Under the Anglo-American governance model, companies prioritise shareholders’ interests, prioritising maximising returns and facilitating regular contact. All other stakeholder groups, such as customers, employees and communities, are secondary to the interests of investors.
The model is generally a less bureaucratic system than others and is generally found in market-oriented economies that focus on free-market principles and individual rights.
Why is it called the Anglo-American model?
The term “Anglo-American” signifies that this model closely relates to the business traditions, economic practices and legal systems that evolved in the UK and the US. It is also referred to as the Anglo-Saxon model, highlighting its popularity in English speaking countries.
Here is an overview of the board composition under the Anglo-American model:
- Typical structure
The shareholders elect the board of directors which consists of the chairperson, executive directors and non-executive, independent directors. Some management figures also sit on the board. However, they, along with the chief officers, have secondary authority to the directors and investors.
- Roles and responsibilities
The board of directors is responsible for appointing and supervising board officers and managers. While the shareholders are the external controlling party, the board of directors has the highest authority internally. They oversee the company’s strategic direction and ensure that shareholder needs are met. The managers and officers handle the day-to-day business.
The officers and managers answer to the board and report directly to them, while the shareholders hold the board of directors accountable.
- Executive remuneration
In the Anglo-American model, executive remuneration is not based on fixed salaries. It is determined by their performance against short-term goals. Equity-based incentives are typically employed to link executive and shareholder interests.
In the UK, the Financial Conduct Authority (FCA) oversees corporate governance standards. It ensures transparency and disclosure in financial markets, regulates financial instruments to protect shareholder rights and sets rules for companies to offer clear information to consumers and investors, aligning with the Anglo-American model.
In the US, the Securities and Exchange Commission (SEC) is responsible for supervising and regulating corporate governance. Its activities align directly with the principles and practices adopted by the Anglo-American model.
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