models in pace that can help the board of a corporation to identify what system or framework of corporate governance suits their style.
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The models chosen by all the different organizations depends on a number of factors such as the organizational culture, structure, workplace ethics and regulations. Internal as well as external (government imposed) laws and restrictions also impact the decision of which model is best suited for a particular organization.
To understand this better, let us take the example of an Indian organization and one that is based in the USA. Obviously, they wouldn’t follow the same Corporate Governance Models as the very mindset of the people differs and so do the laws of both the countries.
It is important for the chosen model to be tailor made to suit your company’s needs. This is because like people, organizations too have their individual distinct personality and a model that may be highly recommended and praised by most big shot organizations, may still not be your cup of tea. So before you dive head on to the most “popular” model, it is important to analyze what your company’s needs and wants are and then proceed accordingly.
Let us take a look at some of the well known models-
The Canadian model: A country’s present is deeply influenced by its past history and since Canada has a history of French as well as British colonization, the effects of both these cultures are reflected by the Canadian industries. French mercantilism, which basically aimed at promoting and maximizing the imports of a nation has had huge influence on the workings of the Canadian market. With the dawn of modernization, Canada has started using newer technologies to increase their produce and promotes entrepreneurial activities. Now, Canada’s model resembles the USA model greatly.
The UK and American Model: After the Sarbanes Oxley act of 2002 was passed, the corporations in the US were forced to become more transparent and accountable with regards to the stakeholders. This act aims to minimize corporate scandals and at the same time maximize investor confidence. This model is also known as the Anglo-American model.
The German model: German is known all over the world for its industrial prowess since the very beginning of the 19th century. These industries were primarily financed by the wealthy families, shareholders, banks and foreign investors. The larger the share held, the bigger the say that particular group had in the industry’s workings. The company law in 1870, introduced a dual board structure so that the small investors as well as the public wasn’t sidelined. Importance was given to “information” and “openness” in 1884. Currently, Germany has a lot of family owned organizations whereas the banks control the smaller companies.
The Italian model: Italy, similar to Germany and Canada had family owned businesses. Earlier, corporate governance was totally controlled by the bureaucrats and the wealthier section. Faith in stock markets and properly controlled corporate governance activities have gained popularity in the last two decades.
The France model: Religion played a major role in the financial system in France. Conservatism ruled the industries. Again, wealthy families controlled these businesses. Companies’ control was passed on through the generations.
The Japanese model: Hereditary caste system was of great importance. The categorization had priests at the highest level with business families at the very bottom. Lack of monetary funds led to stagnation of business. The Keiretsu system is followed by the Japanese.
The Indian model: The Securities and Exchange Board of India (SEBI) Act, passed on January 1992, gave statutory powers and since moved from control regime to prudential regulation. SEBI plays an important role in the corporate governance of Indian corporations. Foreign Direct Investment and Foreign Institutional Investment has increased manifold due to economic liberalization and globalization.
These models are essential in order for you to carry out successful governance in corporations. Along with these models, software tools like VComply make life much easier by making all information regarding your organization, available at your fingerprints.
The better the model choice, the better your chances of being the best!
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