Principal-Agent Conflict in United States of America and Germany

CEU eTD Collection Hungary 1051 Budapest, Nador utca9. Legal Stud Central European University StefanPROFESSOR: Messman COURSE LLM THESIS SHORT

: ies Department Comparative Corporate Governance Princip al - agent conflict in agent conflict

Fayzullokhon Khusankhodjaev

Proposals Uzbekistan for

U nited nited 2014

S tates of

A merica Germany and

CEU eTD Collection Bibliography CONCLUSION Chapter III. Analysis theof Corporate Governance Models inUSA, Germany and Uzbekistan Chapter II. Mechanisms and strategiesfor regulating and preventing agency problems Chapter I.The source of the principal INTRODUCTION Contents 3.2 Comparative 3.2 Analysis Corporate 3.1 Governance Models 2.1 Legal Strategies 3.1.3 Uzbekistan 3.1.2 Germany 3.1.1 2.1.2. GovernanceStrategies 2 .1.1. .1.1. Regulatory Strategies

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CEU eTD Collection proposals for Uzbekistan and Germany and conflict agent about starts separation of ownership and control and its relationship with principal the with connected costs the mitigate to used strategies legal as well as jurisdictions three in used relationships. agent principal core CorporateGovernance. Undermy assessmentthe shareholder of Model Uzbek developing the for lessons providing at aimed is analysis this of result the Germany, Thi ppr nlzs h principal the analyzes paper s - agent confl agent

a list of of list a

the U . T . he last chapter last he zbek Corporate ict. common

The thesis thesis The mechanism that are used in both cou both in used are that mechanism

starts with starts and Governance model and asses the - h mi dsuso i aon te oprt gvrac models governance corporate the around is discussion main The gn polm n ag pbil hl croain i UA and USA in corporations held publicly large in problem agent start ns with ends s with defining with s

an analysis an ABSTRACT

conclud a ii

of the source of the principal agent conflict agent principal the of source the

the Corporate Governance Models of Models Governance Corporate the

n cmaaie nlss ht provides that analysis comparative ing the agencythe problem. Further,a discussion – manag

field er relationshipser viewedthe areas tist elwt h principal the with deal to ntries s

for improvement.

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CEU eTD Collection 1934) Company, 3 2 ,2003) Business AMondaq 1 is corporation the since However, interest. their in and behalf their on act to powers the with managementthe management, partprovide takein and not do principals, principals management the to powers principal The bodies. management 1934 Property Private and Corporation Modern The in analysis throughout work his in Smith Adam by century 18th the in control owners, abusethese ando for powers usetheir them agency "principal the is governance corporate in issues common effici its concerning problems different face occasionally companies governance.corporate of needs shareh the sure makes which and people, processes, policies, encompasses that system INTRODUCTION

Adolf Berle, and Gardiner Means Gardiner and AdolfBerle, Gabrielle Adam Smith, The Wealth of Nations, (London: Me (London: Nations, of Wealth Smith,AdamThe 3 . Thisfact agency a not all. new showsthat is issueat problem les n ohr tkhles r mt n full in met are stakeholders other and olders The corporations exercise their executive powers through the members of the the of members the through powers executive their exercise corporations The and ownership of separation the of result a as identified was problem” “agency The All procedure. complex a is governance corporate company’s of organization The time our In problem that problem O'Donovan,

o h directors the to

i croain oeaei tewrd akt ymas f “ of means by market world the in operate corporations big ,

Change Management Management Change

arises when managers entrusted with certain power from the side of the the of side the from power certain with entrusted managers when arises

, The Modern Corporation and Private Property Private and Corporation Modern The ,

f h cmay rm shareholders from company the of h agents the - agent relationship arises as a result of entrustmen of result a as arises relationship agent –

A Board Culture of Corporate Governance Corporate of Culture Board A

of the company. The shareholders, who are the the are who shareholders, The company. the of thuen & Co., Ltd., 1776) Ltd., Co., & thuen 1

wn benefit. ” 1 Wealth of Nations of Wealth Ti internal This . - agent conflict", also known as the as known also conflict", agent

wo r kon s the as known are who ,

, (New York: The Macmillan Macmillan (New The , York: ency. One of the most the of One ency. by Berle and Means in Means and Berle by arrangement - 2

, and subjected to a a to subjected and , who a who , (Electronic version, ,(Electronic re the agents,the re an internal internal an

t of these these of t s called is CEU eTD Collection p.6 4, 1976.), No. 3, St Ownership 4 costs these of occurrence an bonding agent the the by principal, expenditures the by expenditures monitoring the for costs direct corporation’s costs agency as to pursuit in madeis This owner’sside. the from power a with granted are they when agents, the of behavior opportunistic the of occurrence comparativeanalysis. thesis the to lead may si the the to leads control principal of root the as identified is control opportunis for possibilities ownership of separation the exercised that corporations, of size growing the with interconnected factors best company’sinterest. in perform effectively and responsibly them make would but good, own their for resources company use directors the let not would that way a in structure company of expense the at liability escape personal may bodies management the obligations, its of performance the for liable one the

Michael Jensen, and William Meckling, William and Michael Jensen, de of the shareholders. This relationship between the directors and shareholder which which shareholder and directors the between relationship This shareholders. the of de Te hogot nlss f hs css ol gv a od rud fo ground good a give would cases these of analysis throughout The . Companies use a wide range of different mechanisms in order to minimize the risk of risk the minimize to order in mechanisms different of range wide a use Companies The

ructure and control lead to information asymmetries, which in their turn, created created turn, their in which asymmetries, information to lead control and p icpl gn polm n c in problem agent rincipal

abuse that have been identified by Jensen and Meckling (1976) as the sum of the of sum the as (1976) Meckling and Jensen by identified been have that

, (

Harvard University Press, December 2000; Journal of Financial Economics (JFE), Vol. Vol. (JFE), Economics ofFinancial Journal 2000; December University Press, Harvard entrusted

of of their managerial powers for their own benefit own their for powers managerial their that divide into regulatory and governance strategies that are aimed are that strategies governance and regulatory into divide that i bhvor y h agents. the by behaviour tic

to the directors the to

te eiul loss. residual the d Theory of The Firm: Managerial Behavior, Agency Costs and Agency Costs and Behavior, Managerial Firm: The of Theory company’s

orporations has developed because of a numerous numerous a of because developed has orporations -

agent conflict. agent with certain power certain with 2

reduce the transaction costs, often referredoftento costs, transaction reducethe ses Th assets. 4

hr are There

The separation of ownership and and ownership of separation The

dfiut le i dsgig the designing in lies difficulty e The separation The ea strategies legal

to manage the company from companythe manage to

is in the center of this this of center the in is of ownership of o iiae the mitigate to r future future r

and CEU eTD Collection help providewill to a decent critical topic. analysis ofthe thesis Governance sco The In approach. oriented resourceonline and legalstudies books, analysisof text througha out carriedbe general will shareholder more a has interestingly, laws, governance corporate l a has and system legal civil a is system legal Uzbek that is mention to important be would What governance. corporate of model oriented stakeholder a is Germany approach, oriented shareholder a has US While Germ and US The laws. Uzbek and German the for mechanism these of analysis an improvement of theUzbek CorporateGovernance model and Germany and USA in mechanism these them reduce to created mechanisms as well as corporations, in problem agency that chapters for solutions possible in performance company’s on effect and principal agentcorporations. in problem analysis This affect. they that fields and efficiency their show will strategies and mechanisms these of examination The corporations. standa specific outlining by problem, agent principal regulate to

rds of behaviour in the corporations as well as grant certain powers to the owners of the the of owners the to certainpowers grant as well as corporations the in behaviour of rds as well as present a detailed explanation where needed. All the gathered inf gathered the All needed. where explanation detailed a present as well as The research method of this thesis is comparative analysis. The main sources are US, are sources main The analysis. comparative is thesis this of method research The efficiency practice, their mechanisms, these of framework the on focuses thesis My pe of the of pe . These sources shall provide general understanding of the topics discussed in the in discussed topics the of understanding general provide shall sources These .

