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Abstract:
Corporate governance in Germany is often described as a bank-oriented, block-holder or stakeholder model where markets for corporate control have not played a significant role. This case study of the hostile takeover of Mannesmann AG by Vodafone in 2000 demonstrates how systemic changes during the 1990s have eroded past institutional barriers to takeovers. These changes include the strategic reorientation of German banks from the "house bank" to investment banking, the growing consensus and productivity orientation of employee co-determination and corporate law reform. A significant segment of German corporations are now subjected to a market for corporate control. The implications for the German model are examined in light of both claims by agency theory for the efficiency of takeover markets, as well as the institutional complementarities within Germany's specific "variety" of capitalism. While the efficiency effects are questionable, the growing pressures for German corporations to achieve the higher stock market valuations of their Anglo-American competitors threaten the distributional compromises underlying the German model.

Corporate Governance, Takeovers, Germany

Abstract:
This collection of short papers examines the role of corporate governance with regard to human resource management and corporate strategy over the course of the firm life cycle, as well as in diverse institutional environments such as the UK, Germany and Japan.

Corporate Governance, Human Resource Management

Abstract:
This essay reviews the development of approaches within the comparative capitalisms(CC) literature and points to three theoretical innovations which, taken together, define and distinguish these approaches as a group. First, national economies are characterized by distinct institutional configurations that generate a particular systemic "logic" of economic action. Second, the CC literature suggests a theory of comparative institutional advantage in which different institutional arrangements have distinct strengths and weaknesses for different kinds of economic activity. Third, the literature has been interpreted to imply a theory of institutional path dependence. Behind these unifying characteristics of the literature, however, lie a variety of analytical frameworks and typologies of capitalism. This paper reviews and compares these different frameworks by highlighting the fundamental distinctions among them and drawing out their respective contributions and limitations in explaining economic performance and institutional dynamics. The paper concludes that the way forward for this literature lies in developing a more dynamic view of individual institutions, the linkages between domains, and the role of politics and power.

Varieties of Capitalism

Abstract:
This article examines institutional linkages between corporate governance and labour management in Germany. German corporate governance was characterised by the importance of banks, ownership concentration, long-term investment, and stable corporate networks. This system displayed important complementarities with stable long-term employment, investment in worker training, flexible quality production, low variability and dispersion in pay, and cooperative industrial relations during the post-war period. Since the mid-1990s, corporate governance has changed dramatically - a decline in the role of banks, the unwinding of corporate networks, the rise of foreign and institutional investors, en emerging market for corporate control, and changing careers and compensation of top managers. The paper investigates the resulting introduction of shareholder-value management practices and their impact on employees in large German companies. The findings show that these changes are related to the shrinking of stable core employment and the growth of variable pay. However, such tensions with shareholder value management have not undermined employee codetermination and collective bargaining institutions. Both play an important mediating role between capital market pressures and employment outcomes. The implications for the German "model" of corporate governance are discussed.

Corporate Governance, Industrial Relations, Varieties of Capitalism, Production Regimes

Abstract:
This paper compares the characteristics of M&A in 1991-2005 across five countries: Japan, France, Germany, the UK and USA. We ask what factors explain the growth of M&A markets across these countries, and what similarities and differences exist in the ways the M&A market operates. We find that the growth of M&A reflects a rather similar combination of sectoral, international, and financial factors. However, despite some convergence toward increasing levels, we find important differences in the characteristics of M&A transactions that reflect institutional differences found within different national 'varieties of capitalism'. We find systematic differences between what Hall and Soskice (2001) call liberal market economies (UK and USA) and coordinated market economies (Japan, France, and Germany) across a wide range of in deal characteristics: takeover bids, the size of stakes purchased, the prior stakes held, the use of private negotiation, degree of hostility, and takeover premium. In line with theories of the social embeddedness of markets (Granovetter 1985), we find that in countries with 'coordinated' market economies, M&A reflects greater 'coordination' of transactions through on going business relations. As such, the market for corporate control does not necessary entail a convergence of national business systems, but a pattern of change influenced by strong continuities.

