Comparative Corporate Governance: Old and New

Understanding the Company: Corporate Governance and Theory (Barnali Choudhury & Martin Petrin eds., Cambridge University Press, 2017)

Fordham Working Paper

European Corporate Governance Institute (ECGI) - Law Working Paper No. 321/2016

32 Pages Posted: 3 Apr 2016 Last revised: 1 Oct 2017

See all articles by Martin Gelter

Martin Gelter

Fordham University School of Law; European Corporate Governance Institute (ECGI)

Date Written: March 1, 2016

Abstract

The most fundamental comparative corporate governance debates have often focused on two issues. The first one concerns ownership structure: Why are large corporations in some corporate governance system owned by a multitude of disempowered shareholders, thus effectively giving management free rein? Why are corporations typically governed by a controlling shareholder or a coalition of controlling shareholders in other systems? The second issue is the role of other ‘constituencies’ of the corporation besides shareholders, of which labor is most central to the debate. Some jurisdictions explicitly give labor an influential voice in corporate affairs, whereas in others its influence is developed through factual power or unintended consequences of legislation. This chapter explores the interactions between firm ownership and labor, focusing on the United States on the one hand and Continental Europe, particularly Germany, on the other. It distinguishes between ‘old’ and ‘new’ comparative corporate governance, the former referring to the dichotomy studied by scholars of comparative corporate law up to the early 2000s. Recent changes, heralded by intermediated, but widespread share ownership are leading us to a new equilibrium whose contours have only begun to emerge. Over the past decades, outside investors have gained power both in the United States and in Continental Europe. However, neither in the US nor in Continental Europe has the traditional corporate governance system been completely superseded by a new one. The US remains to a large extent manager-centric. Continental Europe retains powerful large shareholders, and labor as an independent force has remained more important than in the United States. Outside institutional investors – sometimes from the US – have become a player to be reckoned with, thus adding an additional layer of complexity to the system.

Keywords: Berle-Means corporation, law and finance, varieties of capitalism, holdup, human capital, shareholder activism, retail investors, occupational pension plans, PAYGO, shareholder rights

JEL Classification: K22, J50

Suggested Citation

Gelter, Martin, Comparative Corporate Governance: Old and New (March 1, 2016). Understanding the Company: Corporate Governance and Theory (Barnali Choudhury & Martin Petrin eds., Cambridge University Press, 2017); Fordham Working Paper; European Corporate Governance Institute (ECGI) - Law Working Paper No. 321/2016. Available at SSRN: https://ssrn.com/abstract=2756038 or http://dx.doi.org/10.2139/ssrn.2756038

Martin Gelter (Contact Author)

Fordham University School of Law ( email )

150 West 62nd Street
New York, NY 10023
United States
646-312-8752 (Phone)

HOME PAGE: http://www.fordham.edu/info/23135/martin_gelter

European Corporate Governance Institute (ECGI)

HOME PAGE: http://ecgi.global/users/martin-gelter

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