European Corporate Governance Models

University Degree Business and Administrative studies

EC Company Law Coursework 2, Q. 1 – European Corporate Governance Models

Since mid-1980s corporate governance has attracted attention world-wide. From board of directors’ composition and operation to relationship between shareholders, managers and directors, it has evolved into holistic company control system amidst global competition, weighing all stakeholders’ interests.

Each country’s corporate governance model is characterised by distinctive legal, cultural and other contexts, but broadly comparable countries can form corporate governance systems. Anglo-American outsider system favours shareholder value maximisation in influential capital market, while continental European insider system, German and Dutch models, favours broader stakeholder approach in socially-orientated market economy. This work shall consider following corporate governance areas: capital markets’ financial role, ownership and control, shareholder rights and financiers’ protection, external market for corporate control and anti-takeover defences, board system, disclosure rules and accounting standards, company’s role and accountability.

Capital markets’ financial role – market capitalisation ratio in 1975-2000 has grown in all continental countries, catching up with UK on equity raised through IPOs in 1998-1999. Germany progressed less than UK in IPOs; British companies attracted far more outside finance in 1990s, though both countries had similar average growth, German companies experiencing steeper downfalls and higher increases. Some countries, particularly Netherlands, are becoming more financial market-orientated as foreign investment increases, augmenting capital market’s relevance, facilitating convergence with Anglo-American outsider system. Other countries still lag behind – Germany and Belgium, where companies’ enduring corporate or individual long-term profit management with internal production factors prevents sharetrader attitude, making shares unattractive, the market subsequently lacking liquidity to attract outside investors. This creates divergence from UK, where disclosure and insider dealing

prohibition maintain market liquidity.

New stock exchanges’ creation in 1990s, consolidation of Amsterdam, Paris, Brussels, Lisbon and one London exchange into Euronext and introduction of internet exchanges (Tradepoint) enhances (inter)national equity trade and is expected to increase transparency and financial information disclosure to secure investor finance. European countries with weaker markets shall become more exposed to capital market finance. Unfortunately, national legal corporate governance regimes stifle this growth; the Takeovers Directive aiming to develop European capital market has yet to be implemented by 2006.

Ownership and control – while financial investors dominate market-

orientated countries still, like UK, non-financial sector dominates Germany and Spain. All continental countries, except Netherlands and Italy, have nevertheless been diverting from non-financial shareholders in 1990s, increasingly converging with market-orientated countries. However, in Germany in 1999 there were still 30% more non-financial and 15% less financial shareholders than in UK.

Non-financial owning companies – majority in Germany, where group law is well-developed, and also Belgian pyramidal holding structures – monitor entrepreneurship and emphasise group interests rather than profit maximisation in individual companies, risking conflict of interests and weak mutual monitoring. In contrast, UK has very few company shareholdings. The many individual/family shareholders in German companies favour risk management and ration their capital to prevent losing control through IPOs and SPOs; 6 years after flotation they retain majority votes in more companies than UK counterparts. British companies’ ownership becomes public sooner, while German shareholders may keep benefiting privately at minority shareholders’ expense. Less companies in all countries, however, have been owned corporately or individually by late-1990s. Public authority shareholders favour social welfare and employer-friendly goals, rather than profit-maximisation, but government ownership in Europe lacks today due to privatisation; only Dutch and French government minority shareholders exercise influence through golden shares with exceptional nomination rights and veto against mergers.

Institutional investors – biggest number in UK, second in Germany – diversify their large investment over long periods, require transparency and prefer liquidity and risk spreading by maximum ownership ceilings. Insurance companies – most in UK, less in Germany – being financial conglomerates and behaving comparably with non-financial companies, and banks – most in Germany and negligible in UK – being owners-investors risking conflict of interests, do not favour share value maximisation. Pension funds, however – UK’s largest actors, while not present on the continent – are original proponents of ‘shareholder activism movement’. Investment funds are rising, mostly in Germany and UK; some, like pension funds, neither vote nor monitor actively. In British companies much interest is owned by peculiar to UK profit-maximising insurance companies and pension funds, while continental companies mainly attract stable long-term commitment finance with smaller, more frequent profits.

