Appunti schematici lezioni di International Business Law - parte 1

Lesson 1

This course provides an overview of governance, management, and board structures in large corporate entities with limited liability. Corporate governance is fundamental for various entities, including profit-oriented companies, partnerships, cooperatives, not-for-profit organizations, governmental corporate entities, and others. The governance body typically comprises a Board of Directors (BoD).

Key aspects of corporate governance

• Ownership control
• Shareholders' involvement
• The role of directors in decision-making

Corporate governance is viewed from five perspectives:

• Operational
• Relationship
• Stakeholder
• Financial economics
• Societal

The process of incorporation involves the registration of formal documents such as the memorandum and articles of association, which outline the company's purpose, share details, and liability limitations. The corporate entity is characterized by legal personality, limited liability, transferable shares, delegated management under a board structure, and investor ownership.

Corporate entities can be categorized as public or private limited companies, each with distinct requirements and restrictions. The structure of the board depends on factors such as ownership structure, company size and complexity, legal requirements, and cultural aspects. The distinction between governance and management is emphasized, with the board responsible for setting direction and strategy, and management overseeing day-to-day operations.

Different board structures, including all-executive, majority-executive, majority non-executive, and all non-executive (two-tier board), have varying degrees of involvement from executive and non-executive directors. The course also provides insights into the roles and functions of each board structure and the significance of corporate governance in diverse organizational settings.

Lesson 2

In this lesson, various theories and concepts related to corporate governance were discussed, primarily focusing on agency theory, stewardship theory, transaction cost economics (TCE), and enlightened shareholder value (ESV) theory. Here I provided a summary of the key points:

Agency Theory (AT)

• Focuses on the relationship between shareholders (principals) and directors/managers (agents) in corporations.
• Assumes that individuals are self-interested and may not always act in the best interests of the principal.
• Identifies two main risks related to agent behavior: lack of loyalty and lack of care/prudence.
• Recognizes the challenges of ensuring that agents act solely in the interests of the principals and with appropriate care.

Stewardship Theory (ST)

• Counters the negative view of directors presented by agency theory.
• Suggests that directors can be trusted to act in the best interests of shareholders.
• Emphasizes the accountability of directors toward shareholders.
• Acknowledges that in modern corporations, shareholders are often remote from the company.

Transaction Cost Economics (TCE)

• Focuses on mechanisms and controls within organizations to reduce information asymmetry.
• Addresses the need for internal and external audit controls, information disclosure, and the separation of roles (e.g., chair and CEO) to minimize agency problems.
• Looks at the balance between the cost of enforcing mechanisms and the potential loss due to non-compliance.

Enlightened Shareholder Value (ESV) Theory

• Recognizes that corporations have obligations to a wide range of stakeholders beyond shareholders.
• Companies have a duty to balance the interests of various stakeholders, including customers, employees, partners, and the broader community.
• Emphasizes the importance of long-term wealth creation and the role of corporations in satisfying stakeholders' needs and interests.

In summary, the lesson explores various theories and perspectives related to corporate governance and the challenges of ensuring that directors and managers act in the best interests of shareholders and stakeholders. It also discusses the evolving view that a balanced approach that considers both shareholder and stakeholder interests can lead to long-term corporate success.

Lesson 3

This lesson provided details about several legal strategies and governance practices aimed at reducing agency costs and improving corporate governance.

Organizational Role of Law

• "Asset partitioning" ensures the separation of creditors of owners and creditors of the entity.
• Legal strategies focus on reducing agency costs through different subsets of law and economics.

Legal Strategies

• Regulatory strategies prescribe terms that govern the principal-agent relationship directly.
• Governance strategies facilitate principal control over the agent's behavior.

Ex Ante and Ex Post Strategies

• Ex ante strategies take effect before the agent acts, while ex post strategies respond to the quality of the agent's actions after they have occurred.

Regulatory and Governance Strategies

• Regulatory strategies include agent constraints and affiliation terms, while governance strategies involve appointment rights, decision rights, and agent incentives.

Kinds of Law

• Hard law involves mandatory rules, while soft law includes codes of conduct and the "comply-or-explain" principle.

Enforcement and Intervention

• Public and private enforcement, as well as the role of gatekeepers, help ensure compliance with legal norms.

Factors Affecting Corporate Governance

• Ownership patterns, markets for corporate control, and cultural differences all influence corporate governance practices.

Corporate Governance Models in Different Countries

• The American model is characterized by a rule-based system, whereas the UK/Commonwealth model is principles-based.
• The Continental European model often features a two-tier board structure, while the Japanese model is stakeholder-oriented.
• The Asian model involves family-centric control and a paternalistic management style.

The lesson provides a comprehensive overview of the legal strategies and governance practices that play a significant role in shaping corporate governance across different countries and contexts.

Lesson 4

This lesson is about:

Shareholders' Rights

• Shareholders have certain rights determined by Company Law and the Articles of Association, including the right to attend and vote in shareholders' meetings, receive dividends, inspect the shareholder register, and receive regular information.
• Shareholders typically do not have the right to be involved in day-to-day management or inspect company records.

Annual Shareholders' Meeting (AGM)

• The AGM is responsible for making critical decisions related to the company.