will cover the fundamental elements of principal of elements fundamental the cover will thesis will thesis the corporate governance in Uzbekistan. The thesis will consist of consist will thesis The Uzbekistan. in governance corporate the

ot of similarities with German legal system, however in case of case in however system, legal German with similarities of ot be mostly cov mostly be

would USA ered by books on Corporate Law and Law Corporate on books by ered any have different corporate governance models. models. governance corporate different have any 3 and Germany with Germany and

help to prevent the possi the prevent to help .

nenl n external and internal - agent problem, the nature of nature the problem, agent

the main goal of providing of goal main the ble emergence of the the of emergence ble , the usage of usage the , Corp

ormation ormation ue or rules orate three s. s. CEU eTD Collection available corporate of model Uzbek the of developments future the in analysis this developing, still is general finishingbe thecomparative chapter wouldofthe analysis three legislations. areai that mechanisms of list the provide itself, conflict the discuss that after control, and ownership of issu this solving in model governance corporate German and US both by used methods the of analysis In the light of the fact that Uzbek legislation concerning the corporate governance in in governance corporate the concerning legislation Uzbek that fact the of light the In comparative and evaluation critical a produce to is thesis this of objective main The e.

ways to avoid ontheways theearly principal problem agent to stages. med at reducing the possibility of occurrence of the prin the of occurrencepossibilityof reducingthe at med

First I am going to present the reason of the principal agent conflict conflict agent principal the reasonof the present goingto Iam First

governance, can be used as an example for further for example an as used be can

o a eape y listing by example an for cipal -

agent conflicts agent

the separation the

and theand the the

CEU eTD Collection 7 p.6 1983), Economic, ofLaw and Journal 6 5 byentitiesdivided thefunctions thathave thebyproviding wouldbe thatthefirst two Ho was business, alsoof wo theowner the one these ormore functions. of it. to respect having of that (3) and it over power having of that (2) enterprise, an in interests having of that (1) functions: three their States. United and Berle with it. having trade tomaintainthecompetition againstable seldombeen have adventurers private from dispensation compan a a such of affairs the themselves give easily of management the in less, or very more prevail, always must therefore, profusion, and Negligence and honour, master’s their t apt are they man, rich a of stewards the Like copartnery private a in partners the which it with over vigilance watch should they that expected be well cannot it own, their t stockcompanies,joint stated about wrote who (1776), Smith Nations, of Wealth The In Smith. Adam to back go effect, its referen first The managers. corporation’s the by made decisions’ the over control no or limited posses shareholders) (the control Chapter I

he directors of such companies, being the managers rather of ot of rather managers the being companies, such of directors he Berle and Means (1932), supra at p. 112 p. at supra Means (1932), and Berle of (University Claims, Residual and AgencyProblems C.Jensen, Michael and Fama F. Eugene 34 p. 5, ArticleBook 1, SmithSupra (1776), wever, after the revolution AccordingBerleMeansindustrial revolution theand worker (1932) the to before who associated often is control and ownership of separation the in interest recent However, owners the corporations large in when occurs control and ownership of separation The

. The source of theprincipal source. The of 6

While examining the problems of enterprise, one would probably distinguish probably would one enterprise, of problems the examining While Means (1932) who documented the rise of the modern corporation in the the in corporation modern the of rise the documented who (1932) Means

ce to the separation of ownership and control, and concerns over over concerns and control, and ownership of separation the to ce

y. It is upon this account that joint stock companies for foreign for companies stock joint that account this upon is It y. that

the l

arge production inthe industries was portionof provided

uld performall three functions. abovementioned

- agent con 7

A single individual may fulfill, in varying degrees, degrees, varying in fulfill, may individual single A 5 o

consider attention to small matters as not for for not as matters small to attention consider flict –

the separation of ownership and ownership the separation of

frequently watch over their own. own. their over watch frequently her people’s her

with the same anxious anxious same the with

money than of of than money

Chicago Press: Press: Chicago . 5

CEU eTD Collection 8 they that meaning claim, residual a as to referred usually is profit This generates. company that profit the of recipient and owners the are shareholders while firm, the control managers words, other In shareholders. the by prescribed unless company the of benefits the for claims policy or management sh scenario, last the In company. the of (agents) managers the among allocated is process making decision the while (principals), shareholders of attribute an is profit for claims the separation, with is and firm the of activities business day to day the manages who owner, the by possessed is firm the of management and control both proprietorships sole in While bearing. risk residual the from corporation of management residualcontroland claim, grouphave factual whilecompany the powers the over legal separate.groupareof legalinform The ofa ownership andfactual owners merely interests is thewaygovernance, how undercorporate of thefunction o their obligations, managers primarilywas while the role toactthecompany. andmanage This the managerswere takingaction. theones Theact, were owners notexpectedneither to was it words the they difference between that was theowners holdatitle only directorsa tomanage a class position as wereIn in entity the benefit. the owners for other management, whil eitherposition tomanage theentity by it from orseparate tothe giving such powers This hasled tothe emergencewhich systemunderasclass theowners ofthe were a ina performedand owner by the

Ibid.

h sprto o onrhp n cnrl s i is, control and ownership of separation The areholders lack control over the firm and are not allowed getting involved into into involved getting allowed not are and firm the over control lack areholders e at thee same ofthe time receiving entitiesMeanwhile, conduct. profits the

- making decisions of the company, whereas the managers have no no have managers the whereas company, the of decisions making

third onethird wouldbe theforce delegated for hired

the main claimant for the firm’s profits, in companies in profits, firm’s the for claimant main the

is sec, atn te decision the parting essence, its n wnershipcontrol were and –

the positio –

the managers. n, while . ” 8

CEU eTD Collection 11 ( inBangladesh, Practices 10 Press,1 9 of ‘agency ‘principal problems’ or and managers, th have top all conflicts These creditors. or and shareholders minority as such ‘outsiders,’ shareholders controlling as such ‘insiders,’ corporate between compa functions main two has governance provides, thatevery therepaycost firmfor isalsoa separation hasto this the company itself subordinates. bet b) Directors, of Board the and shareholders the between relationships contractual a) corporation: principal of types three Bhuyan Kraakman. public). (general stakeholders other the and company the between c) and shareholders minority and majority b a) categories: three into performance their of way the on firm a in arise may that problems agency categorizes Approach” Functional company’s stakeholders. t by satisfied been have claims fixed and costs all after accumulate

