An International Relations Perspective on the Convergence of Corporate Governance: German Shareholder Capitalism and the European Union, 1990-2000

Abstract

The corporate convergence debate is usually presented in terms of competing efficiency and political claims. Convergence optimists assert that an economic logic will promote convergence on the most efficient form of economic organization, usually taken to be the public corporation governed under rules designed to maximize shareholder value. Convergence skeptics counterclaim that organizational diversity is possible, even probable, because of path dependent development of institutional complementarities whose abandonment is likely to be inefficient. The skeptics also assert that existing elites will use their political and economic advantages to block reform; the optimists counterclaim that the spread of shareholding will reshape politics. This article tries to move the corporate governance convergence debate away from these familiar (and important) arguments towards an international relations perspective. This move has two implications. First, the pace of convergence in corporate governance is understood to depend crucially on a country's, or, perhaps more importantly, on a group of countries' commitment to a project of transnational economic and political integration.

Second, this transnational project may be best advanced by the spread of diffusely-held public firms on the Anglo-American model, because such ownership structures facilitate the contestability of corporate control, which, crucially, helps curb economic nationalism. In particular, such contestability may be necessary for state-level acquiescence to crossborder merger activity, which creates economic organizations that are special conduits for the transnational flow of capital, good, services, and people, and, no less, a transnational attitude. So both as a positive and normative matter, strong form convergence responds to a particular sort of political aspiration, not necessarily efficiency objectives conventionally understood. Examples drawn from the evolution of German shareholder capitalism during the 1990s in the context of the European Union project will illustrate the argument.

Keywords: corporate governance, comparative corporate governance, takeover bid, takeover law

JEL Classification: F02, G34, G38, K22