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For example, Shu-Acquaye (2007) cites the basic differences in the legal systems in various parts of the world as contributing to the different approaches to corporate governance. Likewise, Shu-Acquaye cites these differences and adds, "The American corporate governance system adheres to the idea of shareholder primacy. Because the United Kingdom, Austria, and Canada share a legal system based on English common law and equity principles, they are similar to the United States -- shareholder primacy is the predominant norm in each of these countries."
By sharp contrast, other countries such as Japan and Germany are characterized by stronger protection for their employees, creditors, and other nonshareholder stakeholders in general, representing examples of a stakeholder-orientated system. In their book, the Control of Corporate Europe, Barca and Becht point out that, "Germany has always had a prominent place in the international corporate governance debate. The country is among the largest and richest industrial economies, and many German companies are world leaders in their fields. Moreover, German institutions often differ significantly from those found in other Continental European countries and even more markedly from those of the Anglo-Saxon countries." In fact, as a current example of trend in international corporate governance, Buck and Shahrim cite the example of the "diffusion and translation of German stock-based executive pay, one element of U.S.-style governance, in the face of prevailing stakeholders. Executive stock options (ESOs) can be viewed as a recent governance innovation so far as Germany is concerned, but subject to a national culture and institutions quite different from those in the U.S.A. And UK."
These fundamental differences in corporate governance approaches provides researchers with some rich fodder concerning the responsibilities of German business leaders compared to their counterparts in other countries. According to Shu-Acquaye, "German corporate law creates a fiduciary duty between managers and a diverse group of constituencies, including shareholders, employees, and society. Consequently, the hallmark of the corporate system is its codetermination regime -- a regime that provides employees with structural protection through representation in corporate institutions." As a result, the two-tiered board system used by German companies requires them to be managed by a managing board (i.e., the "Vorstand") which is responsible for the day-to-day conduct business of the company; in addition, a second board comprised of a supervisory council (i.e., the "Aufsichtsrat") (156) is responsible for the election and monitoring of the company's management and are even empowered to approve major corporate decisions.
Likewise, employee participation in the supervisory board is mandated in countries such as Austria, Denmark, Holland, Luxembourg, and Sweden, France, Ireland, Portugal; however, other EU member states have also passed laws concerning corporate governance, but these only require employee participation in certain aspects corporate governance. In this regard, Shu-Acquaye reports, "For example, in France, when employees' shareholding reaches 3%, employees are given the right to nominate one or more directors subject to certain exceptions. Although employee representation on the board does not give them decision-making power per se, their structural involvement as nonshareholder constituencies of the firm is effective in mitigating informational asymmetries, thereby facilitating informal negotiations among corporate constituencies."
The same constituents of globalization (i.e., economic integration, democratization, and global governance networks) are transforming the nature of international corporate governance today. In this regard, Detomasi (2002) differentiates between several characteristics of globalization from the broader concept of interdependence:
Globalization interlinks more countries and occurs over greater, generally transoceanic, distances;
The volume and rapidity of international exchange of ideas, information, and goods and services continues to increase dramatically, fueled primarily by improvements in information technology; and,
Globalization involves numerous and diverse agents that encompass a broad range of issue areas, with the number of interested actors in each issue area continuing to broaden and diversify.
Some authorities go so far as to suggest that improperly administered corporate governance can threaten the world's outlook for peace because of the economic disparities that can be attributed to past business practices. According to Tavis (2002), "Multinational enterprises are the instruments of economic integration. As such, multinationals as a group deserve credit for the positive productivity-related wealth effects of the process. As the implementing institutions, these enterprises are also inextricably related to the inequality -- the social void -- resulting from globalization that threatens peace." These issues are compounded in immediacy and intensity as well by some changes in demographic patterns that have emerged in just the last 5 decades or so. According to O'Sullivan, "Of particular importance in recent decades as a source of pressure for the transformation of existing systems of corporate governance has been the growth of intergenerational dependence. In virtually all of the advanced economies, growing life expectancy and a decline in fertility below that which is required for the replacement of the population have contributed to a 'double' ageing process." In other words, as the life expectancy in developed nations continues to increase while the birth rate continues to decline, emerging nations will be able to exert additional influence in how and why various corporate governance approaches are shaped and when they will be implemented. In this regard, O'Sullivan emphasizes that, "Pressures from the labor market, especially the striking trend towards early withdrawal from the labor force in most of the advanced industrial economies, have exacerbated the rising intergenerational dependence induced by these demographic changes."
Today, the debate over what type and how much corporate governance is needed is also surrounded by a dynamic marketplace as well as the international regulatory mechanisms that are associated with globalization. Indeed, Tavis suggests that the type of corporate governance adopted by multinational corporations in the future will play a large role in shaping the type of world that will exist in the 21st century. According to this author, "The regulatory power of the nation-state, particularly in developing countries, is eroding while a loose web of global governance networks is evolving. Multinational enterprises are involved with many of the global governance networks and, increasingly, are the target of others." Somewhat disingenuously, this author also concludes that, "The balance of globalization pressures and the activities of multinational firms will encourage more peace or greater conflict in our world."
Clearly, then, the study of international trends in corporate governance represents an important initiative today, but how can it be that the corporate governance actions of large multinational corporations can have such a powerful effect on the state of the world? The answer is in the manner in which capital is controlled and channeled in ways that have traditionally placed developing nations at a disadvantage. For instance, according to Milhaupt and West, "Focusing on venture capital casts the debate over bank-versus market-oriented governance systems in a new light. The institutions supporting American governance fortuitously facilitate a complex contracting structure that makes venture capital flourish." Likewise, Mayer (2002) makes the point that, "The idea that corporations may co-create the conditions of peace is contrary to the more customary view that in matters of creating or maintaining peace the role of government completely dominates. Yet, while many corporations may have an insignificant role in co-creating peace -- or in disturbing it -- larger companies do seem to have an impact."
This Article contends that many large corporations have an important role to play in establishing and revising the rules of the global economic game. Moreover, corporations should support those rules providing structural efficiencies that promote full-cost pricing, phase out perverse subsidies, and provide more meaningful information to investors and consumers. In so doing, corporations, consumers, and governments can create more peaceful, sustainable societies even while allowing maximum freedom of movement of people, goods, and services across international borders.
While the Anglo-American approach to corporate governance has not been without its failures, of course, it would seem that this approach encourages new venture creation in ways that other corporate governance systems do not. For example, Milhaupt and West also point out that, "Entrepreneurial finance and the firms it funds, while increasingly crucial to Japanese economic competitiveness and vitality, have been constrained by the institutional framework supporting its postwar corporate governance system." The desirable new venture creation that is associated with the Anglo-American approach, then, is not something that should be simply washed away in the rush to scrub out the inconsistencies that exist in international corporate governance.
This point is also made by Glassman (2007) who points to the increasing transparency of the Anglo-American approach to corporate governance that is used in the United States as a prime example of how this approach can contribute to new venture creation: "America's dominance in the global economy is not about its physical infrastructure. Rather, its competitive market economy, intolerance of corporate governance flaws, risk-taking culture, and dynamic capital markets all reward entrepreneurs for transforming ideas into useful goods and services. Its dominance comes from the flexibility of its…[continue]
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