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vietnam national university, HANOI school of business Do Lan Huong Corporate governance in Vietnam and in state owned enterprises after equitization Major: Business Administration Code: 60 34 05 Master of business administration thesis Supervisor: Dr Can Van Luc Hanoi – 2010 ACKNOWLEDGEMENT I would like to deeply thank my parents who have encouraged me in my education and their constant support through the course of studies. I also would like to thank my husband and my 2 little sons for their encouragement to me to continue my education. Many thanks also go to my colleagues who helped me a lot in collecting data to finish the thesis. Especially, I would like to send my sincere thanks to my helpful supervisor Dr. Can Van Luc, for his advice and support during the time I write the thesis. i ABSTRACT CORPORATE GOVERNANCE IN VIETNAM AND IN STATE OWNED ENTERPRISES AFTER EQUITIZATION Do Lan Huong Hanoi School of Business Supervisor: Dr. Can Van Luc September 2010, 85 pages Corporate governance has been a prominent issue in developed market economies for some considerable time. However, in an emerging and transition economy like Vietnam, it is still unfamiliar and underdeveloped. Legal framework for corporate governance in Vietnam is only in the early stage of development. Awareness of market participants on corporate governance is still limited. In the meantime, the business environment and the capital market are changing very fast and becoming more and more complicated, especially after the world financial crisis in 2007-09. The recent break up of Vinashin and the alarming inefficiency in management and operation of state owned enterprises have also attracted attention to corporate governance and made it become one of the current hottest issues. In this context, this thesis provides a literature review of corporate governance and an up-to-date evaluation of corporate governance practices in Vietnam. Besides, as the success of Vietnam‟s SOE reform through equitization is significant for the country‟s future economic growth and the improvement in corporate governance is one of the major factors for improving efficiency in equitized state-owned enterprises (SOEs), an examination of the changes in corporate governance of SOEs after equitization is also conducted. To conclude, the thesis provides recommendations to building a sound and strong corporate governance system in Vietnam. ii TÓM TẮT QUẢN TRỊ DOANH NGHIỆP Ở VIỆT NAM VÀ TẠI CÁC DOANH NGHIỆP NHÀ NƯỚC SAU CỔ PHẦN HÓA Đỗ Lan Hương Khoa Quản trị kinh doanh Giáo viên hướng dẫn: TS. Cấn Văn Lực Tháng 09 năm 2010, 71 trang Ở các nước phát triển, quản trị doanh nghiệp đã ra đời từ lâu và rất được quan tâm. Tuy nhiên, ở các nền kinh tế mới nổi và đang trong giai đoạn chuyển đổi như Việt Nam, quản trị doanh nghiệp vẫn còn là một khái niệm mới mẻ và chưa được phát triển. Khung pháp lý cho quản trị doanh nghiệp đã được xây dựng nhưng vẫn còn ở giai đoạn ban đầu. Nhận thức về quản trị doanh nghiệp của các bên tham gia thị trường còn nhiều hạn chế. Trong khi đó, môi trường kinh doanh cũng như thị trường vốn đang thay đổi hết sức nhanh chóng và ngày càng trở nên phức tạp đặc biệt sau cuộc khủng hoảng tài chính toàn cầu năm 2007-09. Bên cạnh đó, vụ việc Vinashin mới đây cũng như sự thiếu hiệu quả đáng báo động trong quản lý ở các doanh nghiệp Nhà Nước cũng làm dấy lên sự chú ý của mọi người tới quản trị doanh nghiệp và khiến nó trở thành một trong những vấn đề nóng bỏng nhất hiện nay. Trên tinh thần đó, luận văn đề cập đến hệ thống cơ sở lý luận về quản trị doanh nghiệp và bức tranh cập nhật nhất về thực trạng quản trị doanh nghiệp ở Việt Nam. Bên cạnh đó, do sự thành công trong công cuộc đổi mới doanh nghiệp nhà nước (DNNN) thông qua quá trình cổ phần hóa có ý nghĩa rất quan trọng tới sự phát triển kinh tế trong tương lai của Việt Nam, nên luận văn cũng sẽ trao đổi về quản trị DNNN sau cổ phần hóa. Trong phần cuối, luận văn đưa ra một số kiến nghị nhằm góp phần xây dựng và nâng cao hiệu quả công tác quản trị doanh nghiệp tại Việt Nam. iii TABLE OF CONTENTS ACKNOWLEDGEMENT ............................................................................................ i ABSTRACT ................................................................................................................. ii TÓM TẮT ................................................................................................................... iii TABLE OF CONTENTS ............................................................................................ iv LIST OF ABBREVIATIONS ..................................................................................... vi LIST OF TABLES ..................................................................................................... vii CHAPTER 1: INTRODUCTION ................................................................................ 8 1.1 Background ........................................................................................................ 8 1.2 Rationale of the Thesis ....................................................................................... 9 1.3 Purpose of the Thesis ......................................................................................... 9 1.4 Key Research Area ........................................................................................... 10 1.5 Methodology .................................................................................................... 10 1.6 Contribution of the Thesis................................................................................ 10 1.7 Outline .............................................................................................................. 