The Persistent Debate About Convergence in Comparative Corporate Governance

Abstract

This paper reviews the book, Convergence and Persistence in Corporate Governance, edited by Jeffrey N. Gordon and Mark J. Roe. The book takes its place against the broad theoretical backdrop of the convergence-divergence debate in contemporary corporate governance, and a range of intersecting themes and insights, including the law matters and legal origins hypotheses and path dependence theory. The book maps out the contours of this debate, and includes contributions from prominent U.S. and European scholars, comparing and contrasting the approaches of different legal regimes.

In spite of the considerable influence and sway in contemporary corporate governance of convergence theory (represented in the book by the contribution of Henry Hansmann and Reinier Kraakman), many of the authors express skepticism about its explanatory power. Rather, these authors focus on differences in legal systems, seeking to explain the origins, and continued resilience of such differences, from a range of perspectives and across a range of jurisdictions. A particularly strong theme in the book is the influence of political factors in legal regulation and their potential to obstruct convergence, on the basis that corporate governance cannot be separated from political governance.

While recognizing economic forces driving convergence, Convergence and Persistence in Corporate Governance provides sophisticated analysis of other constraining forces within a broader regulatory ecosystem. The book's attention to the relevance of political and cultural matters creates a more complex and textured picture of legal regulation.

There are, however, a number of other aspects of comparative corporate governance, which could have received greater attention in the book. For example, the assumption is often made by commentators on both sides of the convergence-divergence divide that a standardized Anglo-US model of corporate governance currently exists - a viewpoint that also seems to underpin the book. My paper discusses the extent to which differences, for example, in takeover law in the U.S., U.K. and Australia may challenge this assumption. It also considers several developments, which cast further doubt on a strong convergence position in comparative corporate governance. These developments include first, the corporate governance transplantation experiment in Russia in the early 1990s and secondly, the impact on comparative corporate governance of the international corporate collapses, epitomized by Enron and WorldCom. The regulatory responses to these collapses across several jurisdictions suggest that such events may generate new divergence in laws. Finally, differences in the post-Enron regulatory responses have also affected the issue of cross-listing. The presumption earlier this decade that the trend towards cross-listing of foreign firms in the U.S. could itself operate as a form of regulatory competition may need to be reassessed in the light of international reaction to the stringency of the Sarbanes-Oxley Act 2002 and its effect on cross-listing.

Keywords: Comparative corporate governance, convergence, persistence, corporate regulation, takeovers, corporate collapses, regulation

JEL Classification: G32, G34, K22, K33, M14, 016, M41