Foreign ownership is rising especially due to large Anglo-American institutional investors financing continental companies, forcing them to adopt new corporate governance principles. For example, CalPERS invests in German and French companies actively monitoring them, as do British funds (Hermes) particularly persuading them to put their remuneration reports for shareholders’ vote in general meeting. Continental pension funds have doubled their exposure to foreign equity in 1994-1999. This arguably facilitates future convergence with outsider models on disclosure and shareholder rights, decreasing their takeover defences. This involvement, however, is apparently less aggressive; one-to-one meetings with management are preferred and few Anglo-American investors vote in continental companies. Foreign ownership affects Germany less than UK; Germany and Italy are more likely to diverge from Netherlands, Spain and France.

Traditionally concentrated ownership is weakening in continental Europe. German companies have largest voting blocks – median, 57% (1996) – while British companies only 10% (1992). In biggest companies (>5 bn. Euro), however, major shareholder has on average smaller voting block. Most importantly, continent-wide second and third largest voting blocks are far smaller – in Germany, less than 5% – while in UK much closer to controlling block, so relatively equal shareholders’ coalitions are common (Vodafone Airtouch) and can exert control comparable to continental blockholders. The largest average majority stake in Germany (62%) is held by domestic companies with second biggest, after individuals, number of voting blocks – in UK significantly less – while insurance companies hold only 12% vote and significantly less voting blocks – in UK insurance companies come first, then directors. So, many German companies are controlled by passive non-financial domestic companies and holdings over long periods whereas institutional investors do not even obtain blocking minority. Banks may monitor companies through long-term relationships, representatives on supervisory boards, voting members’ shares lodged with them as authorised and offering wide services, but they have recently been withdrawing. Many British companies are controlled by active insurance companies and pension and investment funds more influentially than others, though restricted by trade-active market and mandatory bids. Continentally, ‘private control bias’ with disproportionate voting power characterises Germany and modest ‘management control bias’ – Netherlands. Continental companies do not part with at least blocking minorities (Germany) partly for smaller free float percentage and lower shares trade, but also for control advantages. Evidence exists of large shareholder monitoring positive effects on company performance, but lacking minority shareholders’ legal protection (Germany) is counter-productive. However, by late-1990s French and German companies became increasingly widely held and controlled with lower cash flow/voting rights deviation.

Shareholder rights and financiers’ protection – shares carry voting rights in directors’ election and other corporate matters. Strong argument exists that countries with better legal protection obtain more external finance on better terms from

higher-valued capital markets. La Porta reports, inter alia, that British company law does not require shares’ deposit before meeting, provides strong minority shareholder

protection mechanisms, which explains significant outside capital in UK from financial investors with small stakes, allows pre-emptive rights to new issues, but has no mandatory dividend rule. Comparatively, Germany loses out on ...

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higher-valued capital markets. La Porta reports, inter alia, that British company law does not require shares’ deposit before meeting, provides strong minority shareholder

Deminor shows that one share-one vote rule is observed absolutely in Belgium. In Germany, 69% of companies respect it – UK-54% – and 23% have non-voting shares – UK-20%. Both German and British companies allow non-voting

shares similarly, but more British companies use fixed voting ceilings, ownership

ceiling and golden shares, while German companies retain control simply through large shareholdings and non-voting shares. Sweden, France and Netherlands use multiple voting rights heavily. Such divergent practices are unlikely to be challenged other than by supranational measures – OECD Principles (non-binding) and EU Directives – under growing institutional investors’ impact. Unfortunately, Second Council Directive is creditor-oriented and ambiguous on shareholder protection, while the more important for protecting minority shareholders EU take-over legislation has yet to be implemented. Directives’ minimum standards, options and public policy restrictions prevent uniform European corporate governance. Alternatively, many institutional investors, including British (though only advisory), have voted on disclosure issues, particularly board remuneration, and strikingly achieved strict legal prescriptions in Netherlands, Belgium, France.

