Anna Rosinus

What is the difference between?

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2
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Anna Rosinus
Corporate Governance, Sustainability, Globalisation
what is Corporate Governance?
the two different systems
Shareholder vs. Stakeholder Approach
Corporate Social Responsibility, Ethics and Sustainability
Globalisation
Digital Age
what to expect?

161
Anna Rosinus
Corporate Governance Definition (1/2)
Corporate Governance should be seen as a system of rules for how to
manage a corporation
this system aims at:
providing transparency to the outside
protecting shareholder interests
controlling management


what does Corporate Governance really mean?
according to the OECD Principles of Corporate Governance
Corporate Governance is a key element in improving economic efficiency and growth as well as enhancing
investor confidence
Corporate governance involves a set of relationships between a companys management, its board, its
shareholders and other stakeholders.
Corporate governance also provides the structure through which the objectives of the company are set, and
the means of attaining those objectives and monitoring performance are determined.
Good corporate governance should provide proper incentives for the board and management to pursue
objectives that are in the interests of the company and its shareholders and should facilitate effective
monitoring.
As a result, the cost of capital is lower and firms are encouraged to use resources more efficiently, thereby
underpinning growth.
162
Anna Rosinus
Corporate Governance Definition (2/2)
Shareholders
Board of Directors
Corporate Governance:
relationship among board of directors,
top management, and shareholders
in giving direction and
monitoring performance
of a corporation
Top Management
what (else) is covered by the term Corporate Governance?
163
Anna Rosinus
Corporate Governance: 2 Different Systems
the difference between the German and the Anglo-Saxon way
supervisory board
(Aufsichtsrat)
management board
(Vorstand)
two-tier board*
(e.g. Germany, China)
one-tier board
(e.g. USA, UK)
inside
directors
outside
directors
* also called dual board
or two-board system
164
Anna Rosinus
Anglo-Saxon Corporate Governance System
how does the Anglo-Saxon way work?
inside
directors
outside
directors
one-tier board
(e.g. USA, UK)
shareholders
top management: CxOs
(CEO, COO, ) and
executive vice presidents
elect
appoints
165
Anna Rosinus
Roles of the Different Groups
shareholders (assembly) board of directors top management
what are the roles of these different groups of people?
example given above: Apple
decides on corporate charter
etc.
approves financial reports
decides on dividends and
major transactions
elects/appoints top
management
voting rights depend on
types of shares
meets usually once a year
SUPERVISING THE COMPANY
sets the corporate strategy
and overall direction,
mission and vision
controls and supervises top
management (incl. hiring/
firing)
reviews & approves the use
of resources
cares for sh.h.s interests
MANAGING THE COMPANY
follows the directions of the
board of directors
formulates and implements
the strategy
evaluates performance and
takes corrective action
executive leadership,
shaping corporate
culture
166
Anna Rosinus
Board of Directors and Strategic Management
monitoring of developments inside and outside the
corporation
evaluation and further influence
review of proposals
advisory
provision of suggestions and alternatives
initiation and determination
definition of the corporations mission and vision
specification of strategic options for the future
how do boards of directors influence strategy?
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v
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Anna Rosinus
Board Members: 2 Types
what is the difference between inside and outside directors?
inside
directors*
outside
directors
one-tier board
(e.g. USA, UK)
outside directors:
or non-management directors
= executives of other companies that are
not employed by the corporation
inside directors:
or management directors
= officers (CxOs) and/or other executives
employed by the corporation
* chairman = CEO in the majority
of the publicly held US-companies 168
Anna Rosinus
Owners vs. Managers: (Dis-)Harmony?
AGENCY THEORY
top management is not willing
to accept responsibility for their
decisions
this pattern might change when
they own a substantial amount
of stock in the corporation
STEWARDSHIP THEORY
as the result of long tenure with the
corporation, insiders tends to identify
with the corporation and its success
top management acts in the best
interest of the corporation more than
in its self-interest
is a companys management always acting in favour of the owners?
slide 175
Anna Rosinus
Board of Directors Apple Inc. (1/2)
practical application
source: http://www.apple.com/pr/bios/
Arthur D. Levinson,
Ph. D.
Chairman
Chairman and
former CEO,
Genentech, a
biotechnology
corporation and
subsidiary of Roche
Bill Campbell
Chairman and
former CEO, Intuit,
a software provider
of business and
financial
management
solutions
Tim Cook
CEO, Apple
Millard Drexler
Chairman and CEO
J. Crew, a retailer of
womens, mens,
and childrens
apparel, shoes, and
accessories
Anna Rosinus
Board of Directors Apple Inc. (2/2)








