Corporate Governance Reform, Regulatory Politics, and the Foundations of Finance Capitalism in the United States and Germany

Abstract

Since 1990, both the U.S. and Germany have substantially reformed their corporate governance regimes as part of an emerging paradigm of international finance capitalism increasingly dependent on securities markets and private shareholding. Corporate governance reform and the emergence of finance capitalism, however, present a double paradox. First, the development of financial markets and the increasing importance of market relations, often linked to thediminutionof state power, have been accompanied by a substantial and ongoingexpansionof law and regulatory capacity into the private sphere to boost shareholder protections. Second, center-leftparties in both countries took advantage of economic crises to press for pro-shareholder reforms against center-right opposition allied with managerial elites. This article explains these developments by analyzing reform processes in United States and Germany over the past decade. It argues that changing economic conditions empowered reformist state actors, and that they have played a central and largely autonomous role in driving the substantial institutional change underway in contemporary capitalism. The analysis also suggests that political conflict over corporate governance is likely to intensify, on the right and the left, as it impinges on the basic allocation of power within corporations and thus the political economy.