dunnettreader + article + asset_stripping   2

Bernard S. Black, Reinier Kraakman, Anna Tarassova - Russian Privatization and Corporate Governance: What Went Wrong? :: SSRN - Stanford Law Review, Vol. 52, pp. 1731-1808, 2000
Bernard S. Black, Northwestern School of Law & Kellogg School of Management; European Corporate Governance Institute (ECGI); Reinier Kraakman, Harvard Law School, ECGI; Anna Tarassova, U of Maryland, Center on Institutional Reform and the Informal Sector (IRIS) -- In Russia and elsewhere, proponents of rapid, mass privatization of state-owned enterprises (ourselves among them) hoped that the profit incentives unleashed by privatization would soon revive faltering, centrally planned economies. The revival didn't happen. We offer here some partial explanations. First, rapid mass privatization is likely to lead to massive self-dealing by managers and controlling shareholders unless (implausibly in the initial transition from central planning to markets) a country has a good infrastructure for controlling self-dealing. Russia accelerated the self-dealing process by selling control of its largest enterprises cheaply to crooks, who transferred their skimming talents to the enterprises they acquired, and used their wealth to further corrupt the government and block reforms that might constrain their actions. Second, profit incentives to restructure privatized businesses and create new ones can be swamped by the burden on business imposed by a combination of (among other things) a punitive tax system, official corruption, organized crime, and an unfriendly bureaucracy. Third, while self-dealing will still occur (though perhaps to a lesser extent) if state enterprises aren't privatized, since self-dealing accompanies privatization, it politically discredits privatization as a reform strategy and can undercut longer-term reforms. A principal lesson: developing the institutions to control self-dealing is central to successful privatization of large firms. -- PDF File: 79 -- downloaded pdf to Note
article  SSRN  Russia  privatization  Russian_economy  corporate_governance  corporate_law  corporate_finance  corporate_control  corruption  asset_stripping  downloaded 
july 2015 by dunnettreader
Kobi Kastiel - Executive Compensation in Controlled Companies — The Harvard Law School Forum on Corporate Governance and Financial Regulation - November 13, 2014
Co-editor, HLS Forum on Corporate Governance and Financial Regulation -- Conventional wisdom among corporate law theorists has long suggested that the presence of a controlling shareholder should alleviate the problem of managerial opportunism because such a controller has both the power and incentives to curb excessive executive pay. My Article (..) forthcoming (,..) proposes a different view that is based on an agency problem paradigm, and presents a comprehensive framework for understanding the relationship between concentrated ownership and executive pay. On the theoretical level, the Article shows that controlling shareholders often have incentives to overpay professional managers instead of having an arm’s-length contract with them, and therefore it suggests that compensation practices in a large number of controlled companies may have their own pathologies. (..) controllers may wish to overpay managers in order to maximize their consumption of private benefits, while providing professional managers with a premium for their “loyalty” and for colluding with tunneling activities. (..) aggravated by the use of control-enhancing mechanisms, such as dual-class share structures, which distort controllers’ monitoring incentives due to the wedge it creates between controllers’ cash flow rights and control rights. (..) certain controllers, (..) could be “weak” due to their lack of experience, motivation or talent, and thus are more easily captured by professional CEOs.(..) biased due to their longstanding professional and social relationship with professional managers, (..) help explain recent puzzling phenomena such as the overly generous pay patterns in Viacom or other controlled companies, as well as the rise in say-on-pay rules in countries with concentrated ownership (as observed in a recent study by Thomas & Van der Elst). -- links to article
article  SSRN  corporate_governance  corporate_ownership  corporate_control  principal-agent  asset_stripping  tunneling  conflict_of_interest  executive_compensation  1-percent  investors  shareholders  shareholder_voting  institutional_investors 
november 2014 by dunnettreader

Copy this bookmark:



description:


tags: