Summary
While there has been some convergence in corporate governance codes and securities regulations across the European Union (EU), the remaining areas of divergence are the most contentious as they reflect differences in fundamental societal norms and values. I propose that using the multinational corporation as the referent unit of analysis yields a means for making a qualitative distinction between the two regimes. I suggest that at least for firms with EU-wide scope, certain critical elements of the German model may be more appropriate, as the neoclassical justifications of the Anglo-American model are less reliable in such a setting.
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Extract
Corporate Governance in the European Union: Firm Nationality and the 'German' Model
INTRODUCTION
The European Commission considers the coordination and convergence of corporate governance codes across the European Union (EU) a priority. Given the widespread loss of confidence in business institutions precipitated by the global financial crisis, the particular choice of governance structure and objectives has become even more salient. In the debate within the EU, advocates of the convergence thesis generally suggest that globalization and the competition for capital will lead to the adoption of the 'Anglo-American' model, which gives primacy to the shareholder; the counterargument is that given the path-dependent nature of institutional development and the use of political advantages by the elite to resist change, the continental European members with governance frameworks along the lines of the 'German' model, with its emphasis on multiple stakeholder constituencies, will ensure diversity (Gordon 2003; Buck and Shahrim 2005; Collier and Zaman 2005; Goergen et al. 2008). An important component of the debate is the efficacy of these two competing models of corporate governance systems. In this paper, I put forth an argument in the EU systems debate that favors the retention of - especially, when considering the role of multinational corporations (MNCs) within the EU - certain critical elements of the German model.Corporate governance codes and practices have been largely a function of the member states' national laws within the EU (Weil et al. 2002; Van der Eist 2002; EIRO 2002). Though the logic of the EU's decades-long project to remove internal barriers to economic activity may suggest a movement towards convergence in the corporate governance frameworks as well, resistance from both lawmakers (e.g., the failure of the Takeover Directive in the EU Parliament), businesses (e.g., the almos...See the full content of this document
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