Market for corporate control and take-over mechanisms – take-overs transfer control to outside efficient management, encouraging it to share interests with shareholders, and restructure assets, even failed attempts disciplining management; partial share sales between shareholders and management are instead more popular in UK and Germany. While in UK 18,7% of total market capitalisation in 1985-1990 was through domestic take-overs, in Germany it constituted only 2,3%. 79% of world-wide targets in 1990-1998 in hostile take-overs were US and UK companies, which also acted as acquirers in roughly same percentage of take-overs; UK had 4% of listed companies taken over annualy. The increasingly active European acquirers still lag far behind as continental companies’ fortress-like structures make control uncontestable. Their defence mechanisms differ much from British. While Dutch, Belgian, Italian companies defend themselves best, through complex pyramidal holding structures (ING Groep, Solvay, Fiat), British and German companies are weaker in anti take-over measures, despite British strong management and German influential blockholders. EU take-over code, finally enacted in December 2003, challenges different national take-over rules which do not guarantee minority shareholders’ equal protection; in UK shareholder acquiring 30% stake must offer to buy all shares so that minority shareholders can leave before self-interest control hits them.

Board System – one-tier boards have executive and non-executive directors on

one board. In two-tier boards, highest tier – supervisory board – comprising non-executive/outside directors, elected by shareholders in general meetings, with supervisory functions, and second tier – board of directors – executes strategic decisions. The German two-tier system differs from British unitary system in directors/auditors’ independence, though practically management and monitoring have similarities. Two-tier boards with independent/outsider directors best fit German culture of controlling shareholders and weak management to guarantee respect for all stakeholders’ interests, particularly minority shareholders. They have, however, been criticised for inefficiency, not meeting regularly and communicating informally; self-checks have recently been introduced. Unitary boards risk conflict of interests between strong management and weak shareholders; since Cadbury Code 1992 required independent supervisory directors – Combined Code 1998 - ½ of board from 2004 – many British boards have majority of these, meeting more often than German counterparts. Research shows how this benefits companies, though management compensation schemes have raised doubts. German supervisory boards, having biggest number of directors, represent shareholders and employees equally, which shows their long-term importance for company, coinciding with social democracy policies. Companies respect their voice, for example voting on audits, rather than just share profitability. British companies have least non-executive directors per board – 75% controlled by non-independent directors – lacking employee representation and shareholders’ empowerment. European labour involvement is not harmonised partly for unacceptability to UK; only information and consultation measure exists. While Germany has strong legally mandated works councils co-determining employee matters, though not management, collective bargaining in UK is unregulated by company law. Many continental companies have imported board audit, remuneration and nomination committees from Anglo-American companies.

Disclosure and accounting – well-developed capital market countries (USA, UK) have wide transparency requirements as fast growth industries, with skilled workforce and larger share of output devoted to research/development, are market equity dependent. Continental European companies dominating mature high cash-flow industries with low stock valuation lag behind due to no significant stock market pressure for transparency. EC Directives are criticised for non-compliance with international standards, though Large Holdings Directive requires 10% and higher voting blocks’ disclosure; implemented in Germany at 5% and in UK - 3%. Becht reports that transparency lacks in cash-flow rights ownership, detailed group and control structures, board remuneration and stock options, related party transactions, conflicts of interests and anti take-over provisions. Europe’s disclosure enforceability varies from liberal publicity system – despite criticisms, recently the disciplinary Greenbury

principles forcing directors’ remuneration full disclosure were applied in many continental countries – to legally prescribed rules. Most countries (Germany) use minimum soft-law enforcement with ‘comply or explain’ approach; Germany has promised class action suits from 2004-2005.

Practically, many European codes and recommendations – German Cromme Kodex and UK Combined Code – prescribe disclosure of financial performance, stressing non-financial information’s importance too (environmental, social, ethic issues), and directors’ interests in company’s annual reports and issues for shareholder’s vote at general meeting. Board practices attract specific requirements.

Interlocking directorships should be avoided to secure independence; all British companies and 90% of German companies disclose directors’ main executive position. German companies do not, however, disclose directors’ shareholdings, unless stakes are large, while British companies do. British companies also disclose directors’ remuneration almost fully, but across continental countries limited disclosure differs greatly. This emphasises German companies’ privacy aspect and British companies’ publicity; meanwhile, compliance with Kodex rises.

While IASC and British ASB accounting standards aim to provide company information for market participants, German and French accounting practices are justified by contractual arrangements’ verification and determination of company contributions. Some countries have seriously reformed national regulations – like on pension liabilities – to fit International Accounting Standards, preferred to US GAAP, from 2005 as proposed by EU. Deutsche Bank publishes share value

information since 1996. This is necessary to enable investors and stakeholders to

compare company performance, preventing repulsion by certain countries’ practices.

