Stock Exchange, whose only corporate governance requirement is related to the in-
dependence of internalauditors.^37
Governance became an issue in the United States in the 1980s during a period of
extensive corporate restructuring. Often the impact of corporate reorganization was
profound, with protracted take-over battles, sale and closing of business units, ex-
tensive layoffs, and so on. Many conflicts among shareholders, creditors, and man-
agers arose. Corporate boards, institutional investors, stock exchange regulators and
the public began to examine their roles in the strategic decision-making process of
corporations.
In the United Kingdom, the creation of the Cadbury Committee, the first group to
draft governance guidelines, was a consequence of serious mismanagement in a num-
ber of Britain’s large firms. Cadbury’s recommendations focused on the function of
boards, and in the United Kingdom, listed companies now face stringent disclosure
requirements concerning corporate governance.
Continental Europe has been becoming more investor-oriented in recent years due
to privatizations, pension reform, economic expansion, the success of the European
Monetary Union, and increasing involvement by individual investors. Continental
European companies have voluntarily started to increase their disclosure levels and
improve their financial reporting to attract new capital and increase investor interest.
However, many Continental European companies, including some of the world’s
largest, remain secretive, make misleading disclosures, and retain anti-investor rules.
In emerging financial markets such as Brazil, corporate governance has become
critically important because weak corporate governance and inadequate disclosure
have been linked to financial crises. Many have argued that the Asian financial crisis
of 1997–1998 in part reflected weaknesses in corporate governance throughout East
Asia.
Exhibit 13.18 presents a summary of corporate governance disclosures made in
annual and interim reports and annual general meeting materials published by the six
auto companies. As with other disclosures examined in this chapter, the six compa-
nies vary widely in their disclosures. The most important observation from the ex-
hibit is that of the six companies surveyed, the three companies listed in the United
States (Fiat, Ford, and Toyota) provide the most detailed disclosure, in conformance
with SEC requirements.
13.10 INTERNET DISCLOSURE
(a) Overview and Regulatory Initiatives. Technology advances have revolutionized
information dissemination and business management, so that businesses and con-
sumers now have access to much more information than ever before. The World Wide
Web increasingly is being used to disseminate information, with print-based media
often playing a secondary role. Electronic information dissemination often is less ex-
13.10 INTERNET DISCLOSURE 13 • 35(^37) Beim and Calomiris (2001) argue that corporate governance can be evaluated only in the context of
corporate goals, and these vary. The primary models of corporate governance found around the world are:
State ownership and control, Family ownership and control, Bank-centered control systems, and Control
by dispersed shareholders. In the United States, most agree that the goal of private enterprise is to max-
imize shareholder value. However, in much of Continental Europe, there has been concern for the wel-
fare of employees. Germany, for example, institutionalizes employee goals in corporate governance with
its policy of Mitbestimmung, under which unions have a right to several seats on large corporate boards.