Codetermination as a (Partial) Substitute for Mandatory Disclosure?
ETH Zurich; European Corporate Governance Institute (ECGI)
European Business Organization Law Review (EBOR), Vol. 7, 2006
Employee board representation can serve information dissemination purposes. This comment argues that in Germany, which (still) has a bank-oriented financial system, transparency may be better served by using codetermination (under which up to half of the supervisory board is composed of employees) as an information channel, rather than by importing the mandatory disclosure requirements that are typical of Anglo-Saxon jurisdictions. There are two reasons for this. One is that the evidence about the efficiency of mandatory disclosure requirements is mixed. The other is that mandatory disclosure is an intrinsic component of market-oriented financial systems such as the US financial system.
Transplanting a market-oriented component into a bank-oriented financial system brings the risk of inconsistencies, as it affects the complementarities that exist among the intrinsic components of a bank-oriented system. This comment thus concludes that before suggesting ways to transplant further mandatory disclosure requirements into the German financial system, or improve existing ones, one should consider how to use or improve the use of codetermination as an information dissemination channel.
Keywords: Codetermination, creditor protection, mandatory disclosure
JEL Classification: K20Accepted Paper Series
Date posted: February 19, 2007
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo1 in 0.375 seconds