Reinier Kraakman, Anatomy ReinierKraakman,

Supra Kraakman, p 35 p Kraakman, Supra U Hamid ween the Board of Directors and the executives, and c) between the executives and their and executives the between c) and executives, the and Directors of Board the ween st ny and ny

hl this While and Comparative A Law: Corporate of Anatomy “The work his in Kraakman Ed,2004) Bhuiyan and othe and Bhuiyan 10

However, this work will be concentrated on the agency problem arising insidearising problem agency the on concentrated be will work this However, 9

attempts to control conflict of interest inside corporation “including those those “including corporation inside interest of conflict control to attempts

The scope of this this of scope The - structure is seen as a something positive in view of all benefits that it it that benefits all of view in positive something a as seen is structure

and others and betweenshareholders. thedirectors and the

The Cost and Management, 35 Management, Cost and The - rs, Audit Committee in Banks: Current Regulatory Framework and Disclosure Disclosure and Framework Regulatory Current Banks: in Audit Committee rs,

gn cnrcul eainhp ihn h mngmn o a public a of management the within relationship contractual agent of Corporate Law Corporate of

further develop the first category and identified that there are are there that identified and category first the develop further - agent’ problems.” agent’ thesis

– .

A Comparative and Functional Approach Functional and Comparative A establishing and controlling the structure of the the of structure the controlling and establishing

il e oeig h frt aeoy dniid by identified category first the covering be will etween managers and shareholders, b) between b) shareholders, and managers etween 7 p 5 (2),2007), 11

- 18.

he company in front of all of front in company he .

Corporate , (Oxford University (Oxford , e character e CEU eTD Collection http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1287185 version,Octobe (Electronic 15 Theory. 14 13 12 differentparties byperformed functions separate are control “ where corporations, widely into turned have they times those since company, his of manager the also was p control and ownership of separation individuals. interest, of conflicts from derive that problems agency the that state (1985) Smith and Jensen them. the agent, their to responsibility making decision delegates delegating making sometotheagent.” decision authority involves which behalf their on service some perform to agent) (the person another engage w (1976), interest own agent’s the in simply than rather interest principal’s the in act to agent the motivating taken actions upon depends “‘ ast, before the industrial revolution there were simple sole proprietorships, where the owner owner the where proprietorships, sole simple were there revolution industrial the before ast, Pallab K. Biswas, K. Pallab Jensen, M. C., and Smith, W. Smith, and C., M. Jensen, 305 p Meckling, Jensenand Supra p.21 Ibid., agency problem’…arises whenever the welfare of one party, termed the ‘principal,’ ‘principal,’ the termed party, one of welfare the whenever problem’…arises agency Journal of Financial Economics, Financial of Journal After analyzing the abovem the analyzing After Meckling and Jensen by provided is relationship agency of definition good Another that states he problem, agency for definition good a provides (2004) Kraakman .” between agent and principal, are common to all cooperative activity among all all among activity cooperative all to common are principal, and agent between 12 oietf ta: “ as: it identify ho

h ro o te gny rbe i te ae f oprtos is n the in lies corporations of case the in problem agency the of root The

and

Hamid U. Bhuiyan, U. Hamid

the risk bearing function of ownership and the manag the and ownership of function bearing risk the r 20, 2008). Available at SSRN: at Available 2008). 20, r

H. (1985). Stockholder, Manager and Creditor Interests: application of Agency of Interests: application Creditor Managerand Stockholder, (1985). H. a contract under which one or more persons (the principal(s)) principal(s)) (the persons more or one which under contract a

- y nte pry tre te aet’ h polm is in lies problem The ‘agent.’ the termed party, another by 360.

p. p. 3 entioned definitions, one can state that while the principal the while that state can one definitions, entioned

Agency that has been discussed in the previous the in discussed been has that

Problem 8

and

the 13

Role

”. agent’s

of 15

Corporate Unsurprisingly

decisions affect both of of both affect decisions

Governance Revisited Governance erial function of function erial ly , these distinctthese , . While in the in While . - held , CEU eTD Collection 18 17 115 16 corporation’s bo principal a of behalf on acting agent an “ is general in cost, Agency costs. principal from resulting issue main The business. and capital people’s other over control with empowered are people when on turns shareholders minority cou take smaller, of expense the at returns their (“outsiders”) increase poor to of face thecould, in controlli jobs a have their that up shareholderslarge particular, give In objectives. to different have may refusing shareholders different simply Even performance. to benefit, personal their for t of size the a increasing bythem example, paying (for justify salary that higher policies from vary can this financiers: outside of that than rather return own their maximize that activities in engage to prefer Managers have. to prefer would the than projects risky less on taking firm the means often which repaid, be will they that probability the maximize to prefer hand, other the on Creditors, debt. its of value the pre …shareholders’ his workthat clash, may bodies

Investopedia,(2011). 1 p (2008), Biswas, Supra StephenProwse, - 116

The issue of principal agent situation has a complex structure. Generally it is costly to costly is it Generally structure. complex a has situation agent principal of issue The ntermeasures in order to avoid parties from taking self taking from parties avoid to order in ntermeasures .

17 Prowse

Corporate Governance in East Asia: A framework for analysis for framework A East in Asia: Governance Corporate dies act in their owninterest.actdies in

in situations where situations in Agencycosts. ferences are to maximize the value of the firm’s equity, without regard for without equity, firm’s the of value the maximize to are ferences

state

d :

a type of internal cost that arises from, or must be paid to, paid be must or from, arises that cost internal of type a g neet n h fr (isdr” wud rfr i they if prefer, would (“insiders”) firm the in interest ng

they have conflict of interests. interests. of conflict have they

- agent problem is the rise of the company the of rise the is problem agent ” 18

Cneunl, hy nrae hn l o the of all when increase they Consequently, . 9

he firm), to the diversion of resources of diversion the to firm), he - interested actions. The greed The actions. interested , (The World Bank, 1999), pp pp 1999), Bank, World (The , As Biswas provides in in provides Biswas As shareholders shareholders ’s agency agency ’s CEU eTD Collection 22 21 20 19 come may both that strategies legal of range wide a of analysis comprehensive a provides “governance” and “regulatory” of managers. of behavior opportunistic the comprised regulate that strategies are that strategies legal of set a provides Law”. Corporate of Anatomy “The Kraakman’s Reinier is problem agency the mitigate or control that strategies legal of number a provide that works universal recognized most the of One stud of number large a is and prevent agency costs. detect to order in measures specific take they why is That problem. this of consequences and bet Principals benefit. personal his for than rather firms between (principals) (agents)company. theowners andof the managers th resolve to ways the analyze to going am I Further, arise costs agency where relationship, core the as Meckling and Jensen by viewed been have that managers and shareholders between relationship the from arising costs agency the “pocket”. corporations of out profits extra some gain and risk the take to agent the persuade may information asymmetric of possession the ideal end, of the In creation contracts. for format standard no is There problem. agency to subject are another part one from perform to promise a or powers of delegation involve that relationships The Chapter I 6 p. at Meckling Jensenand Supra Ibid. Ibid. (2004) supra Kraakman,

