Corporate Governance Reforms in Continental Europe

Abstract

This essay first describes the differences in the ownership structure of companies in the three main economies of continental Europe - Germany, France, and Italy - with comparisons to the United States and the United Kingdom. Next, it summarizes the corporate governance issues that arise in firms with a dominant shareholder. Then, it provides a brief account of the major European corporate scandal, Parmalat, as an extreme example of investor expropriation in a family-controlled corporation. After outlining in general the legal tools that can be used to tackle abuses by controlling shareholders (internal governance mechanisms, shareholder empowerment, disclosure, public enforcement), it describes the corporate governance reforms enacted by France, Germany, and Italy between 1991 and 2005 and assesses the way in which investor protection in the three countries has changed.

Keywords: Corporate Governance, Concentrated Ownership, Corporate Law Reform, Internal Governance, Shareholder Empowerment, Disclosure, Private Enforcement, Public Enforcement

JEL Classification: G18, G32, G34, G38