Shareholders as Agents and Principals: The Case for South Africa's Corporate Governance System

Controlling Firms Through the Majority Voting Rule

“…For instance, multiple voting rights are forbidden in Belgium, hardly used in France, Portugal and Spain, but widely spread in Germany (Biebuyck et al, 2005). Different categories of shares are then traded at different prices, like in South Africa (Barr et al, 1997), and the spread conveys information on the value of corporate votes (Zingales, 1995 Several papers consider that a shareholder controls a company with only 20% of the voting rights, a level suggested by La Porta et al (1999). According to these authors, the threshold can even be lowered to 10% when the ownership is more dispersed, like in Anglo-Saxon countries.…”

Board size, corporate regulations and firm valuation in an emerging market: a simultaneous equation approach

“…This can weaken board independence (Beiner et al, 2004(Beiner et al, , 2006, and thus the ability to effectively advise and discipline management. Third, SA firms have concentrated ownership (Barr et al, 1995). This implies that the market for corporate and managerial control may be less active, and hence directors may be less motivated to effectively monitor management.…”

“…Institutional shareholders have greater financial strength, and as such can positively affect CG mechanisms and firm value (Barr et al, 1995;Mukherjee and Roy, 2011). King II also urges institutional shareholders to play active roles in setting executive pay in SA firms and hence, the dependent variable in the sixth equation of the system is institutional ownership (INSOWN).…”

“…Finally, prior research suggests that ownership of SA listed firms is relatively concentrated (Barr et al, 1995), which may make board appointments different from those of developed settings. We argue that the rich research context in terms of differences with developed countries, in addition to the acute lack of prior studies offer a compelling basis to investigate the link between board size and firm valuation in SA.…”

The king reports, independent non-executive directors and firm valuation on the Johannesburg stock exchange

“…Fourthly, and to ensure balance of power and authority in company decision-making, the chairman of the board should be an INED (King Report, 2002;Mangena and Chamisa, 2008). The SA corporate context is, however, uniquely characterised by high block and institutional ownerships, largely in the form of complicated cross-shareholdings and tall pyramidical structures, but weak shareholder activism and enforcement of corporate laws (Barr et al, 1995;Ntim et al, 2011a). Consequently, critical concerns have been raised as to whether, given the SA corporate setting, a voluntary CG regime like King II will be effective in improving CG standards in the form of greater director independence and capacity to monitor corporate executives.…”