T relationships. contractual of nexus a is corporation that stated, was it beginning, the In

I he problem lies in insuring that the agent acts in the best interest of the principal, the of interest best the in acts agent the that insuring in lies problem he n the author opinion the law plays an important role in reducing agency cost. agency reducing in role important an plays law the opinion author the n I . Mechanisms and strategies and and preventingMechanisms regulating for agency problems

ies, where scholars provide different strategies to achieve this goal. this achieve to strategies different provide scholars where ies, In controlproblems and agency tothemitigate waythere relation of

ter than anyone else understand the nature nature the understand else anyone than ter ese agency problems that arise in the the in arise that problems agency ese 22

Kershaw (2009) in his in (2009) Kershaw My thesis is focusedon is thesis My

21 work y to

He 19

. CEU eTD Collection 26 705 p http://encyclo.findlaw.com/5630book.pdf, 25 24 2009) 9780199215942, 23 of enforcement and specification the be would problem agency the regulate to mechanisms the of one that explained he approach his In law. corporate the addressed also work his in of means the essence o the of in interests the protecting and manager of are behavior the controlling strategies legal These strategies. legal normative to turns agents negligent or dishonest against principals “ help would that cost. agency 2 strategies provided while Kraakman contrasting adding and ofscholars. other views authors. abovementioned all of works mechanisms control internal as well as mechanisms control external comprise generally and manifold are mechanisms monitoring and governance Corporate resources. corporate of utilization efficient achieving con andexternal internal of hybrid a is It resources. corporate principal: the “ and agent the of interests the between divergence go reduces corporate that of mechanism model strong that provides paper his in Biswas Professor analysis. Kraakman’s of basis the on norms regulatory or benefit a as both oprt gvrac i … h wds cnrl ehns ue fr fiin uiiain of utilization efficient for used mechanism control widest the … is governance corporate

. Kraakman, supra at Chapter 2, p. 22 p. 2, Chapter at supra Kraakman, Stephen p.9 (2008), supra Biswas, David 1

Legal Strategies Legal Strategies As discussed As Kershaw, Kershaw,

Marks, Marks,

When trying to resolve the agency problems he advices to turn to legal strategies strategies legal to turn to advices he problems agency the resolve to trying When Company law in context: text and materials and text lawcontext: in Company Separation of Ownership and Control and of Ownership Separation to enhance disclosure by agents or facilitate enforcement actions brought brought actions enforcement facilitate or agents by enhancedisclosure to

above, according to Kraakman, law plays an important role in reducing in role important an plays law Kraakman, to according above,

”.

Marks, in genera in Marks, 25

Further I am going to describe the mechanism and mechanism the describe to going am I Further 11 , (Electronic version, 1999) Available at: Available 1999) (Electronicversion, ,

” l, provides strategies that are reflected in the in reflected are that strategies provides l, 26 . In matters like agency problem, the law the problem, agency like matters In . , ( Oxford University Press, Oxford, UK. ISBN ISBN UK. Oxford, Press, University Oxford trol mechanisms with a view toview a with mechanisms trol wners. wners. 23 vernance is a a is vernance Marks (2009) (2009) Marks

n contrast, In

by CEU eTD Collection 29 28 27 costs. agency mitigating and reducing of field the Consequently, bewill strategiesdescribed bothofthese coherently. in core is Kraakman by created view, of point my In nature. indirect an of more have strategies requirements form their in prescriptive are strategies regulatory the “legal” these strategies. governance that and regulatory categories: identified two into Hedivided be can strategies that. than further much gone has Kraakman problem, ha Marks While law. (corporate) the by provided means the by be would it solve to ways main impo may that acts of form a in be can enforcement Governmental good. public the for government enforcement Public law. corporate or corporation the action of right private a for of form a in public and action private categories: 2 in given legislative, are regimes in mechanisms enforcement specific through These corporate meansenforcement contractual law. administrative, of bythe ways judicial or practice into put be could duties managerial

Kraakman, supra at Chapter 2, p.23 2, Chapter at supra Kraakman, Ibid. 703 p. (1999), supra Marks, sml ietfe ta tee s n nocmn rgm wt 2 aeois f h agency the of categories 2 with regime enforcement an is there that identified simply s se specific managers employees ingeneral duties upon or care). (e.g. of duty

oh f hs shlr sae ht n h aet rnia polm iuto oe f the of one situation problem principal agent the in that state scholars these of Both , in other word they are meant to protect the principal directly, the governance governance the directly, principal the protect to meant are they word other in , may sue the offenders under private law e.g. under law of contract, labor law law labor contract, of law under e.g. law private under offenders the sue may 27 . In his point of view, this could be a be could this view, of point his In .

–

“the right to sue alleged violators of the law”. In other words words other In law”. the of violators alleged sue to right “the government enforcement. government

–

n pbi. rvt i a om of form a in Private public. and is an enforcement mechanism created by the the by created mechanism enforcement an is 12

28 chieved by imposing obligations that obligations imposing by chieved

Private enforcement enforcement Private sal i te om f statutory of form the in usually

this scheme of strategies strategies of scheme this

pri –

ae ih of right vate

gives a right a gives 29

While CEU eTD Collection 32 31 30 which theprincipal that said be can it conclude To accusations. the of validity the lega the about convinced be must company, that court bythe examination close requires standards the within enforced and drafted easily be can rules While not. discr creates strategy standards The company. the within relations complex regulate that rules of code a misconduct the of occurrence the after court the by considered be miscondu possible prevent would that way, a in behavior managers the regulate that rules form strategies Given differently. duties their perform they relationship, agency of core the control directly to aimed are standards principals eyes, the company’s would harm wealth. in which dealings, or decisions certain from managers the restrains strategies these of type the understand else anyone relationship. contractual this of dissolution and agent the of conditions and terms the formulate 2

.1.1 Ibid. 23 p. Ibid. Ibid. Ibid. .

Regulatory Strategies h rgltr srtge fruae ue and rules formulate strategies regulatory The T he - 24 regulatory strategies strategies regulatory etion for adjudicators to determine ex post, whether violations have occurred or or occurred have violations whether post, ex determine to adjudicators for etion

- agent relationshipagent develops internally.

nature and consequences of this problem. That is why is That problem. this of consequences and nature

are dogmatic ct and standards that outlines the procedure that has to to has that procedure the outlines that standards and ct

in their in

- rules and standards and rules It is assumed that the p the that assumed is It principal relationship as well as formation formation as well as relationship principal

nature. In other words, they explicitly they words, other In nature. standards.

32 31 . The rules strategy creates strategy rules The .

