Why do CG vary across the world?
- Institutional reasons
- Historical: how wealth has been dispersed historically affects how the system works
- Culture: we tend to not be good in defining what it means
- Path dependency: You don’t start with a clean slate every day
- Distribution of wealth
- Harmonization?
What are the three dimensions of Corporate Governance?
What adds to every dimension?
Management
* Autonomous vs committed
* Financial vs functional
Labor
* Participation vs control
* Portable vs firm specific skills
Capital
* Financial vs strategic
* Liquidity vs commitment
* Equety vs dept
What are the factors to be considered in the CG dimension labor?
- Participation vs control
- Portable vs firm specific skills
- If you have a portable skill – you can use it in any industry or any position. Firm-specific skills tend to be less prone to changing their job
- Portable skills are more dominant in Anglo-Saxon and firm specific in Europe
What are the factors to be considered in the CG dimension Capital?
- Financial vs strategic
- Liquidity vs commitment
- Equety vs dept
- Are you doing the investment to compete better on the market or in order to maximize profit?
- In the Anglo-Saxon world, debt is more prominent than equity. Equity more dominant in Europe
What are the factors to be considered in the CG dimension Management?
- Autonomous vs committed
- Financial vs functional
What are the three levels of Corporate Governance Systems?
- Level 1: The regulatory level (laws, regulation, rules)
- Level 2: The “advisory” level (codes of conduct, norms, best practices)
- Level 3: The “personal” level (individual beliefs, behavior, discretions)
What is the first level (Level 1) of CGS? What characterizes it?
- Level 1: The regulatory level
- Laws
- Regulation
- Rules
- Same for everyone and all corporations. Some differs between industries and some differs between legislation form
What is the second level (Level 2) of CGS? What characterizes it?
- Level 2: The “advisory” level
- codes of conduct
- norms
- best practices
- No laws, agreements within industries or the firm.
- E.g., Accountants
What is the third level (Level 3) of CGS? What characterizes it?
Level 3: The “personal” level
- Individual beliefs
- Behavior
- Discretions
* How do you behave
* Differs between individuals. If it’s not regulated on level 1 or 2
What are two different CGS?
Market-oriented
Network-oriented
Describe Network oriented CGS
- The network-oriented model is also labeled the continental, insider, civil law, blockholder, bank-oriented, stakeholder-centered, coordinated, or “Rhineland” model
Describe Market oriented CGS
- The network-oriented model is also labeled the continental, insider, civil law, blockholder, bank-oriented, stakeholder-centered, coordinated, or “Rhineland” model
According to Bratton and McCahery (2002), what is the future CGS?
- a unitary system as there is strong convergence towards a global system which assembles the best elements of both major governance systems and combines them together (the least likely alternative);
- a universal market-based system as anticipated by the Chicago School of financial economists, representing the triumph of the rules based outsider system;
- an improved variety of governance systems in which there is weak convergence, but some learning from each other between the different national systems;
- a set of viable distinctive governance systems, based on distinctive institutional complementarity each having a unique identity and capability.