Mergers and acquisitions, market for corporate control, corporate governance

Abstract:
This paper develops an organizational approach to corporate governance and assesses the effectiveness of corporate governance and implications for policy. Most corporate governance research focuses on a universal link between corporate governance practices (e.g. shareholder activism, board independence) and performance outcomes, but neglects how interdependences between the organization and diverse environments lead to variations in the effectiveness of different corporate governance practices. In contrast to such 'closed systems' approaches, we propose a framework based on 'open systems' approaches to organizations which examines these organizational interdependencies in terms of the costs, contingencies and complementarities of different corporate governance practices. These three sets of organizational factors are useful in analyzing the effectiveness of corporate governance in diverse organizational environments. We also explore how costs, contingencies and complementarities impact approaches to policy such as 'soft-law' or 'hard law', and their effectiveness in different contexts.

corporate governance, international comparison, organization theory

Abstract:
In this paper we analyze the comparative capitalisms literature, which encompasses several analytical frameworks, but shares common concerns in understanding the institutional foundations of diverse national 'varieties' of capitalism. One widespread weakness within this literature has been its static analysis and bias toward predicting institutional stability rather than change. Our contention is that introducing more dynamism into this literature must proceed on three distinct levels: the micro, meso and macro. On the micro level, it needs to develop a less deterministic view of institutions that incorporates a stronger understanding of how actors reshape institutions, not only as constraints on particular courses of action, but also as resources for new courses of action that (incrementally) transform those institutions. On the meso-level, it needs to specify more carefully the linkages among institutions and institutional domains and theorize how change in one affects change in the other. At the macro level, it needs to incorporate a compelling view of national and international politics that draws upon a theory of coalitional dynamics and the impact of particular rule-making processes that governs institutional reform in each nation.

Abstract:
In this paper we analyze the comparative capitalisms literature, which encompasses several analytical frameworks, but shares common concerns in understanding the institutional foundations of diverse national 'varieties' of capitalism. One widespread weakness within this literature has been its static analysis and bias toward predicting institutional stability rather than change. Our contention is that introducing more dynamism into this literature must proceed on three distinct levels: the micro, meso, and macro. On the micro level, it needs to develop a less deterministic view of institutions that incorporates a stronger understanding of how actors reshape institutions, not only as constraints on particular courses of action, but also as resources for new courses of action that (incrementally) transform those institutions. On the meso-level, it needs to specify more carefully the linkages among institutions and institutional domains and theorize how change in one affects change in the other. At the macro level, it needs to incorporate a compelling view of national and international politics that draws upon a theory of coalitional dynamics and the impact of particular rule-making processes that governs institutional reform in each nation.

Varieties of Capitalism

Abstract:
Why do employees have rights to representation within corporate boards in some countries, but not in others? Board-level codetermination is widely considered a distinctive feature of coordinated or nonliberal models of capitalism. Existing literature stresses three sets of explanations for codetermination rooted in corporate governance, union strength and political systems. The paper compares data from 22 OECD countries using the QCA method (Qualitative Comparative Analysis) and fuzzy sets approach to explore necessary and sufficient conditions for board-level codetermination. The results show two central pathways toward codetermination both rooted primarily in union coordination and consensual political systems, but with divergent implications for corporate governance systems in Scandinavia and Germany.

Codetermination, Corporate Governance, Labour Management, Stakeholder Theory

Abstract:
In spite of extensive research on corporate social responsibility (CSR) and its link with economic and social performance, less work has investigated the institutional determinants of corporate social responsibility. This paper draws upon recent developments in comparative institutional analysis to compare the influence of different institutional environments on CSR policies of European firms. Using a dataset of European firms, we find that firms from the more liberal market economies of the Anglo-American countries score higher on most dimensions of CSR than firms in the more coordinated market economies in Continental Europe. This result lends support to the view of voluntary CSR practices in liberal economies as being a substitute for institutionalized forms of stakeholder participation. Meanwhile, CSR tends not to mirror more institutionalized forms of stakeholder coordination. Rather, in coordinated market economies, CSR often takes on more implicit forms. Our analysis also shows that national institutional and sectoral-level factors have an asymmetric effect - strongly influencing the likelihood of firms adopting "minimum standards" of CSR, but having little influence on the adoption of "best practices."