11 CHAPTER 2: LITERATURE REVIEW ................................................................... 12 2.1 Definitions of Corporate Governance .............................................................. 12 2.1.2 What is Corporate Governance? ............................................................... 12 2.1.2 Objectives of Corporate Governance ........................................................ 12 2.1.2 Codes of Corporate Governance ............................................................... 13 2.2 Models of Corporate Governance .................................................................... 14 2.2.1 Shareholder Model .................................................................................... 14 2.2.1 Stakeholder Model .................................................................................... 15 2.3 Corporate Governance System ......................................................................... 17 2.4 Corporate Governance Mechanisms ................................................................ 19 2.4.1 Internal Mechanisms ................................................................................. 20 2.4.2 External Mechanisms ................................................................................ 25 2.5 Corporate Governance in Transition Economies ............................................. 28 2.6 Chapter Summary............................................................................................. 31 CHAPTER 3: CORPORATE GOVERNANCE IN VIETNAM ............................... 32 3.1 Introduction ...................................................................................................... 32 3.2 Legal framework and law enforcement............................................................ 33 3.2.1 Development of a legal framework for corporate governance in Vietnam ............................................................................................................................ 33 3.2.2 Current corporate governance framework in Vietnam.............................. 34 3.3 Rights of Shareholders ..................................................................................... 39 3.3.1 Basic shareholder rights ............................................................................ 39 3.3.2 Right to participate in or to be informed of decisions on key corporate changes ............................................................................................................... 42 3.3.3 Rights to participate and vote in general shareholders‟ meeting .............. 43 3.3.4 Markets for corporate control.................................................................... 44 3.4 Equitable Treatment of Shareholders ............................................................... 45 3.4.1 Equal treatment to all shareholders ........................................................... 45 3.4.2 Minority shareholder protection ................................................................ 46 3.4.3 Insider trading and abusive self-dealing ................................................... 48 3.4.4 Related party transactions ......................................................................... 48 3.5 The Role of Stakeholders in Corporate Governance........................................ 49 3.6 Disclosure and Transparency ........................................................................... 49 iv 3.6.1 Information disclosure .............................................................................. 50 3.6.2 Quality of accounting standards ................................................................ 52 3.6.3 Annual audit .............................................................................................. 53 3.6.4 External Audit ........................................................................................... 55 3.6.5 Channels for disseminating information ................................................... 56 3.7 Board of Directors ............................................................................................ 57 3.8 Board of Supervisors ........................................................................................ 62 3.9 Remaining corporate governance issues in Vietnam ....................................... 63 3.10 Chapter Summary .................................................................................... 64 CHAPTER 4: CHANGES IN CORPORATE GOVERNANCE OF STATE OWNED ENTERPRISES AFTER EQUITIZATION ............................................................... 66 4.1 Introduction ...................................................................................................... 66 4.2 Methodology and Data collection .................................................................. 67 4.3 Ownership structure after equitization ............................................................. 68 4.4 Board of Directors Composition ...................................................................... 69 4.5 The Board of Supervisors................................................................................. 70 4.6 Manager orGeneral manager (CEO) ................................................................ 72 4.7 Other committees ............................................................................................. 73 4.8 Executive Compensation.................................................................................. 73 4.9 Case Study........................................................................................................ 73 4.9.1 Vinamilk.................................................................................................... 