The shareholder wealth maximization model is also known as Anglo American model. Please explain the model.

Expert Solution

Under Anglo-American Model of corporate governance, shareholder rights are recognised & given importance. They have right to elect all members of Board & Board directs management of company. Some features of the model are:

This is shareholder oriented model, also known as Anglo-Saxon approach of corporate governance. This is used in Britain, Canada, America, Australia & Common Wealth Countries including India
Directors are very rarely independent from management
Companies are run by professional managers having negligible ownership stake. There is clear separation in ownership & management.
Institution investors such as banks & mutual funds are portfolio investors and when they aren't satisfied with company’s performance they simple sell shares in market & quit.
Disclosure norms are very comprehensive & there are tight rules against insider trading.
Small investors are protected & large investors are discouraged from taking active role in corporate governance.

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