— hl tee ue and rules these While regulate the terms on terms the regulate rincipals better than better rincipals

the general the lity of lity CEU eTD Collection 37 36 35 34 33 transfer get allowsto ridofinefficient that agent. investment is one first strategies: with exit of kinds two are There principals. such by faced losses the reimburse will strategies exit The vain. in others the leaving while shareholders, are the there where situations, However corporation. the in principals major all damaging the by using by and benefited corporation has agent the where cases in applicable is scheme this However, si agents’ the problem on agency misconduct the of revelation the post ex used approach an beforedifferent or they part become organizations people strategycorporation. of The a exit is information of supply adequate an obtain to disclosure systematic of form some “want who investors, outside the by imposed requirement a is This manager. company’s the as performance future t agents ask to possible it makes as well as market, capital public the in employments past his experience, agent’s the of understanding better a have to you goals opportunistic possible or to tendency with agent those out screen to principals conditions required for both viewed is

Ibid. 25 Ibid. Ibid. Ibid. p.24 Ibid. drawal that doesn’t usually lead to to lead usually doesn’t that drawal

h ety taey s motn pr of part important is strategy entry The agents with collaborate principals’ which on conditions the manage to possibility The

as a second set of regulatory strategies available by the law. the by available strategies regulatory of set second a as ” . 35

hs t a b si ta “entry that said be can it Thus

eiin ht h mngr s bu t mk, a bnft ot f the of most benefit may make, to about is manager the that decision entry exit and

e il e eeld h wl b rlae fo hs position. his from released be will he revealed, be will de

agent’s

prospects principal in relationship. agent 14

37 director srtge ae ot f fle ta screens that filter a of sort are strategies ” eoa ad h scn oe s h rgt to right the is one second the and removal

s eeto, n te wrs t help it words other in selection, ’s o reveal the forecast of their their of forecast the reveal o 36 Lgcly we the when Logically, . 33

The law can utter can law The . 34

It allows allows It

CEU eTD Collection 41 40 39 38 remove the whole team one. a managerial with new act the initiated, is procedure takeover the When takeover. the from benefit to able be would contrary, the on an shareholder, costs, active its of because monitoring management strict maintain to incentives small or no controlling a shareholde of active one of concentration hands into shares as of portfolio well as companies other from takeovers for chance a source. this from costs agency future the eliminate consequence ag the of cause the is who agent, the removing allows right transfer shares. the for price lower a propose will therefore and corporation the inside problem agency the about information inside get will shares, the buying principal corporationcharacteristics the of strategy. exit of type before loan, the repay to engaging performancerisky into be thatcan as viewed by them. corporation the ask may who creditor, as well as transaction, decision value the prior shares their of value the claim to upon, disagreed he that transaction transactions “appra an awarding of practice

Ibid. Ibid. Ibid. Ibid.

The shareholders right shareholders The the is field corporate in investment of value the withdrawing of example best The

made by the agents. The principals may also sell their stock before the disputed disputed the before stock their sell also may principals The agents. the by made 38 . This right allows for the principals who acquired significant loss because of a of because loss significant acquired who principals the for allows right This .

hs taey s h otoe f transferability of outcome the is strategy This

to transfer or freely sell their shares on the market is the second second the is market the on shares their sell freely or transfer to . isal right” to principals who dissent from certain major major certain from dissent who principals to right” isal On the one hand, transfer rights may lead to a loss, since th toaloss,since lead transfer rights may one hand, On the

v saeodr r h nw ru o picpl may principals of group new the or shareholder ive 15

r. While the minor shareholders have have shareholders minor the While r.

The transfer right provides right transfer The 40

ency problem and as a a as and problem ency On the other hand, the hand, other the On –

n o te core the of one - reducing e CEU eTD Collection 46 45 44 43 42 Kraakman. i relationship. hierarchic and governance corporate the that on nature indirect concentrates an of more have strategies governance the contrast, In relationships. contractual of level the on parties the between arise that costs agency resolving on focused Kraakman. natural includegovernance corporateasreducing mechanismagency ofrisks. the are governance Var costs. agency corporateavoiding and mitigating for of mechanism mechanisms external and internal effective Consequently, wellbeing. companies the harm significantly may that factor a is know already, resources corporate of use efficient for mechanisms 2 effective disciplining for management mechanisms a the of positions job the in result would that principal active one ncentivestrategy.

.1.2 Kershaw, supra Kershaw, 26 p. Ibid. p.26 at supra Kraakman, Marks Kershaw, Kraakman, Biswas, p.9 (2008), supra Biswas, . Governance Undergovernance strategies inc he by proposed strategies legal the of form second the are strategies governance The control external and internal of combination a is general, in governance, Corporate of hands into or shareholders of group new a to right control of transfer possible The - 44 46 27

hl eciigKaka’ rgltr srtge ecud s could we strategies regulatory Kraakman’s describing While

ak i hs w his in Marks

Strategies

David Kershaw’s work is literally based on the classification provided byprovided classification the on based literally is work Kershaw’s David

r oelp wt Kaka. e ecie te following the describes He Kraakman. with overlaps ork

ludes 1) appointment right, 2) decision Right and 3) Right and3) decision right, appointment 2) 1) ludes 16

42 Principa . ious scholars one way or another another or way one scholars ious l ais f h principal the of basics al ctive managerial team is an is team managerial ctive l - gny conflict agency 43

ee that they are they that ee a we as , - agent agent CEU eTD Collection 49 48 47 the fundamentalprotection of interests. theshareholders mean The directors. of em important board other and directors remove or select to right the or rights appointment the for directors corporation’s of removal and appointment for indire to of consequence forof the byrepetition asame strategiesprovided constant thescholars. no be would there that so me by chosen been hasapproach This scholars. other of works from additions with costs agency mitigating for strategies the of categorization Kraakman’s jud their comparing by view of point my prove to going am I Further problem. universal a is principal agency the since finding, unexpected an not was is That costs. agency controlling of ways conv and overlap all they compensation, and marketcontrol. corporate 4) dividends for committees, and directors control. and ownership of separation of consequences the mitigating for mechanism control ultimate the is governance” “corporate failure business 5) and empowerment shareholder 4) oversight, and structure governance corporate 3) control, corporate for market 2) incentives, financial managerial the of alignment the 1) mechanisms:

Kraakman, supra at p. 26 p. at supra Kraakman, 9 p. (2008), supra Biswas, 6 p. (1985), supra Marks, that conclusion, a to came I scholars, mentioned above the all of works studying After First strategy described by Kraakman is the the is Kraakman by described strategy First ctly control the corporation with help of appointment rights through means of voting voting of means through rights appointment of help with corporation the control ctly mns hr aporae Sm a bfr, h cr srcue il e ae on based be will structure core the before, as Same appropriate. where gments

delegated management. This delegated management allows the shareholders the allows management delegated This management. delegated s h mas f iiaig gny costs. agency mitigating of means the as

re o n pno ta croae oenne s n o te major the of one is governance corporate that opinion an to erge ) o 2)

nrhp ocnrto, ) aaeil wesi and ownership managerial 3) concentration, wnership 48

Under the control mechanism he includes the board of board the includes he mechanism control the Under