74 4.9.2 PVFCCo .................................................................................................... 77 4.9.3 Performance and stock price comparison ................................................ 80 4.10 Chapter Summary........................................................................................... 81 CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS ............................. 82 REFERENCES........................................................................................................... 85 v LIST OF ABBREVIATIONS BOD: Board of Directors GSM: General Shareholders Meeting SOE: State owned enterprises SSC: State Securities Commission HOSE: Ho Chi Minh Stock Exchange HASTC: Ha Noi Stock Trading Center HNX: Ha Noi Stock Exchange OECD: Organization for Economic Cooperation and Development CFA: Chartered Financial Analysts LLC: Limited Liability Company JSC: Joint Stock Company vi LIST OF TABLES Table 4.1: Ownership structure of SOEs after equitization Table 4.2: Composition of Board of Directors Table 4.3: Distribution of chairperson of the BOD by different groups of shareholders Table 4.4: Composition of the Board of Supervisors Table 4.5: Chairperson of the Board of Supervisors by different groups of shareholders Table 4.6: Distribution of managers of surveyed firms by different groups of shareholders Table 4.7: Vinamilk Ownership structure in 2009 Table 4.8: PVFCCo Ownership structure in 2009. vii CHAPTER 1: INTRODUCTION 1.1 Background Vietnam‟s stock market has only been established and developed for the last ten years. However, it has grown very fast and now plays a more and more important role to the country‟s economic development. Total market capitalization to GDP increased considerably from 3% in 2005 to 38% in 2009. Number of companies listed in 2 stock exchanges (Ho Chi Minh Stock Exchange and Ha Noi Stock Exchange) has also increased dramatically to 457 companies by the end of 2009. Among which, equitized state-owned enterprises (SOEs) dominate with more than half of the listed companies and holding key industries including power, oil, chemicals, steel…etc. Like many other emerging markets, Vietnam‟s stock market is facing many agency problems, which are the subject of corporate governance. Investor protection is inadequate, related party transactions are pervasive, compliance with accounting standards is weak and disclosure of quality information is limited. These could be major reasons that foreign investors hesitate to invest in Vietnam and hinder the development of the capital market. In Vietnam, corporate governance is still underdeveloped. Awareness of market participants on corporate governance is limited. The framework for corporate governance is only in the early stages of development with laws and regulations being established. Therefore, a literature review on corporate governance and an examination of corporate governance practices in Vietnam, especially in post-equitized SOEs are necessary for improving and developing a sound corporate governance culture and framework in Vietnam. The enhancement of corporate governance would help reduce emerging market vulnerability to financial crisis, reinforce property rights, reduce transaction costs and the cost of 8 capital, and which would significantly support capital market development (World Bank Corporate Governance Country Assessment, 2006). 1.2 Rationale of the Thesis Corporate governance has been a prominent issue in developed market economies for some considerable time. However, in an emerging and transition economy like Vietnam, it is still unfamiliar and underdeveloped. Legal framework for corporate governance in Vietnam is only in the early stage of development. Awareness of market participants on corporate governance is still limited. In the meantime, the business environment and the capital market are changing very fast and become more and more complicated, especially after the world financial crisis in 2007-09. The recent break up of Vinashin and the alarming inefficiency in management and operation of state owned enterprises have also attracted attention to corporate governance and make it become one of the current hottest issues. An up-to-date study on corporate governance in Vietnam and in State owned enterprises after equitization is therefore very necessary for developing a sound and healthy corporate governance system in Vietnam. 1.3 Purpose of the Thesis This thesis aims to provide a literature review of corporate governance and an up-to-date evaluation of corporate governance practices in Vietnam. Besides, as the success of Vietnam‟s SOE reform through equitization is significant for the country‟s future economic growth and the improvement in corporate governance is one of the major factors for improving efficiency in equitized SOEs, an examination of the changes in corporate governance of SOEs after equitization is also conducted. Finally, the thesis is expected to contribute to the limited literature on corporate governance in Vietnam. 9 1.4 Key Research Area This thesis looks at corporate governance practices in Vietnam and focus on listed companies. In addition, an empirical analysis on changes of corporate governance in equitized state-owned enterprises is also conducted. 