practical application
source: http://www.apple.com/pr/bios/
Albert Gore Jr.
Former Vice
President of the
United States
Nobel Peace Price
Robert A. Iger
Chairman and CEO,
The Walt Disney
Company the
worlds largest
media company
Andrea Jung
President and CEO,
Grameen America, a
nonprofit
microfinance
company
Ronald D. Sugar,
Ph. D.
former Chairman
and CEO, Northrop
Grumman, an
aerospace and
defense technology
firm
Anna Rosinus
German Corporate Governance System
the difference between the German and the Anglo-Saxon way
supervisory board
(Aufsichtsrat)
management board
(Vorstand)
two-tier board*
(e.g. Germany, China)
* also called dual board or two-board system
** depending on the size of the company (equity, employees)
shareholders
assembly
work force
representatives
each group elects 50 %**
the chairman (who has a double vote) is
always chosen by the shareholders side
no over-lapping,
i.e. no executives in
the supervisory
board
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Anna Rosinus
Roles of the Different Groups
management board supervisory board
what are the roles of these different groups of people?
example given above: Adidas
management of the company
know the market and the
business
strategic planning and
operational control
representation of interest of
various groups, including
shareholders and employees etc.
appointment of management
supervision of and advisory to
management
approval of major decisions like
mergers and acquisitions
172
Anna Rosinus
Supervisory Board Adidas AG
practical application
http://www.adidas-group.com/de/unternehmen/aufsichtsrat/
Igor Landau,
Chairman
Sabine Bauer
head of works
council, adidas
AG
Willi Schwerdtle
WP Force
Solutions GmbH
Dieter
Hauenstein
works council,
adidas AG
Dr. Wolfgang
Jaeger
Hans-Bckler-
Stiftung
Dr. Stefan
Jentzsch
Perella Weinberg
Partners UK LLP
Herbert
Kauffmann
self employed
Katja Kraus
Jung von
Matt/sports
GmbH
Kathrin Menges
Henkel AG & Co.
KGaA
Roland Nosko
IG BCE
Hans Ruprecht
works council,
adidas AG
Heidi Thaler-
Veh
works council,
adidas AG
Anna Rosinus
Management Board Adidas AG
practical application
http://www.adidas-group.com/de/unternehmen/vorstand/
Herbert Hainer,
CEO
Roland Auschel,
Global Sales
Glenn Bennett,
Global Operations
Eric Liedtke,
Global Brands
Robin J. Stalker,
Finance
Anna Rosinus
Differences in Ownership across the Globe

managers and shareholders in Japan are often members of the same
keiretsu (a set of companies with interlocking business relationships and
shareholdings)
=> ties between potential adversaries
in France, nonfinancial corporations and state governments are the
largest shareholders
particularly with regard to some of the countrys largest employers
the same holds true for Germany, but banks are also major owners there
it is not unusual for German banks to own both debt and equity in the
same corporation
in addition to the direct voting power that banks have due to their
ownership position, banks also control a significant number of proxy
voting positions from depositors who use the bank as a trustee for
ownership purposes
are there further regional particularities in Governance practices?
176 only FYI
Anna Rosinus
Corporate Governance, Sustainability, Globalisation
what is Corporate Governance?
the two different systems
Shareholder vs. Stakeholder Approach
Corporate Social Responsibility, Ethics and Sustainability
Globalisation
Digital Age
what to expect?