Company’s role and accountability – in developed market economies, companies are almost exclusively profit-making, maximising wealth of shareholders with whom they have flexible, short term relationships and directors are accountable to them only, not other stakeholders. In countries with transaction costs-saving internal organisation (Germany) longer, participatory co-operation with shareholders and employees makes companies seek stable, continuous growth, while high wealth is halted by illiquid equity market, and balance shareholders’ interests with all stakeholders; in German Siemens, employee held 6% of stock. Corporate social responsibility is, however, becoming propagated world-wide as anti-globalisation movement, supported by supra-national organisations’ recommendations, calls for more sustainable growth than in pure economic optimisation models. Despite international recommendations’ voluntarism, globally listed German companies start to appreciate shareholder value more, while British companies begin to respect stakeholders’ interest. Yet, shareholder/stakeholder model differences largely remain.

The surveyed differences in corporate governance models, with UK and Germany at opposite extremes, are explainable by factors like suitability to different strategies and activities, company’s development cycle phase, its performance, etc. Despite US/UK ‘market-orientated’ model’s influence on ‘network-orientated’ Germany with expected equity market finance growth, further ownership and voting rights dispersal, rising foreign institutional investment and exposure to market for corporate control, the different speed of European countries’ convergence with market-orientated model creates increasing divergence within EU where Germany may remain loyal to traditional stakeholder approach longer.

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Bibliography:

Books:

L. Van den Berghe, Corporate Governance in a Globalising World: Convergence or Divergence? A European Perspective, Kluwer Academic Publishers 2002.
C. Mallin, Corporate Governance, Oxford: Oxford University Press 2004.
Corporate governance: a survey of OECD countries, Paris: Organisation for Economic Co-operation and Development 2004.
The Control of Corporate Europe, ed. by F. Barca and M. Becht, Oxford: Oxford University Press 2001.
Comparative Corporate Governance: the State of the Art and Emerging Research, ed. by K. J. Hopt et al., Oxford: Clarendon Press 1998.
Corporate Governance Regimes – Convergence and Diversity, ed. by J. McCahery et al., Oxford: Oxford University Press 2002.
Social and Labour Rights in a Global Context: International and Comparative Perspectives, ed. by B. Hepple, Cambridge University Press 2002.

Additional Reading:

C. Villiers, European Company Law – Towards Democracy?, Ashgate: Dartmouth 1998.
V. Edwards, EC Company Law, Oxford: Oxford University Press 1999.
D. Keenan, Smith and Keenan’s Company Law, 13th Ed., Pearson Longman 2005 (consulted briefly).

Articles:

Gregory, H. and Simmelkjaer, R., “Discussion of Individual Corporate Goverance Codes Relevant to the European Union and Its Member States”, Annex IV, Weil, Gotshal & Manges LLP, 2002 (accessed at: ’).
Gregory, H. and Simmelkjaer, R., “Comparative Study of Corporate Goverance Codes Relevant to the European Union and Its Member States”, Final Report and Annexes I-III, Weil, Gotshal & Manges LLP, 2002 (accessed at: ’).
“Defensive Measures against Hostile Takeovers and the Impact of the 13th EC Directive”, European Company Law Review, Kluwer, April 2004/Issue 1 (2004) (accessed at: ' ).

Websites:

– as a search engine in general, producing above links and other websites visited shortly.
– 13th Company Law Directive.
– press releases and specific issues
– article on takeovers

see L. Van den Berghe, Corporate Governance in a Globalising World: Convergence or Divergence? A European Perspective, Kluwer Academic Publishers 2002, at pp. 1-3; see also S. Deakin and A. Hughes, Enterprise and Community: New Directions in Corporate Governance, Oxford: Oxford University Press 1997.

Franks, J. and Mayer, C., “Ownership and Control” in Trends in Business Organisation: Do Participation and Co-operation Increase Competitiveness, ed. by H. Siebert, Tubingen: Mohr 1995.

Belgium, France, Germany, Italy, The Netherlands, Spain, Sweden, Switzerland.

initial public offerings.

