Internal Diversity in German Corporate Governance: A QCA Analysis

Abstract

We investigate the set of conditions leading to major employee turnover in the governance of large listed German companies further to labour market liberalization for non-standard employment. Using the Qualitative Comparative Analysis (QCA) approach, we illustrate that substantial employee turnover in the core manufacturing sector occurs under the restrictive context of high debt as a necessary condition. In the non-manufacturing sectors, in contrast, downsizing programmes take place under a set of permissive, and alternative, combinations of sufficient conditions driven by shareholder value maximisation objectives: the presence of ownership diffusion in the ownership structure of companies, the importance of highly financialized investors (hedge funds/private equity), or the presence of CEOs with an educational background in law and/or business management. We provide important insights for understanding patterns of change in corporate governance by integrating the QCA approach with theoretical perspectives stressing the characteristics of actors’ identities in combination with their external business environments. The diffusion of new practices in contested contexts will be characterised by the presence of necessary, and restrictive, conditions whilst more favourable contexts will be associated with the presence of non-competing (i.e. alternative) sets of sufficient conditions.