Particularly in the last decades the awareness of companies themselves and the public for good corporate governance increased dramatically. “Corporate governance is set to be the primary focus for the 21st” century. Most of the advanced economies have released new corporate governance rules and codes or company laws, especially as a result of the financial crisis in 2007 and the breakdown of several big companies worldwide. In Australia attention to corporate governance has grown after the „major corporate collapses and scandals of 2001 and 2002“, which included „five publicly traded (…) companies (...) [such as the] telecom company (One.Tel)“.
One.Tel ran out of money and collapsed in 2001. The company could not be revived, all assets were sold and the workers laid off. It has once been the fourth largest telecom company in Australia. The collapse of the Australian company is „associated with serious deficiencies in its corporate governance, including weaknesses in internal control, (…) management communication with the board, and poor executive pay-to-performance link.“
In the first part, this paper will provide you with background information on the terms corporate governance and corporate control. The second part outlines corporate control in Australia by elaborating on the market for corporate control, monitoring by shareholders, monitoring by non-executives and renumeration.
Table of Contents
1. Raised awareness for corporate governance in Australia
2. Corporate governance and corporate control
2.1. Definition and purpose of corporate governance
2.2. Definition and purpose of corporate control
3. Corporate control in Australia
3.1. Market for corporate control
3.2. Monitoring by shareholders
3.2.1. Blockholders
3.2.2. Institutional Investors and Proxy Advisers
3.3. Monitoring by non-executive directors
3.4. Renumeration
4. Conclusion
Objectives and Topics
This paper examines the mechanisms of corporate control within the Australian business environment, aiming to identify how internal and external monitoring systems function to mitigate agency problems and ensure corporate accountability, particularly in the wake of major corporate collapses.
- Theoretical foundations of corporate governance and corporate control.
- Analysis of the market for corporate control as an external monitoring system in Australia.
- Evaluation of internal monitoring roles played by shareholders, blockholders, and institutional investors.
- The impact of non-executive directors and executive remuneration policies on corporate performance.
Excerpt from the Book
3.1. Market for corporate control
The market for corporate control refers to a market where underperforming companies are attractive to hostile raiders. The underperformance might be a result of poor corporate governance. Thus it is an incentive for the management to run the company in the interest of the stakeholders and therefore optimally, because in case of a hostile takeover the risk of the management being replaced due to their poor performance is quite high. Accordingly the management style as well as the behavior of the management is controlled by the market for corporate control, which in this case is an external monitoring system.
In Australia the market for corporate control is “reasonably efficient”. The more efficient a market for corporate control is, the higher is the risk of hostile takeovers for a company, which are not operated efficiently by the responsible management. From 1992 to 2001 there were 401 completed merger and acquisitions in Australia. In 2007 the number of mergers and acquisitions had is all time high with more than 350. 75 of the 401 transactions between 1992 and 2001 were hostile takeovers. In comparison to other developed economies this number is an indicator for Australia being an efficient market for corporate control. As the risk for hostile takeovers is high in Australia, the management of Australian companies has to focus on running the company efficiently and in the interest of stakeholders such as shareholders.
Summary of Chapters
1. Raised awareness for corporate governance in Australia: This chapter highlights the increased global and local focus on corporate governance following major financial crises and company collapses, specifically mentioning the One.Tel case.
2. Corporate governance and corporate control: This section establishes the theoretical definitions of corporate governance and corporate control, identifying them as essential frameworks for balancing management interests and investor protection.
3. Corporate control in Australia: This main body chapter details the external and internal monitoring mechanisms within Australia, including the market for corporate control, shareholder monitoring, and the role of directors.
4. Conclusion: The conclusion synthesizes the findings, noting that the failures of the One.Tel collapse were rooted in poor internal control mechanisms and insufficient monitoring of executive compensation.
Keywords
Corporate Governance, Corporate Control, Australia, Agency Problem, Shareholders, Blockholders, Institutional Investors, Proxy Advisers, Non-executive Directors, Remuneration, Hostile Takeover, One.Tel, Accountability, Monitoring Systems, Management Performance
Frequently Asked Questions
What is the core focus of this publication?
The publication explores the mechanisms of corporate control in Australia, focusing on how different internal and external systems monitor management behavior and company performance.
What are the primary themes discussed?
The key themes include the definition and purpose of corporate governance, the market for corporate control, shareholder monitoring (including blockholders and institutional investors), the role of non-executive directors, and executive remuneration practices.
What is the main objective of this research?
The goal is to provide an overview of how corporate control mechanisms aim to solve agency problems and ensure companies act in the long-term interest of stakeholders.
Which scientific methods are applied?
The work utilizes a literature-based analysis of academic publications, corporate governance rules, empirical studies on ownership structures, and specific case study evidence like the One.Tel collapse.
What content is covered in the main section of the paper?
The main section evaluates external monitoring through the market for corporate control and internal monitoring through shareholders, non-executive directors, and incentive-based remuneration.
Which keywords define this work?
Central terms include Corporate Governance, Corporate Control, Agency Problem, Shareholder Monitoring, and Executive Remuneration.
How did the One.Tel case influence the analysis?
One.Tel serves as a prominent example of how failures in corporate governance and poor internal monitoring can lead to corporate collapse.
What role do proxy advisers play in the Australian market?
Since 2005, proxy advisers have become critical in providing guidance to institutional shareholders, thereby increasing their influence on board composition and executive pay issues.
How has the "say-on-pay" requirement changed in Australia?
In 2011, Australia transitioned from a non-binding to a binding vote on executive remuneration, significantly empowering shareholders to hold the board accountable.
- Citar trabajo
- Daniel Meidl (Autor), 2014, Corporate Governance and Corporate Control. The Market for Corporate Control in Australia, Múnich, GRIN Verlag, https://www.grin.com/document/320254
