Composition of the board of directors

1. COMPOSITION OF THE
BOARD OF DIRECTORS

2. COMPOSITION OF THE
BOARD OF DIRECTORS
Insider (executive director)
 is a person who is either employed by the
corporation can be an executive, manager,
employee or somebody who has significant
personal and/or business relationships with
corporate management.
Outsider (non-executive / independent director)
is a person or institution which has no direct
relationship with the corporation or corporate
management.

3. COMPOSITION OF THE
BOARD OF DIRECTORS
The same person has served as both chairman
of the BOD and CEO of the corporation
which led to ff. abuses:
Concentration of power in the hands of one
person.
Concentration of power in a small group of
persons.
Management and/or the board of directors’
attempts to retain power over a long period
of time, without regard for the interests of
the other players entrenchment.
The board of directors’ flagrant disregard for
the interests of outside shareholders.

4. COMPOSITION OF THE
BOARD OF DIRECTORS
Several factors contributed to an increased interest in
corporate governance in the UK and US. These
included:
1. the increase in institutional investment in both
countries
2. greater governmental regulation in the US
3. the takeover activity of the mid- to late-1980s
4. excessive executive compensation at many US
companies and a growing sense of loss of
competitiveness vis-а-vis German and Japanese
competitors.

5. COMPOSITION OF THE
BOARD OF DIRECTORS
Several factors influenced the trend
towards an increasing percentage
of “outsiders” on boards of
directors of UK and US
corporations. These include:
1. The pattern of stock ownership.
2. Recommendations of self-
regulatory organizations.

6. REGULATORY
FRAMEWORK

7. REGULATORY FRAMEWORK
In the UK and US, a wide range of laws and
regulatory codes define relationships among
management, directors and shareholders.
In the US, a federal agency, the Securities and
Exchange Commission (SEC), regulates the
securities industry, establishes disclosure
requirements for corporations and regulates
communication between corporations and
shareholders as well as among shareholders.

8. REGULATORY FRAMEWORK
US has the most comprehensive disclosure
requirements and a complex, well-regulated
system for shareholder communication.
The regulatory framework of corporate
governance in the UK is established in
parliamentary acts and rules established by
self-regulatory organizations, such as the
Securities and Investment Board, which is
responsible for oversight of the securities
market.

9. DISCLOSURE
REQUIREMENTS

10. DISCLOSURE REQUIREMENTS
The following information is included either
in the annual report or in the agenda of
the annual general meeting (formally
known as the “proxy statement”)
1) Corporate financial data
2) Breakdown of the corporation’s capital
structure
3) Substantial background information on
each nominee to the board of directors
4) The aggregate compensation paid to all
executive officers

11. DISCLOSURE REQUIREMENTS
5) All shareholders holding more than 5% of the
corporation’s total share capital
6) Information on proposed mergers and
restructurings
7) Proposed amendments to the articles of
association
8) Names of individuals and/or companies
proposed as auditors.

12. CORPORATE ACTIONS
REQUIRING SHAREHOLDER
APPROVAL

13. CORPORATE ACTIONS REQUIRING
SHAREHOLDER APPROVAL
The two routine corporate actions
requiring shareholder approval
under the Anglo-US model are:
1. Elections of directors
2. Appointment of auditors

14. CORPORATE ACTIONS REQUIRING
SHAREHOLDER APPROVAL
Non-routine corporate actions which also
require shareholder approval include:
1. Establishment or amendment of stock
option plans
2. Mergers and takeovers
3. Restructurings
4. Amendment of the articles
of incorporation.