Sergey Lutsenko1
Dilemma as to the Model of Corporate Governance
2014.
No. 2.
P. 162–172
[issue contents]
Lutsenko Sergey - Leading Expert, Russian Federation President Control Department. Address: 8/5 Staraya Ploshchad, Moscow, 103132, Russian Federation. E-mail: scorp_ante@rambler.ru.
The present article considers the models of corporate governance. The purpose of the research is the choice and evaluation of priority model of corporate governance. Two models will be presented: the models of management prioritizing management and model prioritizing shareholders. In the model, prioritizing directorate, the latter is obliged to use the powers to capitalize the company value, and thus, be beneficial for the shareholders. The decision making power is vested to the company managers, not the shareholders. Thus, the management should follow the basic principles of corporate governance to fiduciary duties. The presented model is under the protection of the business judgment rule. The model of management primacy has disadvantages. It suggests the policy of certain closeness from shareholders. In turn, the situation is created of information asymmetry. The main problem in the Russian corporate practice is the situation when the company management does not act in the interests of shareholders and seeks to act in its own interest to the detriment of interests of the company. In turn, the model of shareholders primacy means the compromise of interests between the management and shareholders. An agreement is concluded between shareholders and management which specifies: the choice of economic strategy of the company, a participation range in the corporate governance of the company from shareholders, powers and responsibility of the parties, conditions of implementing some transactions, it determines the conditions concerning carrying out monitoring from shareholders. The model of business target-setting can be used at monitoring. The presented model allows performing the control of a management, and also to test their actions about integrity and rationale. The model of shareholders primacy has flaws. Permanent conflicts between shareholders (for example, abusing the right to be informed from minor shareholders) destabilize company economic activities. The presented work has an interdisciplinary character. That is the features of management as sciences, and corporate law are mentioned. Use of model of shareholders primacy can create a certain basis for creative cooperation between the company shareholders and management.
The present article considers the models of corporate governance. The purpose of the research is the choice and evaluation of priority model of corporate governance. Two models will be presented: the models of management prioritizing management and model prioritizing shareholders. In the model, prioritizing directorate, the latter is obliged to use the powers to capitalize the company value, and thus, be beneficial for the shareholders. The decision making power is vested to the company managers, not the shareholders. Thus, the management should follow the basic principles of corporate governance to fiduciary duties. The presented model is under the protection of the business judgment rule. The model of management primacy has disadvantages. It suggests the policy of certain closeness from shareholders. In turn, the situation is created of information asymmetry. The main problem in the Russian corporate practice is the situation when the company management does not act in the interests of shareholders and seeks to act in its own interest to the detriment of interests of the company. In turn, the model of shareholders primacy means the compromise of interests between the management and shareholders. An agreement is concluded between shareholders and management which specifies: the choice of economic strategy of the company, a participation range in the corporate governance of the company from shareholders, powers and responsibility of the parties, conditions of implementing some transactions, it determines the conditions concerning carrying out monitoring from shareholders. The model of business target-setting can be used at monitoring. The presented model allows performing the control of a management, and also to test their actions about integrity and rationale. The model of shareholders primacy has flaws. Permanent conflicts between shareholders (for example, abusing the right to be informed from minor shareholders) destabilize company economic activities. The presented work has an interdisciplinary character. That is the features of management as sciences, and corporate law are mentioned. Use of model of shareholders primacy can create a certain basis for creative cooperation between the company shareholders and management.
Citation:
Lutsenko S. (2014) Dilemma vybora modeli upravleniya kompaniey [Dilemma as to the Model of Corporate Governance]. Pravo. Zhurnal Vysshey shkoly ekonomiki, no 2, pp. 162-172 (in Russian)
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