Christine Mallin

Derivatives usage in UK non-financial listed companies

In this paper, the authors present the results of a 1997 survey of derivative used by some 231 UK non-financial companies. The questionnaire instrument used in this research is based upon the postal survey methodology of Bodnar et al. (1995). A glossary was attached to the questionnaire survey to enable consistency in defining terminology used. A direct comparison between US and UK findings was undertaken together with an analysis of results from other published surveys conducted in the last four years. We find broadly similar trends in the use of derivatives. The results of our research show that derivatives usage to hedge financial price risk is well established amongst larger UK companies. Our findings support the size effect phenomena reported in other empirical studies. The primary objective cited in using derivatives was to manage fluctuations in accounting earnings, a focus that is inconsistent with the theoretical view of paying attention to cash flow benefits of hedging. The predominant issues of concern to UK inancial directors are the lack of evaluation of risk of proposed derivative transactions and the level of transaction costs incurred. This contrasts with the greater concerns of credit risk and market risk raised by their US counterparts in Bodnars study. A possible explanation for these concerns could be the impact of the currency crisis happening in Asia especially for firms that are exposed to the affected currencies. It also suggests a lower level of sophistication and liquidity in UK derivatives market. The value of developing a basis for benchmarking good management practice in the use of derivatives to manage financial price risk represents an important area of research. Such a framework is of relevance to the demand and supply side of the derivatives market and to Government policy makers.

Board reputation attributes and corporate social performance: an empirical investigation of the US Best Corporate Citizens

The aim of the paper is to investigate the relationship between board reputation and corporate social performance. Specifically, we claim that corporate social performance may be a function of board attributes and we investigate the association between board reputation – in terms of board composition, competence, diversity, leadership, structure and links with the external environment – and the social performance of firms, after controlling for other company-specific characteristics. In order to explore such a relationship, we analyse the association between corporate social performance and board reputation of the Business Ethics 100 Best Corporate Citizens over the period 2005–2007. Data on corporate social responsibility are collected from the KLDs SOCRATES database, which is derived from multiple sources and is not dependent upon corporate self-reporting. Data on board reputation are hand-collected from corporate reports and proxy statements. Our empirical evidence shows that the proportions of independent, community influential and female directors are positively associated with corporate social performance, while the presence of a corporate social responsibility (CSR) committee is positively associated with community performance. In contrast, we find that CEO duality and community influential directors with multiple directorships have a negative effect on corporate social performance.

Women in the Boardroom: Evidence from Large UK Companies

A considerable amount of attention has recently been given to the lack of equality for women in the economic arena. Women are systematically disadvantaged in many ways in terms of pay for the same job, promotion prospects and access to the most important top jobs in the United Kingdom. In this paper we present new evidence on women participation rates in UK boardrooms. In particular, our objectives are to (i) examine the proportion of executive and non-executive directors who are women (ii) to document the degree to which women are deployed to key boardroom committees.

Corporate Governance in Small Companies - the Alternative Investment Market

This paper examines corporate governance in small companies listed on the Alternative Investment Market (AIM) which was established in the UK in 1995. The London Stock Exchange rules stipulate that each company wishing to join AIM must have a nominated advisor and broker. The nominated advisor is seen as playing a key role in AIM companies, enjoying an ongoing advisory relationship as well as playing a monitoring role. The presence of the nominated advisor may, in some ways, mean that less emphasis is placed on formal corporate governance structures, as the nominated advisor does have a close relationship with the company it advises. The formal aspects of corporate governance are analysed in terms of disclosures in the admission document put forward by AIM companies coming to market. Preliminary findings suggest AIM companies brought onto the market by a nominated advisor who also acts as the nominated broker pay more attention to the Cadbury Code on corporate governance. Also, the study suggests AIM companies raising no new capital on admission possess relatively weaker corporate governance structures. The success of AIM, with over 240 companies having joined in the first 18 months of its existence, means that our findings have implications for policy-makers involved in corporate governance not only in the UK but also for those involved in the establishment of markets for small companies in a global context.

Institutional Investors and Voting Practices: an international comparison

The potential influence of groups of large shareholders was identified in the 1930s when Berle and Means (1932) highlighted the impact of the separation of ownership and control in corporations. Over sixty years later, institutional investors own large portions of equity in many companies across the world, and play a key role in the corporate governance arena. Corporate governance is defined in the Cadbury Report (1992) as “the system by which companies are directed and controlled. Boards of directors are responsible for the governance of their companies. The shareholders’ role in governance is to appoint the directors and the auditors and to satisfy themselves that an appropriate governance structure is in place”. In order to help satisfy this role, institutional shareholders engage in regular dialogue with companies; they also have the right to vote at companies’ annual general meetings. However evidence (Mallin 1995, 1996; PIRC 1998, 1999) shows that there is a much lower level of voting by institutional investors in the UK than might be expected. In the UK, the existing proxy voting system is generally viewed as slow and overly-complicated with many players in the chain and with little flexibility. By comparison, the US has, for a number of years, had in place state and federal legislation to allow proxy votes to be cast using modern media. Corporations have changed their articles as appropriate to take advantage of these revisions, and to enable them to be enacted in their own corporations. Legislation making similar provisions was also enacted in Australia in 1998. Increasingly it is seen as desirable, and eminently sensible, for the UK to follow suit (NAPF Inquiry, 1999). This paper discusses the concept of the vote being a “fiduciary duty”, and compares the voting systems in several countries, including the UK, US, Australia, and Germany. The emerging trends in the area are discussed and the development of voting in the next millennium explored.