Comparative Analysis of Economic Systems, Corporate Governance, Corporate Social Responsibility, Economic Sociology, Institutions

Abstract:
This article proposes a simple framework for understanding an emergent diversity of linkage 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 Japanese CG-OA 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 human assets essentiality, made viable by lessening of institutional-complementarity-constraints which surrounded the traditional Japanese model. We argue that this new mode interpreted in terms of reciprocal essentiality may have broader applicability beyond Japanese context.

Corporate governance, essentiality, human assets, institutional change, organizational architecture, path dependence

Abstract:
This article examines the role of ambiguity in processes of institutional change. One challenge for understanding institutional change is to overcome the rather "oversocialized" view of action within Institutional theory. Drawing upon recent work in sociology, the paper introduces a non-teleological model of action that stresses the ambiguity of institutionalized beliefs. Ambiguity is then applied to Masahiko Aoki's concept of institutions as "summary representation" of a strategic game. Rather than institutional break down, ambiguity is associated with incremental modes of institutional change through creative reinterpretation and redeployment of old institutions for new purposes. Empirically, the paper applies these considerations to understanding the historical evolution of employee codetermination in Germany. The continuity in formal legal rules of codetermination contrasts with remarkable diversity as an organizational practice-over time, across industrial sectors and between individual firms. Codetermination illustrates how ambiguity originated in political compromise, but also how ambiguous agreement allows scope for institutional innovation. Ambiguity is, thus, central for understanding how codetermination was partially reproduced and partially changed over time.

Institutional change, codetermination, Germany

Abstract:
A key theoretical and methodological issue for comparative scholars concerns the non-identical nature of actors across different institutional contexts. This paper reviews the relationship between actors and institutions within various strands of institutional theory, showing some emerging points of agreement among different social sciences disciplines regarding their co-generative or mutually constitutive nature. While actors' identities and interests are shaped by the broader institutional environment, institutions are equally the outcome of particular constellations of actors and their interactions. This understanding of institutions in terms of actor identities, interests, and constellations is illustrated with reference to industrial relations and corporate governance institutions. The paper also draws upon recent theories of action grounded in pragmatism to argue that institutions should be understood as an historical and non-deterministic context of action, wherein institutionalization can be usefully understood as a matter of degree. In particular, the ambiguity of institutionalized constraints and opportunities and the different strategic capacities of actors to enact institutionalized routines may give rise to more or less heterogeneous forms of organizational within different national business systems.

comparative institutional analysis, institutions, corporate governance, theories of action

Abstract:
The notion of distinct national varieties or systems of capitalism gained considerable currency in the last two decades. This review essay highlights three theoretical premises which define what we call the comparative capitalisms (CC) approach to political economy: First, national economies are characterized by distinct institutional configurations; second, these configurations are a source of comparative institutional advantage; and third, the configurations are stabilized by institutional path dependence. Within these common premises, the CC literature contains a number of competing theories and we highlight the fundamental distinctions among them and draw out their respective limitations. We specifically examine the role of politics within the CC literature and how emerging conceptions of politics may contribute to understanding institutional change in capitalist systems.

Comparative capitalism; business and society; institutional change; path dependence; comparative advantage; policy coalitions

Abstract:
A small but significant stream of research has emerged on how changes in corporate governance impact labour management, particularly in countries with stakeholder-oriented corporate governance. This paper briefly reviews existing empirical and theoretical literature on the links between corporate governance and labour management. Then it compares recent trends in Germany and Japan in terms of how changes in corporate governance affect the distribution of value-added, employment adjustment, pay systems and employee participation. Germany and Japan have proven able to adapt and modify their stakeholder model of employment and employee participation to changing circumstances. However, the size of the core model is getting smaller.

Abstract:
Germany and Japan are often seen deviating from an economic model of shareholder control and thereby as being similar by virtue of their mutual contrast with the US. Given the common challenges for bank-based and stakeholder-oriented models of corporate governance, Germany-Japan comparison seems particularly timely. This article provides an introductory overview and analysis for the Special Issue by comparing recent developments in corporate law reform, banking and finance, and employment in Germany and Japan. While rejecting arguments for international convergence, we discuss this evidence of simultaneous continuity and change in corporate governance as a potential form of hybridisation of national models or renegotiation of stakeholder coalitions in German and Japanese firms. One consequence is the growing diversity of firm-level corporate governance practices within national systems.