C. Van der Elst, Aandeelhoudersstructuren, aandeelhoudersconcentratie, en controle van beursgenotee- rde ondernemingen, Doctoral Dissertation, Ghent University 2001 (in L. Van den Berghe, 2002, at p. 31).

ibid.

ibid. (in L. Van den Berghe, 2002, at p. 30).

see, for example, Barnard, C., and Deakin, S., “Corporate Governance, European Governance and Social Rights” in Social and Labour Rights in a Global Context: International and Comparative Perspectives, ed. by B. Hepple, Cambridge University Press 2002, at p. 131.

see for recent development on Euronext and Deutsche Börse, BBC News, 11 May 2005.

see L. Van den Berghe, 2002, at p. 32.

Directive 2004/25/EC of the European Parliament and the Council on takeover bids [2004] OJ L142/12

art. 21 of Directive; see full text of Directive at: .

C. Van der Elst, 2001 (in L. Van den Berghe, 2002, at pp. 34-35).

Belgium, Germany, France, The Netherlands, Italy, Spain and UK.

see also OECD Institutional Investors Statistical Yearbook 2001.

supra n. 13.

secondary public offerings.

M. Goergen, Corporate Governance and Financial Performance: A Study of German and UK Initial Public Offerings, Cheltenham: Edward Elgar 1998; for reasons of IPO failures, see Gerke, W., “Market Failure in Venture Capital Markets for New Medium and Small Enterprises” in Comparative Corporate Governance: the State of the Art and Emerging Research, ed. by K Hopt, Clarendon Press 1998, at p. 621

see, for example, Jensen, M., and Meckling, W., “Theory of the Firm: Managerial Behaviour, Agency Costs and Ownership Structure”, Journal of Financial Economics (1976) 3/4: 305-60.

except Italy and Spain.

however, see Corporate governance: a survey of OECD countries, Paris: Organisation for Economic Co-operation and Development 2004, at p. 21.

see, for example, C. Van der Elst, 2001 (supra n. 5).

decreasing since 1995 Pension Act and Minimum Funding Requirements; but, see Myners Report, March 6, 2001 (downloadable at: ).

see L. Van den Berghe, 2002, at pp. 41-45; see also J. Plender, A Stake in the Future: The Stakeholding Solution, London: Nicholas Brealey 1997.

the public Californian Pension Fund.

Price Waterhouse, Converging Cultures – Trends in European Corporate Governance, Price Waterhouse, April 1997.

see Hermes Press Release, 14th March 2001 (in L. Van den Berghe, 2002, at pp. 65-66).

ibid., at pp. 47-48.

see R. Breuer, “The absence of exporting capabilities proves the failure of the system”, Financieel Forum Brussels, 7th March 2001; see also Financial Times, 5th February 2001 (in L. Van den Berghe, 2002, at p. 65).

see Mulbert, P., “Bank Equity Holdings in Non-financial Firms and Corporate Governance” in Comparative Corporate Governance: the State of the Art and Emerging Research, ed. by K. Hopt, Oxford: Clarendon Press 1998, at p. 455.

but, see currently “ABN AMRO Holding NV launches bid for all of Banca Antonveneta-WSJ”, BBC News, 19th May 2005.

J. Coffee, “The Rise of Dispersed Ownership: The Role of Law in the Separation of Ownership and Control”, working paper no. 182, Columbia University, January 2001, pp. 14-15; confirmed by Wymeersch, E., “Convergence or Divergence in Corporate Governance Patterns in W. Europe” in Corporate Governance Regimes – Convergence and Diversity, ed. by J. McCahery, Oxford: OUP 2002.

Becht, M., and Mayer, C., “Introduction” in The Control of Corporate Europe, ed. by F. Barca and M. Becht, Oxford: OUP 2001, p. 19.

ibid.; see also Goergen, M., and Renneboog, L., “Strong Managers and Passive Institutional Investors in the UK” in The Control of Corporate Europe, ed. by F. Barca and M. Becht, Oxford: OUP 2001, p. 268.