Anna Rosinus
Shareholder vs. Stakeholder Approach (1/2)
Social Responsibility:
a private corporation has
responsibilities to society that
extend beyond making a profit
what are a business responsibilities?
Friedmans traditional view:
the social responsibility of
business is to increase its
profits [not spending
shareholder money for the
general social interest]
177
Anna Rosinus
Shareholder vs. Stakeholder Approach (2/2)
what are a business responsibilities?
SHAREHOLDER APPROACH:
a company should operate
exclusively in the interests of
the owners
maximisation of a companys
value
maximisation of profits by
expanding & investing in
profitable bizs
restructuring & divesting of
unprofitable bizs
societal concerns as distraction
STAKEHOLDER APPROACH:
companies are social
institutions that should
pursue the interests of
multiple groups
key role of management is to
balance the different and
often conflicting interests of
stakeholders
shareholders
customers
employees
178
Anna Rosinus
Carrolls four responsibilities of business


philantropy
(discretionary obligations)
ethical behaviour
complying with laws and regulations
achieving economic profit
how to take care of social issues?
social responsibilities
179
Anna Rosinus
Corporate Governance, Ethics, Sustainability & CSR
how to behave appropriately in an international setting?
CORPORATE
GOVERNANCE
some examples:
management practices
labour conditions
no deceptive marketing,
advertising, selling
avoiding fraudulent
behaviour in production
and/or marketing
intellectual property
denying bribery &
corruption
ETHICS
CORPORATE SOCIAL
RESPONSIBILITY
SUSTAINABILITY
provision of the means to respect ethics, corporate social
responsibility & sustainability by managerial action
code of conduct
continuous scanning for ethnical issues
some examples:
respecting human rights
avoiding compulsory or
child labour, allowing
labour union participation
no discrimination
natural environment
protection
refusing corruption
philanthropy (donations)
TRIPLE BOTTOM LINE
economic interests (job
creation, wages, tax flows,
public works, etc.)
social interests (diversity
in hiring, work conditions,
retirement benefits, health
insurance, education)
environmental interests
(efficient use of input
factors & energy, etc.)
180
Anna Rosinus
Ethics, Sustainability & Corporate Social Responsibility
how to behave appropriately in an international setting?
ETHICS SUSTAINABILITY
CORPORATE
SOCIAL
RESPONSIBILITY
181
Anna Rosinus
Corporate Governance, Ethics, Sustainability & CSR
how to behave appropriately in an international setting?
CORPORATE
GOVERNANCE
provision of the means to respect ethics, corporate social
responsibility & sustainability by managerial action
code of conduct
continuous scanning for ethnical issues
Sarbanes-Oxley Act
180-1
Anna Rosinus
Corporate Governance, Ethics, Sustainability & CSR
how to behave appropriately in an international setting?
some examples:
management practices
labour conditions
no deceptive marketing,
advertising, selling
avoiding fraudulent
behaviour in production
and/or marketing
intellectual property
denying bribery &
corruption
ETHICS
180-2
Anna Rosinus
Corporate Governance, Ethics, Sustainability & CSR
how to behave appropriately in an international setting?
CORPORATE SOCIAL
RESPONSIBILITY
some examples:
respecting human rights
avoiding compulsory or
child labour, allowing
labour union participation
no discrimination
natural environment
protection
refusing corruption
philanthropy (donations)
180-3
Anna Rosinus
Corporate Governance, Ethics, Sustainability & CSR
how to behave appropriately in an international setting?
SUSTAINABILITY
TRIPLE BOTTOM LINE
economic interests (job
creation, wages, tax flows,
public works, etc.)
social interests (diversity
in hiring, work conditions,
retirement benefits, health
insurance, education)
environmental interests
(efficient use of input
factors & energy, etc.)
180-5
Anna Rosinus
what could sustainability mean for a business?
http://environet.ie/news/sustainability-%E2%80%93-what-can-it-mean-your-business
180-6
Anna Rosinus
Corporate Social Responsibility: Starbucks
(1) list potential problems in terms of ecological, economic as well as
social responsibility (2 aspects for each)
(2) please figure out how Starbucks could react on 3 of the issues listed
before
(3) for one of these plans develop an appropriate way of communicating
your activities
group work
Anna Rosinus

