1. Corporate Governance
YD Ahn, PhD
July 2009

2. Stakeholders of a Corporation
Type of Firms: Korean Commercial Code Merchant(상인), Partnership(합명), Mixed Ownership(합자), LLC(유한회사) , Corporation(주식회사)
Stakeholders of a Corporation
Principal : Shareholders
Economic: Employees, customers, suppliers, lenders,
Social: Community, NGOs, unions
Public: State, government, supranational institutes
Others: Management, “the owner” (in Korea)
competitors

3. Corporate Purpose Raison D’être: whose interest to put first?
Shareholder capitalism: Anglo-Saxon, legal approach
← Property right, residual rights
Stakeholder capitalism: Continental Europe, practical
← Implicit license to conduct business
→ Closer to CSR
Management Goals
Shareholder C.: Profit maximization
Stakeholder C.: Harmonization of interests → CSR
Base Line
Profitability is a must: “CSR is only as sustainable as the company.”
Profit benefits all stakeholders.

4. Control vs. Governance Control Structure of a Corporation (기업지배구조)
General meeting → board of directors → management
Auditor or audit committee
Corporate Governance (회사기율)
Systems and mechanisms, official or practical, to secure managerial
behavior conducive to achievement of the corporate purpose
In general, management thought to be agent of shareholders as
principal
→ The Agency Problem
Meaning: Prerequisite for societal transparency and a vibrant capital market
→ Part of IMF conditionality in 1997 Korea

5. Corporate Governance ①
Types of Corporate Governance <Fig 1>
Internal: General meeting, board of directors, auditor
Regulatory: Laws, guidelines, enforcement authorities
Social: Community, NGOs, popular press
Capital market: Securities markets, market for corporate control, institutional investors
Other: Employees, customers, suppliers, lenders, unions…
Market for Corporate Control: M&A
(기업 지배권 시장)
The best protection: purposive management → appreciation
of the stock price

6. Corporate Governance ②
Functions of Board of Directors
Appointment of CEO
Decision on strategic direction
Overseeing Corporate Social Responsibility
Board Structure
Chairperson (CEO or separate), executive directors,
outside directors (or independent directors)
Committees: Executive, audit, nomination, compensation….
Standard: 10 members with 2/3 from outside
Cross-nation differences: US, UK, Germany, Korea …

7. <Fig 1> Comprehensive view of Corporate Governance
Shareholders
General Meeting
Capital Market
Securities Market
M. for Corporate Control
Institutional Investors
Board of Directors
Auditor or
Audit Committee
Social
Community
NGOs
Popular Press
Regulatory
Laws and Guidelines
Authorities
CEO
Executives
Economic Stakeholders
Customers
Suppliers
Lenders
Employees
Union
* Solid lines: More or less official. Dotted lines: Practical

8. 상품설명서 in Lieu of Thank-You
Tesco's Tiramisu dessert (printed on bottom):
“Do not turn upside down.” (well...duh, a bit late, huh!)
테스코스 디저트 (밑바닥에 적혀 있음):“거꾸로 뒤집지 마시오.”
(이런, 벌써 늦었군, 허!)
Nytol Sleep Aid: “Warning--May cause drowsiness.”
(and... I'm taking this because???....)
나이톨 수면제: “주의사항--졸음을 유발할 수 있음”
(내가 왜 이 약을 먹는 건데?) <펀 글>