1.5 Methodology This thesis provides a review of Vietnamese corporate governance that is upto-date and as complete as possible by assessing corporate governance in 6 areas which are stated in the Organization for Economic Cooperation and Development (OECD) Corporate Governance Principles: (i) corporate governance framework; (ii) rights of shareholders; (iii) equitable treatment of shareholders; (iv) role of stakeholders in corporate governance; (v) disclosure and transparency; and (vi) responsibility of the Board. Besides, as the success of Vietnam‟s SOE reform through equitization is significant for the country future economic growth, an empirical analysis is also conducted to illustrate the changes in corporate governance of SOEs after equitization. The analysis is mostly based on published and readily available data. In addition, to get deeper views on this area, analysis of corporate governance in 2 typical SOEs has also been made. 1.6 Contribution of the Thesis For a country which is still in the early period of building corporate governance system like Vietnam, the thesis has considerable contributions. First, it provides a literature review on corporate governance and helps improve understanding on this issue. Second, it provides an up-to-date evaluation on Vietnam‟s corporate governance practices and contributes to a limited number of studies on this area in Vietnam. Third, an empirical analysis and case study conducted on changes of corporate governance in SOEs after equitization also help understand the current corporate governance practices in these typical firms. 10 Fourth, recommendations given at the end of the thesis are expected to contribute to building a sound corporate governance system in Vietnam. 1.7 Outline The thesis is divided into five chapters with an introduction in Chapter 1 and literature review in Chapter 2. Chapter 3 analyzes corporate governance practices in Vietnam, and followed by an investigation of changes in corporate governance in SOEs after equitization. The thesis concludes with conclusions and several recommendations in Chapter 5. 11 CHAPTER 2: LITERATURE REVIEW 2.1 Definitions of Corporate Governance 2.1.2 What is Corporate Governance? The Organization for Economic Co-Operation and Development (“OECD”) defines corporate governance as “a set of relationships between a company‟s 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” (OECD Principles of Corporate Governance, 2004). In the definition stated by Charter Financial Analyst Institute (CFA Institute), corporate governance is defined as the system of principles, policies, procedures and clearly defined responsibilities and accountabilities, used by stakeholders to eliminate or minimize conflicts of interests. 2.1.2 Objectives of Corporate Governance The objectives of a corporate governance system are (i) to eliminate conflicts of interests among stakeholders, particularly between managers and shareholders, and (ii) to ensure that the assets of the company are used efficiently and productively and in the best interests of the investors and other stakeholders (CFA Institute). Good corporate governance enhances the quality of listed companies, forms a scientific constraint and incentive mechanism that motivates managers to maximize returns on investment, and effectively protect the interests of investors. Furthermore, it creates fairness, transparency and accountability in company business activities. In short, good corporate governance is an actuator for good company performance as it effectively reduces risks and decision mistakes. Good 12 corporate governance is also a firm foundation for healthy securities markets in the long run. It reduces speculation and violations of market rules, and thereby helps ensure stability in the financial markets. This heightens public confidence in firms as well as playing an important role in attracting foreign investment (OECD Principles of Corporate Governance, 2004). 2.1.2 Codes of Corporate Governance In many economies, codes of corporate governance and best practices have been promoted by various agencies including stock regulators, corporations, institutional investors, or associations (institutes) of directors and managers with the support of governments and international organizations. As a rule, compliance with these governance recommendations is not mandated by law, although the codes linked to stock exchange listing requirements may have an enforcement effect. For instance, companies quoted on the London and Toronto Stock Exchanges formally need not follow the recommendations of their respective national codes. However, they must disclose whether they follow the recommendations in those documents and, where not, they should provide explanations concerning divergent practices. Such disclosure requirements exert a significant pressure on listed companies for compliance. Nevertheless, among the codes of corporate governance worldwide, the OECD Principles of Corporate Governance are considered as comprehensive and well-accepted, and deemed to contribute to the development of corporate governance globally. The latest revised version of OECD Principles of Corporate Governance was released in 2004. The Principles are intended to assist the OECD and non‐OECD countries „to evaluate and improve the legal, institutional and regulatory framework for corporate governance‟, and „to provide guidance and suggestions for stock exchanges, investors, corporations, and other parties that have a role‟ in the corporate governance process (OECD Principles of Corporate 13 Governance, 2004). The Principles cover broad areas of corporate governance including the following key issues: (i) ensuring the basis for an effective corporate governance framework; (ii) the rights of shareholders and key ownership functions; (iii) the equitable treatment of shareholders; (iv) the role of stakeholders in corporate governance; (v) disclosure and transparency; and (vi) the responsibilities of the board. Although the OECD Principles focus on corporate governance matters of publicly traded companies on the basis of the separation of ownership and control, to some extent they are also useful for the improvement of corporate governance in unlisted companies, including privately held and state-owned enterprises. More importantly, a key reason why the Principles have been widely accepted is that they are based on common elements of corporate governance, embracing different corporate governance models found in the OECD and non-OECD economies. 