Anna Rosinus
Capitol Hill - Washington, D.C. LEED certified Starbucks Store

practical application
further reading: http://articles.mcall.com/2014-04-07/opinion/mc-starbucks-recycle-web-20140407_1_starbucks-cups-
starbucks-customers-paper-mills
Anna Rosinus
Porter & Kramer: Shared Value
redistributing the value already
created
example: fair trade of cocoa is about the
redistribution of value by paying farmers
a higher price for their crops (cocoa)
expanding the total pool of
economic and social value
example: improving the efficiency of
cocoa growing through improved
growing methods, better quality control,
and improved infrastructure
is there a way to combine ethical values and business success?
2011:
creating economic value in a way which also creates value for society.
recommended video: https://www.youtube.com/watch?v=0iIh5YYDR2o
187
Anna Rosinus
Corporate Governance, Sustainability, Globalisation
what is Corporate Governance?
the two different systems
Shareholder vs. Stakeholder Approach
Corporate Social Responsibility, Ethics and Sustainability
Globalisation
Digital Age
what to expect?

Anna Rosinus
GLOBALISATION
Anna Rosinus
Globalisation the Idea
= worldwide integrated marketplace that includes
buyers,
producers,
suppliers, and governments in different countries

=vanishing of inter-country boarders in terms of
tariffs, customs, and other trade barriers
customers preferences
technologies and work skills
but also price levels and purchasing power

what does globalisation mean?
189
Anna Rosinus
A Typical Consumer Might
drive a Volkswagen
from Germany, manufactured in Bratislava,
Slovakian Republic (e.g. UP!)
drink a Starbucks Coffee
from US (local store), with Coffee Beans from
Ethiopia
wear a shirt from H&M
from Sweden, made in Bangladesh
wear a MAVI Jeans
from Turkey, made in Turkey
wear some UGG boots
from Australia, made in Australia
answer a Samsung phone
from South Korea, assembled ether in Korea,
China or Vietnam
or an iPhone
designed in California, assembled in China
own/wear an Omega watch
from Switzerland, made (at least in parts) in
Switzerland
carry a Longchamp bag
from France and probably made in France,
drink a Becks beer
brewed in Bremen, Germany, the brewery
owned by Anheuser-Busch a Belgian-Brasilian
multinational brewing company
application
190
Anna Rosinus
World Trade Growth
how did world GDP and world exports grow since 1950?
development of world exports and world GDP since 1950 (index 1950 = 100)
data source: WTO, 2014, online
x35
x9
0
500
1.000
1.500
2.000
2.500
3.000
3.500
4.000
1950 1960 1970 1980 1990 2000 2010
Exports GDP
191
Anna Rosinus
global GDP growth and distribution: from West to East
2000
2010
2020
+7% CAGR
+6% CAGR
25%
31%
35%
2%
7%
Asia
Europe
(Western Europe, Eastern Europe, MENA)
North America
Australia, South Africa
South America
27%
34%
27%
4%
8%
35%
28%
25%
4%
8%
nominal GDP growth averages at ~6% p.a. over the years ahead (2000 - 2020)
Asia, Europe and North America together contribute more than 80% of global GDP
the Asian share of Global GDP will grow from 25% in 2000 to 35% in 2020
the North American share will in turn diminish from 35% to 25% the European from 31% to 28%
Anna Rosinus
Consequences of Globalisation
firm-level consequences of market globalisation
extension of market(s) increased sales opportunities
emergence of new production sourcing/possibilities
internationalisation of the firm's value chain
intensified competition: new entrants
societal consequences of market globalisation
contagion: rapid spread of monetary or financial crises
loss of national sovereignty
offshoring and the flight of jobs
effect on the poor
effect on sustainability and the natural environment
effect on national culture
what are (inevitable) consequences of globalisation?
193
Anna Rosinus
Cultural Change
how do cultures converge?
Anna Rosinus
http://www.abc.net.au/news/2014-02-04/facebook-global-connections-map/5236592
194
Anna Rosinus
today facebook
195
Anna Rosinus
Anna Rosinus
Strategic Dimensions of the Internet
(1) shift toward disaggregation and reaggregation
(2) movement toward information symmetry
(3) Internet as distribution channel
(4) speed
(5) interactivity
(6) potential for cost reductions and cost shifting
what has changed and how do businesses have to change/adapt?
200
Anna Rosinus
Movement toward Information Symmetry

