European Corporate Governance Models
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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' interests1. 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 economy2. 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 countries3, catching up with UK on equity raised through IPOs4 in 1998-19995. 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 increases6. 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 Belgium7, 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 liquidity8. New stock exchanges' creation in 1990s, consolidation of Amsterdam, Paris, Brussels, Lisbon and one London exchange into Euronext9 and introduction of internet exchanges (Tradepoint)10 enhances (inter)national equity trade and is expected to increase transparency and financial information disclosure to secure investor finance.
by B. Hepple, Cambridge University Press 2002. Additional Reading: 1) C. Villiers, European Company Law - Towards Democracy?, Ashgate: Dartmouth 1998. 2) V. Edwards, EC Company Law, Oxford: Oxford University Press 1999. 3) D. Keenan, Smith and Keenan's Company Law, 13th Ed., Pearson Longman 2005 (consulted briefly). Articles: 1) 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: www.europa.eu.int/comm/internal_market/company/docs/corpgov/corp-gov-codes-rpt-part2_en.pdf#search'Gregory%20and%20Simmelkjaer,%202002'). 2) 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: www.ecgi.org/codes/documents/comparative_study_eu_i_to_en.pdf#search='Gregory%20and%20Simmelkjaer,%202002'). 3) "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: www.kluwer.nl/overkluwer/images/multimedia/pdf/ecl_1.pdf# search='EC%2013th%20Company%20Law%20Directive' ). Websites: 1) www.yahoo.com - as a search engine in general, producing above links and other websites visited shortly. 2) www.germanlawjournal.de - 13th Company Law Directive. 3) www.europa.eu.int - press releases and specific issues 4) www.kluwer.nl - article on takeovers 1 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. 2 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. 3 Belgium, France, Germany, Italy, The Netherlands, Spain, Sweden, Switzerland. 4 initial public offerings. 5 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). 6 ibid. 7 ibid. (in L. Van den Berghe, 2002, at p. 30). 8 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.
(Law on Control and Transparency in the Corporate Sector). 109 see Heidrick & Struggles, 2001, at p. 17. 110 see Combined Code (July 1998) 2003. 111 but, see most recently on German Executive Pay Draft Law, BBC News, 16 May 2005. 112 see also The Final Report of the Company Law Review Steering Group "Modern Company Law for a Competitive Economy", July 2001 (obtainable from www.dti.gov.uk/cld/review.htm). 113 for general compliance, see Umsetzung des Deutschen Corporate Governance Kodex in Börsennotierten Gesellschaften, Berlin, 19 May 2003 (www.bccg.tu-berlin.de). 114 International Accounting Standards Commission. 115 Accounting Standards Board. 116 see Corporate governance: a survey of OECD countries, 2004, at p. 79. 117 US Generally Accepted Accounting Principles. 118 see, for example, EU Commission Recommendation, May 2002. 119 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. 120 see Financial Times, 19th December 2001; see also European Union (2001): www.europa.eu.int/comm/internal-market/en/company/index.htm for EU Commission's work on enforcement infrastructure. 121 see M. Friedmann, Capitalism and Freedom, University of Chicago Press 1962. 122 see in contrast, French Vienot Report (1995). 123 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. 124 Voigt, H., "Discussion Report" in Comparative Corporate Governance: the State of the Art and Emerging Research,, ed. by K. Hopt, 1998, at p. 441. 125 see OECD "Guidelines for Multinational Enterprises" and EU Commission's Green Paper "Promoting a European Framework for Corporate Social Responsibility", COM (2001), 366. 126 see D. Cassidy, 4th International Conference on Corporate Governance and Direction, Henley Management College, October 2001. 127 see L. Van den Berghe, 2002, at p. 86; see also UK Company Law Review proposal in Financial Times, 16th March 2000. 128 see, for example, Heidrick & Struggles, 2001, at p. 14. 129 see, for example, S. Vitols, S. Casper, D. Soskice, S. Woolcock, Corporate Governance in Large British and German Companies, London 1997, at p. 36. 1
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