2.2 Models of Corporate Governance 2.2.1 Shareholder Model The identification of the separation of ownership and control as a source of conflicting interests between owners and managers can be traced back to Berle and Mean (1932) and Jensen and Meckling (1976) developed the theory in an agency context, where the agent (manager) acts on behalf of the principal (owner), but differing objectives of the owners and managers, incomplete information on the managers‟ behavior, and incomplete contracts give rise to the principal-agent problem. Particularly, incomplete contracts as a source of agency problems have 14 been discussed by many authors, such as Coase (1937), Fama and Jensen (1983) and Hart (1995). Much conventional corporate governance thinking is focused on arrangements to solve this agency problem and ensure the firm is operated in the interests of the owners (shareholders and creditors). In line with this thinking, Shleifer and Vishny (1997) and Bech et al. (2002) define corporate governance as “dealing with the ways in which suppliers of finance to corporations assure themselves of getting a return on their investment”. This definition is too narrow and there has been a great deal of critique relating to this „conventional‟ view of corporate governance. Firstly, this perspective overlooks the diversity of the stakeholders within the principal-agent relationship and thus ignores the game around an enterprise, which is performed by multiple stakeholders with varying degrees of conflicting interests among themselves. Secondly, this perspective focuses too narrowly on the bilateral contract between owners and managers, and ignores the interdependencies and interactions among stakeholders. Opponents of the shareholder model stress that the interests of all of the stakeholders‟ interests must be accounted for. If the emphasis is solely on shareholder value maximization, there are externalities that are imposed on other stakeholders of the corporation. This critique is the foundation of the corporate governance stakeholder model advocated by many theorists. 2.2.1 Stakeholder Model Stakeholders in a corporation include, but are not limited to, suppliers, employees, customers, governmental bodies, political groups, trade associations, trade unions, communities, associated corporations, prospective employees, prospective customers and the general public. Various stakeholder models and definitions are advocated by scholars. Allen (2005) suggests that corporate governance concerns arrangements to ensure that firms are operated in a way that society‟s resources are used efficiently, and that competition and reputation should 15 also be included as mechanisms to deal with in addition to the conventional ones. Allen‟s model however, is too simple to be used for analyzing complex realities, especially when the role of different stakeholders is to be considered. Tirole (2001) advocates that corporate governance consists of institutions that induce or force management to internalize the welfare of stakeholders. Based on this approach, a stakeholder model is designed in which there is a broader mission of management, and management in turn is sharing control with stakeholders. The former suggests that management should aim at maximizing the sum of stakeholders‟ benefits, and incentive systems should then be designed with the purpose of achieving this aim. In this model, control is shared between stakeholders in the form of generalized code terminations. This model is more elaborately designed, but it is based on the assumption of optimal contracting among stakeholders. This assumption is however considered unrealistic as there are a range of institutional setting restrictions on the contracts among stakeholders, for example, government intervention is an important factor that is prevalent in many emerging economies. Berglof and von Thadden (1999) define corporate governance as the “set of mechanisms that translate signals from product and input markets into firm behavior.” Based on this approach, the authors are proposing a broader corporate governance paradigm. Firstly, the model consists of multilateral negotiations and influence-seeking among stakeholders, shareholders and other groups – both inside and outside the firm. Secondly, the model includes different institutions providing mechanisms, and influencing the transmission of signals. In addition to the legal and financial systems, the model also includes facets such as the product, input and labor markets. In the case of intense competition in the product and input markets, firms‟ investment decisions are under pressure from consumers and suppliers as well as shareholders, and managers must focus on running the firm effectively in order to remain competitive. Thus, the competitive situation of the firm is of 16 particular significance for consumers and suppliers, as increased competition leads to stronger protection of their interests. Employees make up another group which can monitor managers‟ decision making, and the labor market. Finally, stakeholders and institutions are also influenced by national and local government. This model also accounts for the political system and the role of government having influence on the transmission of signals, either directly or indirectly through the external framework it provides. However, stakeholder model also faces several objections. The first is that giving control rights to non-investors may discourage financing in the first place. The second is that it may create inefficiencies in decision making. On many decisions, investors and natural stakeholders have conflicting interests. They may not converge to mutually agreeable policies. The third is managerial accountability. The concern is that the management‟s invocation of multiple and hard-to-measure missions may become an excuse for self-serving behavior, making managers less accountable. 