Using class material, newspapers, academic articles and government/specialized reports, compare the US corporate governance system with the French system of corporate governance and explain the key differences and common points you identify. As we wish to compare the American and French model of Corporate Governance, we will do so by stating common points or differences following the 8 main points of Corporate Governance. They are the following: forms of organizations in the country, shareholders’ rights, stakeholders’ rights, management structure, the role of directors, employees, the government and finally, the corporate social responsibility.
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Form of Organizations: In France, there are a great number of private companies; most often owned by families since generations and generations; for example Hermès. These types of corporations (private) generally do not sell their stocks, which stay in the same family. However, shareholders in these companies have the same characteristics as in another type of organization. The most numerous form of business in the United States is the model of sole proprietorship (75%) (and partnership represent 8% of all businesses). They are mainly small enterprises and are the easiest ways to start a business in the United States. The other dominant model is the corporation one (20% of businesse). Although they are fewer in number, they represent an important share of the country’s aggregate business receipts (86.5% of business sales). Indeed, many of the largest businesses in the US are public companies; such examples include Microsoft or General Motors Company. These public companies generally have numerous shareholders, who sell and buy shares on the stock market. Shareholders’ rights and roles: In France, companies’ shareholders have an important role. The Winter report (2002), aimed at modernizing and tightening corporate law as well as corporate governance through 10 priorities including a set of rules about shareholder’s rights. The law on new economic regulations of 2001, following existing guidance of “best practice” wanted to increase the rights of minority shareholders. (Charreaux, Wirtz, 2007). Another major point of this law was to ensure a transparency towards shareholders. In France we can state 3 main rights which are; the right to vote at general meetings, the right to dividends and finally, the right of “balance-adjustment” in case the company would go bankrupt. In North America, we can identify 6 shareholders’ main rights. They have the voting power on major issues like the election of directors or major changes for a company like a merger or an acquisition. One of their rights is the ownership of a portion of the company; indeed, by buying stock, they own something which has value. They also have the right to transfer ownership by trading their stock on the market. They are entitled to the company’s dividends (in the case profits are not reinvested in the firm to increase its value).
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