The Dynamics of Corporate Governance in Bahrain: Structure, Responsibilities and Operation of Corporate Boards

There has been an increasing emphasis on corporate governance in recent years in a global context. The board of any company is key to the adoption and implementation of corporate governance best practice. In this paper we examine the dynamics of corporate governance in Bahrain, a Middle-Eastern country, by analysing the board structures of companies in Bahrain. We employ a survey methodology with a questionnaire being sent to all of the companies listed on the Bahrain Stock Exchange Market. The aim of the questionnaire is to elicit information regarding the structure, responsibilities and operation of corporate boards in companies in Bahrain. We find that non-executive directors dominate the board composition, key factors influencing appointment of these directors being relevant skills and business experience and reputation. However, none of the companies has a Nominations Committee and so NEDs are generally nominated by the board as a whole or by major shareholders, Chairmen/CEOs. Nonetheless, the non-executive directors would appear to be relatively independent, as in the majority of cases the NEDs are not former executive board members or major shareholders. Whilst Bahrain does not have a corporate governance code per se, the company law reforms contain some interesting provisions that will contribute to the corporate governance framework in Bahrain. Amongst these provisions is one that excludes directors from being on more than three boards. There are therefore some encouraging features and developments in corporate governance in Bahrain.

Handbook on International Corporate Governance

This major Handbook provides a comprehensive analysis of the development of corporate governance across a range of countries including Australia, Germany, India, Italy, Japan, Poland, Russia, South Africa, Spain, Turkey and the UK. Whilst the stage in the corporate governance life cycle may vary from country to country, there are certain core features which emerge such as the importance of transparency, disclosure, accountability of directors and protection of minority shareholders’ rights.

Corporate Governance in Bahrain

Corporate governance is developing rapidly in many countries across the world. In this paper we analyse the existing state of corporate governance in a country in the Middle East: Bahrain. We employ a survey methodology, with a questionnaire being sent to all of the companies listed on the Bahrain Stock Exchange Market. An analysis of the responses reveals that Bahraini companies have in place some of the features of corporate governance best practice with boards dominated by non-executive directors, for example, and the separation of the roles of Chair and CEO. However, it is not clear how effective the nomination/appointments process is and directors tend to be fairly entrenched. In terms of risk management and control, the majority of Bahraini companies have an internal audit department and risk management control. Overall, it seems that Bahraini companies have a number of key corporate governance structural features in place, but that there remains further progress to be made. Copyright Blackwell Publishers Ltd 2002.

Developments in Corporate Governance in Central and Eastern Europe

The countries of western Europe have seen far reaching corporate governance developments in recent years, ranging from the Cadbury Report in the UK to the Vienot Report in France. These developments have been discussed in toto in the report of the CEPS working party on corporate governance in Europe. However alongside the developments in western Europe, there are fundamental political and economic changes going on in the countries in Eastern and Central Europe (CEEC) which have significant implications for the development of corporate governance in these countries. In this paper we analyse the changes that have taken place in a number of CEEC countries, highlighting both the commonalities and the differences, and the way that these countries are developing in terms of their corporate governance structures. The demise of central planning, for example, has led to a shift of control, and we seek to examine such issues as where control now lies, the effects of privatisation, and the problems of development of institutional arrangements for corporate governance. Financial institutions have a key role to play in the changes in the CEEC and therefore the latter part of the paper places a special emphasis on the role of financial institutions, particularly banks, as monitors in the CEEC, and analyses the banks’ role in firms’ restructuring. The implications for the role of banks in any developing corporate governance system are immense, with banks playing a central role as monitors of corporate success. However the privatisation of banks and firms is not, per se, sufficient to ensure that these enterprises develop adequate corporate governance structures which are able to cope with problems endemic in the current framework, and are capable of evolving to take account of future changes. We examine the existing structures in several CEEC, and provide a taxonomy of changes that have occurred to date. We discuss likely future changes and conclude on the likely effects on corporate governance in the CEEC.

Factors influencing corporate governance disclosures: evidence from Alternative Investment Market (AIM) companies in the UK

This study examines the relationship between company and ownership characteristics and the disclosure level of compliance with Quoted Companies Alliance (QCA) recommendations on corporate governance in Alternative Investment Market (AIM) companies. We report clear evidence that compliance increases with company size, board size, the proportion of independent non-executive directors, the presence of turnover revenue, and being formerly listed on the Main Market. However, we find that shell and highly geared AIM companies disclose relatively lower levels of corporate governance than recommended under QCA guidelines. Our findings suggest that market regulators should review the potential impact of the quality of corporate governance in these companies on the future vibrancy of AIM. We find no evidence that ownership structure or the type of Nominated Advisor is related to disclosure of compliance with QCA guidelines. Overall, in a lightly regulated environment such as the AIM market, it seems that companies will ultimately pursue a cost–benefit strategy in voluntarily complying with good corporate governance practice.