“ a

47 ppointment right”, right”, ppointment

iws xlcty tts that states explicitly Biswas 49

ployees is ployees ht s a is that

need CEU eTD Collection 53 52 51 50 “ that stated Marks scholars. strateg same The directors. of board the to power managerial decisions. managerial certain veto or sanction alter, initiate, and management firm’s the into intervene to principals allow that the in board, thusdecr knowledge of mean a be well as advices independent objective provide to is areas wit up backed management, executive the into the and Officer Executive non of role Chief The Board. the of of Chairman roles the is one second the and directors executive analyze be to need are that components important two throughout decisions. important f as well as communication for time less need boards small since performance, in increase an to lead to believed is BOD the of size the decreasing mechanism, monitoring as co described also are directors of board the of composition the and size the Furthermore,

Kraakman, supra at p.26 at supra Kraakman, Ibid. 9 (2008), supra Biswas, Ibid. rporate governance mechanisms. governance rporate

composition. Board the be would point important Next of analysis The “Decision right” “Decision

analysis. ease the information asymmetry.ease theinformation 51

ic, oeie tm i a oe important more a is time sometimes Since, o pas bg oe n h aayi o al te shlr a well. as scholars other all of analysis the in role big a plays BoD

is the next form of governance strategy. governance of form next the is

hrhle epwret eue te eaain n gives and separation the reduces empowerment shareholder 50 53

While large board of directors may seem as an effective an as seem may directors of board large While hs taey s lo cneune f eeain of delegation of consequence a also is strategy This

- executives as outside directors who are not engaged engaged not are who directors outside as executives 18

ter xets ad nweg i specific in knowledge and expertise their h . is oe s h aon o non of amount the is one First d. 52

i pooe b al other all by proposed is y The Board composition has composition Board The

Decision right is right Decision atr compared factor or adoption of adoption or

the rights the

to a - CEU eTD Collection 59 58 57 56 55 54 misbehavior. shie would that powers, with principals the provide than rather agent, the induce to is goal main its because strategies, previous the all from nature its in different their for need of constant monit absence and managers of groups different for decisions delegating of by type certain performance corporate the enhances which management”, delegated “the i in mechanism governance our to jurisdiction decisions.” managerial no initiate to and shareholders requires statutes, knowledge corporation existing under post ex shareholders fundamental most mer and as largest (such decisions the corporate Only directors. of board the to authority and power managerial of delegation the for vehicle a as designed is form corporate the that fact the other with compared when method effective strategies. governance not a as it sees Kraakman while option, available “theoretically” a as strategy this seen has Biswas opportunism. managerial the fight “ management in say more shareholders o

Ib 11 p. at supra Kraakman, Ibid. 26 p. at supra Kraakman, 11 p. (2008), supra Biswas, 708 p. (1985), supra Marks, wnership id., 26 id., p.

et oenne taey s the is strategy governance Next

c 59 oncentration”

oring. There are twoincentive strategies:reward strategy and strategy. trusteeship 58

According to Kraakm to According

55 ts nature is contrary to the core characteristic of the corporation the of characteristic core the to contrary is nature ts . However, none of them has them of none However, .

es n catr mnmns rqie h rtfcto of ratification the require amendments) charter and gers ”.

icnie strategy”. “incentive Biswas also considered the “decision right” under right” “decision the considered also Biswas 19 an, “ an,

this disparity is a logical consequence of consequence logical a is disparity this seen it as a major strategy when to when strategy major a as it seen h icnie taey is strategy incentive The ld him from the agents’ agents’ the from him ld 57

n te wrs this words, other In

–

CEU eTD Collection 64 63 62 frame time certain withina 61 60 oftimes thecorporations default direct its even ormay become the in even corporation the of members different benefit may it since popular, less is form returns. principal’s his sharing without interests, her advancing successfully for paid age an form this In rule”. “sharing the of opposite an as seen be can form This regime. orrestricted stockrights, can reducevariety ofagency problems a “ incentives incentives. attractive more even creating of goal the with incentives way. warrants divid increasethe would waysharevalue the maximizing that in work to willing be agent the would result a As income. principal’s the to connected directly are benefits extra and salaries their is form This strategy. reward a of form common a is rule This rule”. “sharing called is form This performance. corporation’s from returns principal’s the with connected directly is one First agents. committed and loyal principals. the of interest best

Kraakman, supra at p. 27 p. at supra Kraakman, 12 p. (2008), supra Biswas, 707 p. (1999), supra Marks, Ibid. A derivative security that gives the holder the right to purchase securities from the issuer at a specific price specificprice a at theissuer from securities purchase the to right holder the gives that security A derivative 62 ends paidtheshareholders. to income, higher agent’s the higher The isthe fee.

I h scn rwr mcaim s the is mechanism reward second The like instruments financial different view, of point his In approach. this widens Marks The t is proposed to mix the warrant mechanism with the standard corporate governance corporate standard the with mechanism warrant the mix to proposed is t 61 my rvd mngr wt icnie o ok n sae au maximizing value share a in work to incentive with managers provide may , in the form of accounting of form the in reward strategy’s reward

- 708

main goal is to remunerate the agent, who is working in the in working is who agent, the remunerate to is goal main

There are 2 ways the pr the ways 2 are There believed to strongly motivate the corporations agents, since agents, corporations the motivate strongly to believed - based bonuses, stock option grants, st grants, option stock bonuses, based

20 pay

- for - performance incipals in corporations reward their reward corporations in incipals cause. .” 63

tutehp strategy) (trusteeship iws rvds that provides Biswas ock appreciation ock

nt is nt This

CEU eTD Collection 65 theseextent mechanism are practice putinto . what to and many how examples present will and Germany and America of States United confli of their principals. good the for manage to likely more are incentives of type this have that agent of kinds These within reputation about more is it time this strategies, previous the in as money, not is strategy this in incentive main The afterwards. rewarded be not would opportunistically act could who agent the that beforehand ensures transaction decision, actual the before interest of conflict the of elimination the is strategy trusteeship of goal main The above. considered those from distinct

Ibid.

cts, further I will proceed by providing an analysis of corporate governance models in models governance corporate of analysis an providing by proceed will I further cts, fe dsusn te nvra mcaim fr euain f h principal the of regulation for mechanisms universal the discussing After quite it which strategy, incentive the of form next the is strategy trusteeship The

the company as well as pride for the job done well. done job the for pride as well as company the 21

or dispute. or 65

In order words it words order In - agency CEU eTD Collection 71 70 69 68 67 66 activity. productive organizing for suitable corporation the make and harmonize they since them. of more or one exclude corecharacall implement to decidewhether who ones, the corporationsare the of owners The principals. underlyingthese under corporation acreate to possibility a provides contr business of costs the lowers thus and entity, corporate the of medium the through easily transact to off providing and rights availa widely form this making attributes. core five all these thatholds legal form corporation. five all holds that form legal a implement businesses major all almost economies, market large in that fact the to attention draw to important is It characteristics. these of all with firms of formation the forprovides that statute basic a thereis shared capital. of (5) contributors by and ownership structure, board a under management centralized (4) shares, transferable structural core five The of jurisdictions. characteristics all in problems legal of set similar face basically

