The Globalization of Corporate Governance

Abstract

The process of economic globalization, as product and capital markets integrate, places huge, and it is argued by some, irresistible pressures, on the worlds ‘insider’ stakeholder oriented corporate governance systems. Insider corporate governance systems in countries such as Germany and Japan, so the argument goes, should converge or be transformed by global product and capital market pressures to the ‘superior’ shareholder oriented ‘outsider’ corporate governance model prevalent in the UK and the US. What these pressures from globalization are, how they manifest themselves and whether they are likely to cause such a convergence/transformation lies at the heart of our exploration in this book. We began working on this book out of a common concern that there was a misunderstanding in the comparative corporate governance literature about the way pressures to change from the process of globalization, play out into real systemic change. Analysis of a competition between insider and outsider systems in terms of ‘triumph’ and ‘failure,’ ‘superiority’ and ‘inferiority,’ comparisons in natural selection terms or descriptions of outsider systems as the ‘standard model’ or the ‘Top,’ in a race to the ‘Top’ analysis, seemed to us oddly misplaced given the complexity of the issues at hand. In one sense our aim in writing this book is relatively simple, we aim to show that change within corporate governance systems produces very uncertain outcomes even where the intention is to produce a uniform one. Observing, as much of the literature does, that outsider shareholder oriented rules are being adopted in insider systems does little, as we will demonstrate over the course of this book, to help us understand what effect this will have, as diversity of reaction should, in our view, be regarded as the norm. That does not mean we rule out convergence occurring, it is a possible outcome, but just one of many that might occur. In essence while we are interested in the cause of change and the effect of change in corporate governance systems, we are also interested in the gap between cause and effect. Like all good lawyers we also begin with a caveat. In exploring the globalization of corporate governance we work across a number of disciplines, primarily - law, finance, economics, economic history and political history - in order to get a broader view of change and transformation related to the process of economic globalization. This has advantages in that it allows us to make links between disciplines that provides additional insight into the process of economic globalization and its outcomes in corporate governance terms. It also has its downside as it means we have to cover a lot of ground without necessarily going into detail everywhere. This is particularly risky where we enter highly contested territory within the five disciplines we cover. We acknowledge these limitations as the price we pay for our aerial view but we think the risk has been worth running. We would hope that those who read it bring to their reading a similar willingness to reach out from the confines of their discipline.