C. Van der Elst, 2001.

see, for example, Becht, M., and Bohmer, E., “Ownership and Voting Power in Germany” in The Control of Corporate Europe, ed. by F. Barca and M. Becht, Oxford: OUP 2001, at pp. 138-9.

see Goergen, M., and Renneboog, L., “Strong Managers and Passive Institutional Investors in the UK” in The Control of Corporate Europe, ed. by F. Barca and M. Becht, Oxford: OUP 2001, at pp. 268-70.

see supra n. 33, at p. 20 (Figure 1.6).

see Rickford, J., “Do good governance recommendations change the rules for the board of directors?” in Comparative Company Law and Capital Markets, ed. by K. Hopt, Oxford: OUP 2002.

supra n. 33, at p. 27 and 28 (Table 1.2); see also Goergen, M., and Renneboog, L., 2001, at pp. 270-3.

on Depotstimmrecht (art. 135(1) AktG1965), see, for example, L. Van den Berghe, 2002, at p. 52.

but, for criticism, see M. Hellwig, On the economics and politics of corporate finance and corporate control, SSRN.

see A. Hackethal, R. Schmidt and M. Tyrell, “Corporate governance in Germany: Transition to a modern capital market-based system?”, Paper prepared for the Conference on Corporate Governance: the Perspective of the New Institutional Economics, Saarbrücken, October 2002.

for detail, see Becht, M., and Mayer, C., “Introduction” in The Control of Corporate Europe, ed. by F. Barca and M. Becht, Oxford: OUP 2001, pp. 5, 18-26.

see L. Van den Berghe, 2002, at. pp. 53-55 and “Index change will hit company values”, Financial Times, 11th December 2000.

K. Gugler, Corporate Governance and Economic Performance, Oxford: OUP 2001; see also Bessler, W., “Going Public: A Corporate Governance Perspective” in Comparative Corporate Governance: the State of the Art and Emerging Research, ed. by K. Hopt, Oxford: Clarendon Press 1998, at p. 592; for recent study, see W. Drobetz, “Corporate governance and expected stock returns: evidence from Germany”, ECGI Finance Working Paper, 11/2003.

but, see minority shareholder-friendly practices in German Neuer Markt and French Nouveau Marché.

Corporate governance: a survey of OECD countries, 2004, at p. 34.

C. Van der Elst, 2001.

see J. Coffee, 2001, for political index explanation of this.

see La Porta, R., “Legal Determinants of External Finance”, Journal of Finance, vol. LII, No. 3, (1997) pp. 1131-1150; see also McKinsey & Co., Investor Protection Survey, June 2000, p. 16; for Italy, see Pagano, M., Panetta, F., and Zingales, L., “Why do Companies go Public? An Empirical Analysis”, mimeo, University of Chicago 1995.

see Court of Appeal ruling in Menier v. Hooper’s Telegraph Works Ltd. (1874) 9 Ch. App. 350.

supra n. 51 (see in L. Van den Berghe, 2002, at pp. 57, 199-202).

ibid.

Deminor, “Voting by Institutional Investors”, presentation by Jean-Nicolas Caprasse (Partner) at the First European Corporate Governance Conference, The European Corporate Governance Forum, Brussels, November 2000.

see in detail, Becht, M., and Bohmer, E., “Ownership and Voting Power in Germany” in The Control of Corporate Europe, ed. by F. Barca and M. Becht, Oxford: OUP 2001, at pp. 132-4, 146-7.

Organisation for Economic Co-operation and Development.

however, for problems with European company law directives, see L. Van den Berghe, 2002, at p. 62; most recently, see IP/05/561, EC Commission Consultations on Minimum Standards that should apply to shareholders’ rights, particularly voting rights, 13/05/2005.

the Second Council Directive EEC 77/91 of 13 December 1976.

E. Wymeersch, “Company Law in Europe and European Company Law”, working paper no. 2001-06, Financial Law Institute, Ghent University 2001.

see L. Van den Berghe, 2002, at p. 63; see also on this, Barnard, C. and Deakin, S., “Corporate Governance, European Governance and Social Rights” in Social and Labour Rights in a Global Context: International and Comparative Perspectives, ed. by B. Hepple, Cambridge University Press 2002; but, see “Defensive Measures against Hostile Takeovers and the Impact of the 13th EC Directive”, European Company Law Review, Kluwer, April 2004/Issue 1 (2004), at pp. 4-8.

ibid., at p. 67.

Franks, J., and Mayer, C., “Capital Markets and Corporate Control: A study of France, Germany and the UK”, Economic Policy (1990), pp. 199-231; but, see opposite views in Franks, J., and Mayer, C., “Hostile Takeovers and the Correction of Managerial Failure”, Journal of Financial Economics, 400: 163-81.

see Franks, J., Mayer, C., and Renneboog, L., “Managerial Disciplining and the Market for (Partial) Corporate Control in the UK” in Corporate Governance Regimes – Convergence and Diversity, ed. by J. McCahery, Oxford: OUP 2002, at pp. 441-2.

see Hopt, K., “Common Principles of Corporate Governance in Europe?” in Corporate Governance Regimes – Convergence and Diversity, ed. by J. McCahery, Oxford: OUP 2002, at pp. 178-81.

