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This paper analyses a longitudinal dataset on legal protection of shareholders over a 36 year period, 1970–2005, for four advanced countries, the UK, France, Germany and the USA. It examines two aspects of the legal origin hypothesis—whether shareholder protection is higher in the common law countries (UK and USA) than in the civil law countries (France and Germany) and whether shareholder protection matters for stock market development in the short and long runs. It also examines the ‘causation’ issue and the ‘endogeneity’ problem—whether greater shareholder protection leads to stock market development or whether stock market development leads to changes in law. The paper casts serious doubt on the validity of the basic theses of the Anglo Saxon legal and developmental model. [ABSTRACT FROM PUBLISHER]

We report our findings on cross-societal variations in values concerning Corporate Social Responsibility (CSR) held by senior executives from five economies. We find that executives in all five economies are concerned with the roles of their firms in society, with those in Japan most so and those in Hong Kong least so. However, executives in each context have different conceptualizations of how firms contribute to society. The data suggest variation along three dimensions: implicit versus explicit CSR, stakeholder-oriented versus production-oriented CSR within implicit CSR and different main stakeholders within stakeholder-oriented CSR. We discuss the implications of these findings for future research on CSR and for comparative business systems. [ABSTRACT FROM PUBLISHER]

This article proposes a simple framework for understanding an emergent diversity of linkages between corporate governance (CG) and organizational architecture (OA). It distinguishes discreet modes of their linkage by different combinatorial patterns between three basic assets: managers' human assets (MHA), workers' human assets (WHA), and non-human assets (NHA). Using the concept of essentiality of human assets proposed by Hart (1995) and distinguished from that of complementarities, we first propose a new characterization of four known modes of CG-OA linkage: three traditional (Anglo-American, German, and Japanese) and one relatively new (Silicon Valley) models. Then we present empirical evidences of emergent diversity of CG-OA linkages in Japan, which is somewhat at odds with the old Japanese model. We interpret its emergent dominant mode as the path-dependent evolution of a new pattern of essentiality between human assets, made viable by lessening of institutional-complementarity-constraints, which surrounded the traditional Japanese model. We argue that this new mode interpreted in terms of essentiality may have broader applicability beyond Japanese context. [ABSTRACT FROM AUTHOR]

Strong debates in the varieties of capitalism literature as to whether financial liberalization and internationalization undermine 'insider' corporate governance systems based on patient capital in coordinated and state-ledmarket economies have focused on 'impatient' overseas private capital. However, cross-border state investment has also grown. Weexamine government policies towards a prominent type of state investment--equity purchases by sovereign wealth funds (SWFs). We argue that policymakers in 'insider' corporate governance systems can see such investment as an attractive international source of patient capital to offset declines in traditional sources of patient capital. We compare Germany and France and show that policymakers actively welcome SWF investment. Policy is driven by coalitions of 'insiders' of the managements of large industrial firms and governments who seek passive patient capital and beneficial relationships with overseas investors. Thus, financial liberalization and internationalization can allow new sources of patient capital through overseas state investors. [ABSTRACT FROM AUTHOR]

German corporate governance and corporate law are currently undergoing a major change. The old "Deutschland AG," a nationwide network of firms, banks, and directors, is eroding, ownership is diffusing, and the shareholder body is becoming more international than ever. This Article presents new data to support this development and explores the consequences in governance and in law that have been taken or that need to be drawn from this finding. Consistent with market-based theoretical accounts on corporate law, it finds that the changes currently underway are mainly a response to global market pressure: German banks divested their equity stakes mainly as a consequence of increased international competition. The Article extends the model of market-led change by two important observations: first, market pressure is not the only driver of legal change, but the law itself in this case contributed to facilitating competition. Notably, a taxation law reform enabled and accelerated the competition process already underway. Legal rules and market competition may thus be understood not as operating in isolation, but as forces that can work in dialogue. Secondly, the Article highlights the importance of ownership structure as a significant intermediate condition in the logical order between market competition and legal change. [ABSTRACT FROM AUTHOR]

Building on existing attempts to theorize the role of ideas in politics, this article argues that legal experts can shape how policy-makers see the world and what courses of action they deem viable. More particularly, expert opinion can signal policy-makers what kind of societal demands deserves primary political attention and whose interests are of secondary importance. The empirical analysis examines how the perceived importance of shareholders' interests among German corporate law experts developed throughout the twentieth century and how this development influenced the political process underlying corporate governance reforms. After a stakeholder-oriented view had dominated the legal discourse for many decades, corporate lawyers put greater emphasis on shareholders' interests in the 1990s. It is also shown that legal experts used their position as advisors for both the opposition and the government to infuse a shareholder-centred vision of corporate law into the rule-making process and to make the extension of shareholder rights appear a politically compelling response to the internationalization of financial markets and the growing economic power of institutional investors. [ABSTRACT FROM AUTHOR]

