The Globalisation of Corporate Governance? Irresistible Markets Meet Immovable Institutions

Abstract

This paper challenges whether a universal corporate governance system is practical, necessary or desirable. The increasingly recognized premium for governance is considered in the context of a globalizing economy. The implications of the deregulation of finance and the globalization of capital markets are examined, with a focus on the growth of equity markets and the dominant position of the Anglo-American stock exchanges. In the inevitable contest between the insider, relationship based, stakeholder oriented corporate governance system (as experienced in different forms in countries of Europe and the Asia Pacific) and the outsider, market-based, shareholder value oriented system (as practiced in the US, UK and other Anglo-American economies), it is often implied that the optimal model is the dispersed market-based ownership with shareholder foci for achieving competitiveness and enhancing any economy in a globalized world. The validity of this convergence thesis is debated in the paper, examining different theoretical arguments for and against the inevitability of convergence of corporate governance systems. Finally, the future direction of corporate governance trends is questioned, with the likelihood of greater complexity rather than uniformity emerging from current developments. While capital markets have acquired an apparently irresistible force in the world economy, it still appears that institutional complementarities at the national and regional level represent immovable governance objects.