This paper argues that debate on corporate governance in an international context is hampered by the lack of a coherent framework. A taxonomy of systems of corporate governance is proposed as a remedy.

The taxonomy is based upon eight related, yet discernible characteristics: (1) the prevailing concept of the firm, (2) the board system, (3) the salient stakeholders able to exert influence on managerial decision-making, (4) the importance of stock markets in the national economy, (5) the presence or absence of an external market for corporate control, (6) the ownership structure, (7) the extent to which executive compensation is dependent on corporate performance and (8) the time horizon of economic relationships.

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For comparative purposes, systems of corporate governance prevailing in the industrialized countries can be divided roughly into ``market-oriented'' systems (Anglo-Saxon countries, e. g. the USA and the UK) and ``network-oriented'' systems, like the Germanic countries (e. g. Germany and the Netherlands), Latin countries (e. g. France and Italy), and Japan. Anglo- Saxon countries Stakeholders can be identified which can exert a substantial influence on managerial decision-making: the influence of shareholders is strongly institutionalized in these countries.

The law strongly protects shareholders. In the Anglo-Saxon countries by-and-large the democratic principle of ``one share, one vote'' applies. Both the executive and non-executive board members are appointed and dismissed by the general assembly of shareholders. Stock markets play a more important role in Anglo-Saxon countries than they do in the other groups of countries. The best known characteristic of the Anglo-Saxon systems of corporate governance is an active external market for corporate control, often referred to as the takeover market.

The most familiar takeover techniques are mergers, tender offers, proxy fights and leveraged buy-outs. In general, in the Anglo-Saxon countries firms are relatively widely held (low ownership concentration). About the executive compensation, particularly in the USA, this remuneration is an important and still growing part of total managerial compensation. Also in the UK and Canada, the employment of performance-related pay is of clear and growing importance.

Finally, the Anglo-Saxon system of corporate overnance is characterized by relatively short-term economic relationships. Germanic countries Germany and the Netherlands have a two-tier board system. In Germany, the board comprises a management board and a supervisory board , which provides a complete separation between management and supervision of management. Employees and shareholders are salient stakeholders that can exert substantial influence on managerial decision making. More specifically, large German general banks are salient influential stakeholders.

Stock markets play a less important role in the economy of Germanic countries than they do in Anglo-Saxon countries, and an active external market for corporate control is almost nonexistent. Generally, in the Germanic countries influence on managerial decision-making is not exerted via the ``invisible hand'' of stock markets, but via the visible hand of dialogue between the management board and the supervisory board around the negotiation table. The use of performance-related compensation for executives in the Germanic countries seems to be rather limited.

Germany is one of the countries wherein stakeholders are persistently seen to employ a long-term time horizon Latin countries Shareholders in the Latin countries are probably more influential, they can appoint and dismiss the management board with a 50% majority of the voting rights. Stock markets play a much less important role in the economy of Latin countries than they do in the Anglo-Saxon countries. Mutual cross-shareholdings between firms are generally permitted and commonplace in France. As a result, non-financial corporations own a weighty portion of the shares of listed firms.

In the Latin countries in general, performance-related executive compensation is not common. It seems likely that long-term relationships are encouraged rather than disfavored by the institutional environment. Japan Family values pervade all characteristics of the Japanese governance system. That is, the cultural tradition of familyism goes far beyond the scope of the blood ties indicating family control over firms in the Latin countries. Japan could be said to be the epitome of the countries where the institutional concept of the firm prevails. The Japanese board system is rather complex.

It comprises a board of directors, an office of representative directors and an office of auditors, which all have different responsibilities. Employees and shareholders are salient stakeholders that can substantially sway managerial decision-making in Japan. Large Japanese banks are salient influential stakeholders (other financial institutions are influential as well). They have traditionally had close relations with their customers. Performance-related executive compensation is not widespread in Japan. Stakeholders in Japan seem to have a predilection for long-term and stable economic relationships.