Ibid p.5 Ibid Ibid p.2 Ibid Ibid 1 p. at supra Kraakman, Chapter III.

uies oprtos ae fnaetly iia st f ea caatrsis and characteristics legal of set similar fundamentally a have corporations Business

acting The main purpose of corporate law is to present to the business enterprises a enterprises business the to present to is law corporate of purpose main The

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- In general, all developed countries have a specific statute or law that law or statute specific a have countries developed all general, In the - shelf housekeeping rules housekeeping shelf

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— — i.e., by altering background property property background altering by i.e., corporate law enables entrepreneurs enables law corporate ai caatrsis f h business the of characteristics basic

in USA,Germany in and teristics or willor teristics ions, by 71

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CEU eTD Collection 93 92 91 223 No. 90 competencegeneral ofthe meeting. supervisory The board established by the council.members compensations The ofsuch are and sizes supervisory indemnification becompensation compensatedcosts, andconnected to of tofulfillment (or) functions ofthe supervisorycompany council of during will. the andMemberscompany, dismiss as Board asofthe appoint well Supervisory at own its documents ofthe company, orliquidat restructure Shareholders Meeting mayInsider Uzbek say that Model Governance ofCorporate is vast employees,governmentUzbekistan thegovernmental the influence andthe investors,in is German Governance Corporate sideof affectedby modelis fromrepresentation the an insidermodel ofcorp 65 art. Ibid, Ibid, Art. 81 Art. Ibid, 65 Art. Ibid, LAW OF THE REPUBLIC OF UZBEKISTAN, OFUZBEKISTAN, REPUBLIC OF THE LAW

91 because of

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29 stock companies and protection of shareholder rights shareholder of protection and companies stock can be found in Germany. However, becan while found inGermany. the -

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n a matter the deem to benefit the company. the benefit to deem the matter a n conflict of interestsof conflict the Overall, they provide different duties for the directors. directors. the for duties different provide they Overall,

have Nevertheless udmna picpe o croae oenne in governance corporate of principles fundamental "On measures on cardinal enlargement of share of enlargement cardinal on measures "On

31 en dpe amn t ipoe corpo improve to aiming adopted been

. 96

, after a short period this strategy was was strategy this period short a after , The supervisory board members arenotmemberssupervisory The board - tc cmais and companies stock , whose duties are listed in his or their or his in listed are duties whose , for the employees was reduced toreducedemployeeswas the for

97 of 24.01 of , as well as obliged to carry outcarry to obliged as well as , areholders in case where there where case in areholders .2003. № .2003. №189 , 2003), Art. 26 Art. 2003), , 98

protection of of protection УП However, the However, privatized - 3202 llapse of of llapse

rate and

CEU eTD Collection 100 Wo (The Challenges, Refore Structural 99 joint in principles governance corporate worldwide of implementation for conditions be to Uzbekistan in governance corporate of framework regulatory and legal current the business." and government between separation effective little and performance, als ill are governance corporate gov corporate poor of result direct in infrastructure, includinga large the all strategicenterprises inwhichithold shares. blockof Sovie a as past long a from inherited structure ownership government the from away movement the sector." despite private the in firms registered all of percent 45 for account that " that Challenges", Reform Uzbekistan'sStructural Asia: Central in Regulation and Governance 3 there shares isatendency toprovide fo joint created in Uzbekistan the state owned state the Uzbekistan in

. Harry G. Broadman, Competition, Corporate Governance, and Regulation in Central Asia: Uzbekistan's Asia:Uzbekistan's Central in Regulation and Governance, Corporate Competition, HarryBroadman, G.

2 Ibid, p.1, p.9 p.1, Ibid, i piaie frs egneig ek xenl n itra dsilns n corporate on disciplines internal and external weak engendering firms, privatized in o

Comparative Analysis Comparative tutrd n codne ih nentoa sadrs and standards international with accordance in structured hs atr s el s n nedvlpd ea evrnet n wa supporting weak and environment legal underdeveloped an as well as factor This Corporate "Competition, paper his in stated ago decade a than more Broadman -

stock companies are not allowed to provide shares for the employees, in general in employees, the for shares provide to allowed not are companies stock t Republic, even nowadays the State holds shares in thousand of enterprises, enterprises, of thousand in shares holds State the nowadays even Republic, t cluding financial management systems and immature capital markets are a a are markets capital immature and systems management financial cluding

defined, not only in SOEs and State and SOEs in only not defined,

enterprises are being transformed into joint into transformed being are enterprises rld Bank, 1999 ), p. ), p. 1 rld 1999 Bank, ernance. According to Broadman Broadman to According ernance. r the investors. overseas

" s ie a providing at aimed is “ trade associations”, but associations”, trade l ines of authority for for authority of ines -

99 stock companies companies stock

Unfortunately, 100

Overall, thought - stock

all CEU eTD Collection Board. Supervisory the in representatives shareholders never happens. the to powers certain delegate can it law, the by although company the within power does almost separation t Uzbekistan in Boards, the to extent some to powers their delegate would shareholders the control and ownership is there that see all theexecutive bodiesare chosen supervisory through by the board General the of hands and consuming time process this prove provisions some of irrelevance the shows years, for legislation in mistakes obvious of see th of decisions the or President the of and change constant under act legislative main all forgone already have that regulations German and US the occurrence. its after problem agency with deal to ways provides cor companies. oain ih goal a with poration the multilayer system of control, of system multilayer the h Sprioy or i eetd y h Gnrl etn, n atrad the afterwards and Meeting, General the by elected is Board Supervisory The can we Uzbekistan, in implemented strategies governance corporate the Concerning lay exit and entry of terms the systems legal two other the to Compared assump

h rgltr srtge i gnrl impose general in strategies regulatory The

a major difference compared to the US and Germany. While the separation of of separation the While Germany. and US the to compared difference major a tion to be to tion

is still not as direct and concrete as it should be. The regulations are regulations The be. should it as concrete and direct as not still is

Meeting of Shareholders. of Meeting

has been one of the most important factors in both systems both in factors important most the of one been has n

o t exist. The exist. t o eue h saeodr rm h mngrs ibhvo and misbehavior manager’s the from shareholder the secure to

was amended numerously by numerously amended was

wrong

of control over the entities activitiesof control the entities over n eecss h hg lvl f eiin right decision of level high the exercises and .