Prowse, S., “Corporate Governance in an international perspective: a survey of corporate control mechanisms among large firms in the US, UK, Japan and Germany”, Financial Markets and Institutions, no. 1, 1995, pp. 1-63.

see L. van den Berghe, 2002, at p. 67.

Franks, J., Mayer, C., and Renneboog, L., “Who Disciplines Management in Poorly Performing Companies”, Journal of Financial Intermediation (2001).

see C. Mallin, Corporate Governance, Oxford: OUP 2004.

see Becht, M., and Mayer, C., “Introduction” in The Control of Corporate Europe, ed. by F. Barca and M. Becht, Oxford: OUP 2001, at pp. 30-35.

Deminor, November 2000.

consider victory of hostile take-over bid of Vodafone.

Thirteenth European Council Company Law Directive [1990] O.J. C240/7.

Directive 2004/25/EC of the European Parliament and the Council on takeover bids [2004] OJ L142/12.

see Corporate governance: a survey of OECD countries, 2004, at p. 68; for analysis of Directive’s future impact, see Reforming Company and Take-over Law in Europe, ed. by G. Ferrarini, Oxford: OUP 2004; also see Barnard, C., and Deakin, S., “Corporate Governance, European Governance and Social Rights” in Social and Labour Rights in a Global Context: International and Comparative Perspectives, ed. by B. Hepple, Cambridge University Press 2002, at p. 128.

B. Pettet, “Duties of UK Board of Directors, Unitary and Two-Tier Structures”, paper presented at the First European Corporate Governance Conference, The European Corporate Governance Forum, Brussels, November 2000; see Berlin Initiative Code, June 2000, on conflict of interest (ethics).

see E. Wymeersch and K. Hopt, Comparative Corporate Governance – Essays and Materials, De Gruyter 1997; see cases of Holtzman and Berliner Bank; for strong critique, see Davies, P., “Board Structure in the UK and Germany: Convergence or continuing divergence?”, International and Comparative Law Journal, 2, 2000.

see Corporate governance: a survey of OECD countries, 2004, at p. 88.

see Maxwell case in UK – large scale pension funds abuse.

for definition, see Review of the role and effectiveness of non-executive directors, DTI London, 2003.

see L. Van den Berghe, 2002; but, for critique of outside directors’ optimising role, see Romano, R., “Less is more: Making Shareholder Activism a More Valuable Mechanism of Corporate Governance” in Corporate Governance Regimes – Convergence and Diversity, ed. by J. McCahery, Oxford: OUP 2002.

see also Corporate governance: a survey of OECD countries, 2004, at p. 35.

the Co-determination Act 1976; see also the Works Constitution Act 1972.

see Roe, M., “Political foundations for separating ownership from control”, Stanford Law Review, vol. 53, (2000), pp. 539-606.

for Italy, see A. Melis, “Corporate Governance in Europe: an empirical analysis of the Italian case”, Working Paper Universita di Cagliari 1998.

see Corporate governance: a survey of OECD countries, 2004, at p. 101.

Heidrick & Struggles, Is your board fit for the global challenge? Corporate Governance in Europe, Heidrick & Struggles Inc. 2001.

see PIRC’s Annual Review of Corporate Governance, December 2002 ().

see Gregory, H., and Simmelkjaer, R., “Discussion of Individual Corporate Goverance Codes Relevant to the European Union and Its Member States”, Annex IV, Weil, Gotshal & Manges LLP, 2002, pp. 223-4

see European Council Draft Fifth Company Law Directive [1983] OJ No. C2402; also see C. Mallin, Corporate Governance, Oxford: OUP 2004, at p. 125, Table 10.1.

see Barnard, C., and Deakin, S., “Corporate Governance, European Governance and Social Rights” in Social and Labour Rights in a Global Context: International and Comparative Perspectives, ed. by B. Hepple, Cambridge University Press 2002, at p. 129.

