The EVA methodology was implemented in order to improve resource allocation across Asahi Glass’s number of business around the world as well as to evaluate the managerial performance of top level executives (Mir and Seboui, 2008. Brown and Caylor, 2005). The case study explores the way the company calculated EVA and the weighted average cost of capital for the different business segments based in different countries (Desai, 2006). In this report we will analyze the impact of the bank based system on the company, the reforms associated with corporate governance, the barriers faced by the CEO while bringing about the reforms and lastly the implementation of the EVA methodology.
Corporate governance framework constitutes of a bunch of mechanisms that are both market and institutional based which encourages the controllers of an organization to make decisions that are aimed towards maximizing the value of the shareholders. These mechanisms are meant to tackle agency problems. Normally, two basic models are utilized. control model that focuses on control from internal boards and market control that usually constitutes of independent boards, scattered ownership and policies that promotes transparency. It is however tough to determine the model that is the most appropriate one (Talamo, 2011. Handley-Schachler, Juleff and Paton, 2007. Thomsen, 2004).
Corporate governance comprise of a variety of internal as well as external factors in companies such as Asahi glass. First of all, the ownership concentration in companies based in Asia is much higher than in companies based in the Western countries. This is precisely because majority of the big organizations in Asia are either family enterprises or state-owned. This results in the creation of an unequal and unfair selection system.