Abstract:
This comparison of labor-management relations at Deutsche Telekom (DT) and NTT Group (formerly Nippon Telephone and Telegraph) demonstrates the value of considering both institutions and strategic decision-making to understand the interaction between companies and unions. As corporations diversify, multi-divisional or holding company structures emerge, but the degree of diversity introduced in employment relations within the corporate group depends on the interaction between corporate strategy and the strategy of organized labor. The authors’ field research, based on interviews with managers and labor leaders, shows that despite a broadly similar corporate strategy of diversification by DT and NTT after the liberalization of telecommunication markets, employment relations became more decentralized—both for unions and for works councils—within the DT group than within the NTT group. This difference in outcomes is explained by the relative power and strategic choices of labor and management, rather than by constraints and opportunities specific to the existing national institutions.

strategy, industrial relations, restructuring, comparative institutional analysis, unions

Abstract:
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 () 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:
Since the early 1990s, the UK has been very active in undertaking policy reforms that includes a number of corporate governance codes, expert reports, a high level review of company law, and new regulations and legislation. These policy initiatives need to be monitored and evaluated in terms oftheir success in influencing the key drivers of 'good' corporate governance. This Report undertaken for the DTI has several aims: to identify key drivers of good corporate governance based on a review of social science literature; to describe the content of UK regulatory initiatives with regard to those drivers; and to evaluate gaps in the content and implementation of UK policy regarding corporate governance, using those drivers as benchmarks. In addition, some further implications of this study are discussed for future policy and research on UK corporate governance.

The Report defines 'good' corporate governance with regard to the rights and responsibilities of company stakeholders, and the wealth-creating and wealth-protecting functions of corporate governance within this context. Based on this definition, a detailed review of the theoretical and empirical social science literature on corporate governance was undertaken across seven broad areas: boards of directors, shareholder activism, information disclosure, auditing and internal controls, executive pay, the market for corporate control, and stakeholders. The result was the identification of 18 key 'drivers' or governance mechanisms, which promote 'good' corporate governance. Key gaps in the UK regulatory framework are then explored with reference to the drivers of good corporate governance. A comprehensive review was undertaken to evaluate corporate governance related developments in UK regulation since 1990. Several potential gaps in coverage were identified in the areas of executive pay and employees stakeholders. A number of potential gaps in effectiveness were also identified with regard to other key drivers such as boards, shareholder involvement, information disclosure, auditing, and the market for corporate control.

The Report also emphasises that the effectiveness of corporate governance regulation depends very much on balancing different governance demands and regulatory trade-offs. Corporate governance is shaped by a number of contingencies, complementarities, and costs. Various organisational contingencies may place different demands on corporate governance drivers, and their implementation is also associated with different sorts of costs. Looking more generally, different drivers may act as complements or substitutes for one another. Better appreciation of such interdependencies is crucial to formulating a coherent regulatory strategy and balancing important regulatory trade-offs between the following - mandatory regulation (uniform requirements) and more flexible forms of soft-law such as codes based on comply-or-explain principles and self-regulatory norms of professional groups.

Corporate Governance

Abstract:
In this article, we develop a theoretical model to identify and explain the diversity of corporate governance across advanced capitalist economies. Our sociological approach is inspired by "actor-centered" institutionalism in stressing the interplay of institutions and firm-level actors. This model bridges the gap between undersocialized agency theory approaches and oversocialized views of institutional theory. In particular, we examine: (1) how a country's property rights, financial system, and inter-firm networks will shape the role of capital; (2) how a country's representation rights, union organization, and skill formation will influence the role of labor; and (3) how a country's management ideology and career patterns will affect the role of management.

In the discussion, we explore how different configurations of institutions support different sorts of interactions among capital, labor and management in corporate governance. We illustrate the different patterns of conflict and coalitions among stakeholders around three axes: class conflicts, insider-outsider conflicts, and accountability conflicts.

This approach has strong implications for studying issues of internationalization and the potential convergence of corporate governance in light of the interdependencies, complementarities and tensions between institutions within various national settings.

corporate governance, international comparison, organization theory