what has changed and how do businesses have to change/adapt?
200-1
Anna Rosinus
what has changed and how do businesses have to change/adapt?
200-2
Anna Rosinus
Internet as Distribution Channel

what has changed and how do businesses have to change/adapt?
200-3
Anna Rosinus
Strategic Dimensions of the Internet
(1) shift toward disaggregation and reaggregation
(2) movement toward information symmetry
(3) Internet as distribution channel
(4) speed
(5) interactivity
(6) potential for cost reductions and cost shifting
what has changed and how do businesses have to change/adapt?
200-4
Anna Rosinus
Innovation Adoption
how our technological life is speeding up
208
Anna Rosinus
History of Internet and Social Media
1969: first attempts of Internet
1989: predecessor of World Wide Web
1995: classmates.com
2002: LinkedIn
2003: Myspace
2004: Facebook
2005: YouTube
2006: Twitter
2007: tumblr
2010: Instagram, Pinterest
2011: Google+
what about the origins of the Digital Age?
206
Anna Rosinus
Social Networks - Facts & Figures
size of social networks 2013
Quellen: Globalwebindex, YouTube, mediabistro, IMF
0 250 500 750 1.000
India
Faccebook
Twitter
Google+
US
LinkedIn
Instagram
Germany
Pinterest
social networks regarded as countries
207
Anna Rosinus
Social Networks - Facts & Figures
impact of social networks 2013
Quellen: Globalwebindex, YouTube, mediabistro, IMF
684.000
100.000
3.600
2.880
1 10 100 1.000 10.000 100.000 1.000.000
posts are shared on Facebook
tweets are sent
pictures are published with Instagram
minutes of videos are uploaded to Youtube
each minute
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Anna Rosinus
source: https://www.facebook.com/photo.php?fbid=10150651968316850&set=a.59511371849.82597.22707976849
Anna Rosinus
World's Largest Internet Companies
digital business: no longer a start-up phenomenon
source: http://en.wikipedia.org/wiki/List_of_largest_Internet_companies,
http://en.wikipedia.org/wiki/List_of_the_largest_information_technology_companies
RANK COMPANY INDUSTRY
REVENUE
2013 or 14
[USD billion]
EMPLOYEES
MARKET CAP
[USD billion]
HEADQUARTER
1 Amazon E-commerce $74.45 117,300 $160.49 United States
2 Google Search $59.82 47,756 $380.64 United States
3 eBay E-commerce $16.05 31,500 $68.51 United States
4 Facebook Social $7.87 6,337 $160.03 United States
5 Tencent Social $6.96 25,517 $65.01 China
6 Rakuten E-commerce $5.56 10,867 $13.06 Japan
7 Priceline.com Travel $5.26 8,000 $35.58 United States
8 Yahoo Web portal $4.68 12,200 $35.58 United States
9 Baidu Search $3.54 21,800 $29.75 China
10 Salesforce.com Cloud computing $3.05 12,000 $25.85 United States
for comparison purposes: worlds largest IT companies
Samsung Electr. Electronics $212.68 270,000 $163.41 South Korea
Apple Inc Electronics $170.91 80,300 $453.03 United States
Foxconn Electronics $132.07 1,290,000 $32.15 Taiwan
HP Hardware $112.30 317,500 $60.84 United States
210