At the same time same the At

a e Cabinet of Ministers. While on the one hand hand one the on While Ministers. of Cabinet e s a s S

hareholders General Meeting is the main the is Meeting General hareholders

good device for monitoring in theory, in monitoring for device good 33

The GM chooses the Supervisory Board and and Board Supervisory the chooses GM The

creates

different bodies through bodies different oprd o the to Compared

S ue and rules upervisory

an the fundamental changes, fundamental the . unstable,

Nevertheless, shareholders

tnad wti the within standards B oard overly scrutinized overly highly , in reality this reality in , Furthermore, . directly

compared to to compared

consent.

he presence he the decree's decree's the

managerial developed developed , whereby whereby , one may may one

in the the in

and the his

CEU eTD Collection the occurrence ofinterest.conflict ofthe in. interested are shareholders the of some only that transactions s different of representatives the rather are but company, the by employed directly not is Board Supervisory the reality in interest, best its in act should and company the represents Board Supervisory Body. Executive the still is fiduciary main impose duties of list a is there While outlined vaguely are duties fiduciary the perspective, dev less a and model US in duties fiduciary of principles

hareholders who can influence the decisions on the conclusion of major major of conclusion the on decisions the influence can who hareholders o the on d

Although in regulations it is clearly stated that the the that stated clearly is it regulations in Although 34

Supervisory Board and Executive Body, the the Body, Executive and Board Supervisory under eloped,

Uzbek Corporate Governance. Governance. Corporate Uzbek

This fact alone may lead to lead may alone fact This

but

still efficient German efficient still CEU eTD Collection 101 in sector, business the of fields many of privatization for need a is There Republic. the within shif to need a clearly is There creditor. main the is government the cases the of most in before, discussed was it as a mo strategy this Through of reduction a in results lev the completely removes Model Governance Corporate Uzbekistan. in different is situation the Germany and USA both for costs transaction create and interest control and ownership of separation the of consequence the seen is cost agency the of source main damag that costs agency create clashes These interests. of goals. and opinions different have and responsibilities diverse bear that bodies distinct and relationships agency corporations complex of structures hierarchical it purposes, o number “ calls even Jensen which firms, held publicly large of creation to leads which innovation progressive a was separation this While problem. agent C ONCLUSION Supra 4, Jensen and Meckling (1976), 71 p. (1976), Meckling Jensen and 4, Supra dern thebenefits corporations and provides. that it T identifies law Corporate – he

f owners and investors were able to gather large amount of capital for production for capital of amount large gather to able were investors and owners f the asymmetrical information, that allows the agents to manipulate for their own own their for manipulate to agents the allows that information, asymmetrical the

Uzbek Model Uzbek is also the reason for the existence of the principal agent problem. problem. agent principal the of existence the for reason the also

Unsurprisingly

t away from overly protectionist approach toward corporate governance corporate toward approach protectionist overly from away t shareholders are limiting one of the most advantageous characteristic of of characteristic advantageous most the of one limiting are shareholders

its main drawbac main its ,

in general in el of separation bet separation of el

the separation of ownership and control as a root of principal of root a as control and ownership of separation the ae xesv aon o dcso rgt ht iis f not if limits that right decision of amount excessive have , these distinct bodies may clash, where they have conflict have they where clash, may bodies distinct these , ,

positions itself as the creditor oriented model, however model, oriented creditor the as itself positions

the k: the agency problem, it also has a disadvantage. a has also it problem, agency the k: company. However company. 35 ween the management and control. While this While control. and management the ween

in USA and Germany and USA in an awesome social invention social awesome an

e the corporation’s welfare. The The welfare. corporation’s the e ,

while in theory this is true fortrue is this theory in while

The shareholders in Uzbek in shareholders The have created a created have ” The modern modern The 101 , where a where ,

various -

CEU eTD Collection agency towards approach different a have incentives the above, discussed been has As r main the address they since costs, see as efficient. themost they that way, a in board, the of power and composition structure, the shape to them allows of Board b the in arise the may that problems agency other mitigates in also and Directors problem selection adverse the controls effectively right” discussed “appointment above The side. manager’s the from behavior opportunistic of possibilities the decre as well as costs agency diminishing for tools superior as seen be can mechanisms governance the view of point my In interests. shareholders’ the for defense of line first strong old decades present the the in all mistakes remove well as would and strategies governance corporate loopholes inlegislatio for look not and Law the by prescribed is it as whole a as society the and Company the of right. decision controllin big new of emergence the into the result only removing would shares governments the of Simply sales the enough, not is control. influence governmental and ownership of separation the through corporation the and general. business in government the between separation the widening and corporations the with authority of line general. th in economy the boost and results better achieve to order rough diffusion of the governments influence on the business sector by clearly defining the the defining clearly by sector business the on influence governments the of diffusion rough The incentives mechanisms are somewhat promising mechanisms for reducing agency reducing for mechanisms promising somewhat are mechanisms incentives The and regulatory the all revise would that reform legal a through achieved be can This Simultaneously it is required to provide more provide to required is it Simultaneously

The Supervisory Board and the Executive should be acting in the best interest best the in acting be should Executive the and Board Supervisory The

legislation. ns to continuens to working shareholders. best interest inthe ofseparate

The improvement of corporate law in general would create a a create would general in law corporate of improvement The eason of managerial opportunistic behavior behavior opportunistic managerial of eason

saeodr ta wud exercis would that shareholders g 36

independence of the internal organs of organs internal the of independence

hs a b achieved be can This oard. This strategy strategy This oard. hg lvl of level high e –

the money. money. the asing

CEU eTD Collection governancecorporate model. this enormous information would to lead would Germany. and USA both in used mechanisms governance corporate external and internal both of combination the of most of blend a be would agents and principals both for advantageous be would that structure efficient most the Model, Governance Corporate Uzbek in control and ownership of separation the of implementation the of case in problem the firm’s share value is higher the performance; managers’ the is better The performance. managerial in increase an performance provide would this since fall will costs agency the Governance Corporate of Model Uzbek the in mechanism h shield would that powers, with principals the provide than rather agent, the stimulate to is goal Their problem.

step by step by step

eut n bo ta te oenet ihs o avoid to wishes government the that boom a in result eliminate fully would that framework perfect no is there Although, Ituy believe truly I . , sources and their analysis their and sources ,

political reform political

d consequently d n opportunity an

conversi Though . m rm h aet’ misbehavior. agents’ the from im

on , that , , this is a matter of a of matter a is this , ,

might lead to a creation of well a functioning hybrid system of of system hybrid functioning a well of creation a to lead might

weso h opn ilipoemngr’lyly and loyalty managers’ improve will company the of owners that ne h ih influence right the under o te Directors the for might

the efficient separation of ownership and ownership of separation efficient the lea 37 d to significant changes significant to d

change in the state policy of Uzbekistan that that Uzbekistan of policy state the in change

o an an gain to

n reasonable and By reintroducing the incentives incentives the reintroducing By

abovementioned mechanisms, a a mechanisms, abovementioned However, . xr rwr fr hi good their for reward extra within the country the within

transition the principal the h aon o the of amount the

l period al control - agent agent and

is ,

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6.04.1996. № 223 6.04.1996. - II.

vial a: https://users.wfu.edu/palmitar/ICBCorporations at: Available he Republic of Uzbekistan "On measures on cardinal enlargement cardinal on measures "On Uzbekistan of Republic he ket» of 27.09. 2006. №ket» of 27.09. 2006.

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and Law and

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