Voluntary codes of best practice have become increasingly prominent in corporate governance regulation. Given their similarity in focus and substance, the global spread of private self-regulation in corporate governance is often attributed to the rise of institutional investors and seen as signalling a global convergence of standards among the traditionally divergent national corporate governance systems. Drawing on institutionalist approaches of Comparative Political Economy, we argue that national code developments are strongly shaped by national state–economy relationships, in particular by domestic ‘key coalitions’. Comparing the emergence of corporate governance codes in the UK and Germany, our study reveals marked differences with respect to the formulation, substance and function of codes in national corporate governance. In the UK, the code largely reflects the demands of institutional investors for stricter standards. In contrast, members of the traditional German ‘stakeholder coalition’ pushed for a code that was intended to be more of a marketing than a regulatory instrument. [ABSTRACT FROM PUBLISHER]

Small- and medium-sized enterprises (SMEs) are embedded differently in institutional spheres than large corporations. This influences how they are affected by institutional change. Based on our observations, scholars of the transforming German coordinated market economies are mostly focusing on large enterprises. In contrast, we explore how institutional change in the financing sector affects privately owned SMEs, especially those engaged in manufacturing. Additionally, we asked who is pushing SMEs towards a stronger shareholder-value orientation and how they respond to these changes. Although the direct impact of capital market actors on German SMEs is still limited, we find a diffusion of advanced management tools, which is linked in the literature to the shareholder-value concept, and a redefinition of firm–bank relationships without embracing the arms'-length, equity market-oriented mode of finance. These two features constitute a recomposition that includes institutional continuity as well as change. [ABSTRACT FROM PUBLISHER]

Wal-Mart's exit from the German market in 2006 after 10 years of attempting to achieve sustainable competitive advantage contributes an interesting case to the small but expanding literature on ‘failure’ in international investment. The work on the disinvest decision in all its forms has been critical to a re-conceptualization of the international investment process as dynamic rather than static, linear and inexorable. An important segment of the work on investment and disinvestment as dynamic processes focuses on the environment in which investment and disinvestment decisions evolve. While the environment of the host country market has begun to be examined, the market environment of the country in which the retail transnational corporation (TNC) originates also affects the international disinvestment process. To explore this ‘home country effect’, I examine the resources Wal-Mart brought into the German market and their ability to use those resources in the German context. Wal-Mart's resources were shaped by the market governance regime in which the firm evolved, and not insignificantly, over which it had and has influence. Within this theoretical frame, Wal-Mart's reliance on the resources of network dominance and autonomous action that made for its success in the USA contributed to unsuccessful strategies in the German retailing market. [ABSTRACT FROM AUTHOR]

Under the German corporate governance system of codetermination, employees are legally allocated control rights over corporate assets through seats on the supervisory board--that is, the board of nonexecutive directors. The supervisory board oversees the management board--the board of executive directors--approves or rejects its decisions, and appoints its members and sets their salaries. We empirically investigate the implications of this sort of labor participation in corporate decision making. We find that companies with equal representation of employees and shareholders on the supervisory board trade at a 31 percent stock market discount as compared with companies where employee representatives fill only one-third of the supervisory board seats. We show that under equal representation, management board compensation provides incentives that are not conducive to furthering shareholders' interests, possibly because labor maximizes a different objective function than shareholders. We document that, under equal representation, companies have longer payrolls than their one-third representation peers have. Finally, we provide evidence that shareholders respond to the allocation of control rights to labor by linking supervisory board compensation to firm performance and by leveraging up the firm. [ABSTRACT FROM AUTHOR]

The German system of corporate governance is often thought to be effective at addressing problems arising in large firms. In addition to the usual emphasis on the role of German banks, it is increasingly recognized that the German system also involves a high concentration of the ownership of large firms. We analyse the relative significance of these two features of the German system and conclude that high ownership concentration is more important. Although banks may influence corporate governance via their control of proxy votes, positions on supervisory boards, and provision of loan finance, in practice they do not play a role in the governance of large German firms which is distinct from that of other types of large shareholders. Any case for the superiority of German corporate governance of large firms must therefore be based on high ownership concentration rather than a special role of banks, and must consider the costs of ownership concentration as well as the benefits. [ABSTRACT FROM AUTHOR]