Globalizing Trust? Transferring Anglo-American Minority Shareholder Protections to Civil Law Germany

Abstract

This paper critically examines the conventional view that the lack of fiduciary duty protections for corporate shareholders in civil law systems explains crucial differences in corporate structure and finance. It questions the thesis that the structure of civil law systems militates against the use of such residual doctrines. This thesis has been developed in a series of widely discussed articles by Rafael La Porta, Florencio Lopez-de-Silanes, Andrei Shleifer and Robert Vishny ("LLS&V") and is supported by their empirical study of investor protections in 49 countries. In their studies LLS&V have claimed that the weakness of minority shareholder protections, especially of fiduciary duty protections, explain why securities markets in civil law jurisdictions, such as Germany, France, and Italy have been relatively weak by comparison with common law jurisdictions. These findings have been widely cited. By comparing fiduciary duty protections in Germany and the U.S., with an eye to functional equivalents, this paper shows that neither a fairness deficit nor a literalism constraint can be attributed to civil law systems across the board. The paper shows that, contrary to what LLS&V's data suggest, fiduciary duty protections are by now well-established in the German law of stock corporations.

Keywords: fiduciary duty, comparative corporate governance, minority shareholder protections, corporate governance

JEL Classification: G30, G34, G38, N40, K22