2.3 Corporate Governance System National corporate governance systems can be distinguished in terms of the degree of ownership concentration, and the control and identity of the controlling shareholders. A widely dispersed ownership structure is a feature of outsider systems (e.g., the US and UK), while concentrated ownership is characteristic of insider systems (e.g., Germany and Japan). Outsider systems are characterized by having independent boards, dispersed ownership, transparent information disclosures, well-developed stock markets, well developed legal systems, and a competitive market for corporate control. Insider systems are characterized by concentrated ownership structure, widespread cross-shareholding, limited information disclosures, and reliance on family finance or banking systems (Shleifer and Vishny 1997). The insider system emphasizes the function of banks and legal persons, which have great influence over the firm‟s long-term development. As 17 majority shareholders, banks and corporations play a tremendous financial role and thereby directly impact corporate governance. In the insider system, it is minority shareholders that are in the weaker position. The various corporate governance systems that exist globally have emerged in an ad-hoc manner (Sison 2000; Shleifer and Vishny 1997). Firms and economies have been shaped simply by following conventions, or by the environment, worldview and culture, legislative and political frameworks in which they operate. Over time they have evolved into today‟s corporate governance systems, although it is certain they continue to evolve. Besides the political and legal influence, systems have been influenced by “culture, democratic representation and accountability, the distribution of power, and the protection of property rights and equality” (Sison 2000, p181). Other influencing factors include the level of media freedom and the intensity of competition amongst firms (Zingales 2000). The essential point however, is that the national corporate governance system typically evolves in an ad-hoc manner, without being designed specifically to achieve maximum efficiency, economic benefit, or shareholder protection or wealth. The assertion of the dominating political process applies to the insider systems of Germany and Japan. During the period of rapid economic development of the late 19th century, these countries forged their systems of powerful banks with healthy State support (Gerschenkron 1962). Furthermore, German banks discouraged initiatives such as disclosure rules, insider trading prohibitions and increased minority shareholder protection. These initiatives ensured that minority shareholders never became dominant enough to protect their rights, and that the banks maintained a powerful position. These legal systems thus developed to accommodate the banks as the predominant economic power. The evolution of national corporate governance systems thus sheds some light on the issues involved in the process. The arguments show clearly that there are many kinds of influences behind the search for the optimum corporate 18 governance system. These influences have also had a number of policy implications, particularly for emerging and transitional economies. 2.4 Corporate Governance Mechanisms Corporate governance mechanisms consist of a combination of economic and legal institutions that ensure the flow of external financing to the firm, aligns the interests of owners (investors) with managers and other stakeholders, and guarantees a return to investors. Corporate governance mechanisms are defined and categorized by different authors in different ways. Shleifer and Vishny (1997) identify five categories of mechanisms which include (i) incentive contracts, (ii) reputation considerations by managers and investor‟s optimism, (iii) legal protection, (iv) large investors and (v) specific governance arrangements, such as the debt/equity choice, leveraged buyouts (LBO‟s), co-operatives and state ownership. Maher and Anderson (1999), on the other hand, recognize three broader mechanisms, including (i) executive compensation plans, monitoring by boards etc., (ii) legal protection of shareholder rights, prohibition of insider dealing etc., and (iii) indirect control over managers through capital markets, managerial labour markets, and markets for corporate control (e.g. takeovers). Liu (2005) identifies two typical governance mechanisms that address the conflicts of interest between shareholders and managers, and between majority and minority shareholders. The first is an internal mechanism consisting of ownership structure, board of directors, executive compensation, and information disclosure and transparency. The second is an external mechanism consisting of a market for corporate control, product market competition, good legal infrastructure and rigorous law enforcement. Given its comprehensiveness and applicability, this categorization will hereafter be used as the framework to present and discuss corporate governance mechanisms. 19
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