94/95/EEC European Works Councils Directive [1994] OJ L254/64; see also Directive 2002/14/EC of the European Parliament and Council establishing a general framework for informing and consulting employees in the European Community [2002] OJ L80/29, art. 5; but, see recently EU Commission’s White Paper on European Governance, July 2001, COM (2001) 428.

for detail, see Corporate governance: a survey of OECD countries, 2004, at pp. 72-74.

for UK, see recent Companies (Audit, Investigations and Community Enterprise) Act 2004, strengthening auditors’ demand of information from directors.

for Germany, see German Kodex, updated May 2003.

see Carlin, W., and Mayer, C., “How do Financial Systems Affect Economic Performance” in Corporate Governance Regimes – Convergence and Diversity, ed. by J. McCahery, Oxford: OUP 2002.

see Thomas, L., and Waring, G., “Competing Capitalisms: Capital Investment in American, German and Japanese Firms”, Strategic Management Journal, Chichester, vol. 20, no. 8, (1999), pp. 729-748.

88/627/EEC Transparency Directive.

see Wertpapierhandelsgesetz, arts. 21-25, 41 (BGBL 30.7.1994) (Securities Trading Act).

see Disclosure of Interests in Shares (Amendment) Regulations and (No. 2) Regulations of 1993.

Becht, M., “European Disclosure for the New Millennium” in Comparative Company Law and the Capital Markets, ed. by K. Hopt and E. Wymeersch, Oxford: OUP 2002.

see Lipton, M., and Lorsch, J., “A modest proposal for improved corporate governance”, The Business Lawyer, vol. 48, 1992, pp. 59-77.

see L. Van den Berghe, 2002, at p. 79.

see German Panel on Corporate Governance (Grundsatzkommission Corporate Governance) – no change to German corporate law yet.

see Corporate governance: a survey of OECD countries, 2004, at p. 62.

for more detail, see C. Mallin, Corporate Governance, Oxford: Oxford University Press 2004.

consider new regulatory requirements in UK, France and Germany.

for Germany, see Gesetz zur Kontrolle und Transparenz im Unternehmensbereich 1998 (KonTraG, BGBL I786) (Law on Control and Transparency in the Corporate Sector).

see Heidrick & Struggles, 2001, at p. 17.

see Combined Code (July 1998) 2003.

but, see most recently on German Executive Pay Draft Law, BBC News, 16 May 2005.

see also The Final Report of the Company Law Review Steering Group “Modern Company Law for a Competitive Economy”, July 2001 (obtainable from ).

for general compliance, see Umsetzung des Deutschen Corporate Governance Kodex in Börsennotierten Gesellschaften, Berlin, 19 May 2003 ().

International Accounting Standards Commission.

Accounting Standards Board.

see Corporate governance: a survey of OECD countries, 2004, at p. 79.

US Generally Accepted Accounting Principles.

see, for example, EU Commission Recommendation, May 2002.

see Frankfurter Allgemeine Zeitung, 11/12/1995, no. 296, 16; see also for other German banks, Frankfurter Allgemeine Zeitung, 2/3/1996, no. 79, 20.

see Financial Times, 19th December 2001; see also European Union (2001): for EU Commission’s work on enforcement infrastructure.

see M. Friedmann, Capitalism and Freedom, University of Chicago Press 1962.

see in contrast, French Vienot Report (1995).

see S. Vitols, S. Casper, D. Soskice, S. Woolcock, Corporate Governance in Large British and German Companies, London 1997, at p. 35; see also “die Neue Mitte” political program in Germany.

Voigt, H., “Discussion Report” in Comparative Corporate Governance: the State of the Art and Emerging Research,, ed. by K. Hopt, 1998, at p. 441.

see OECD “Guidelines for Multinational Enterprises” and EU Commission’s Green Paper “Promoting a European Framework for Corporate Social Responsibility”, COM (2001), 366.

see D. Cassidy, 4th International Conference on Corporate Governance and Direction, Henley Management College, October 2001.

see L. Van den Berghe, 2002, at p. 86; see also UK Company Law Review proposal in Financial Times, 16th March 2000.

see, for example, Heidrick & Struggles, 2001, at p. 14.

see, for example, S. Vitols, S. Casper, D. Soskice, S. Woolcock, Corporate Governance in Large British and German Companies, London 1997, at p. 36.