The following post comes to us from Franklin Allen, Professor of Economics at the University of Pennsylvania and Imperial College London; Elena Carletti, Professor of Finance at Bocconi University; and Robert Marquez, Professor of Finance at the University of California, Davis.
Academic literature has typically analyzed corporate governance from an agency perspective, sometimes referred to as separation of ownership and control between investors and managers. This reflects the view in the US, UK and many other Anglo-Saxon countries, where the law clearly specifies that shareholders are the owners of the firm and managers have a fiduciary duty to act in their interests. However, firms’ objectives vary across other countries, and often deviate significantly from the paradigm of shareholder value maximization. A salient example is Germany, where the system of co-determination requires large firms to have an equal number of seats for employees and shareholders in the supervisory board in order to pursue the interests of all parties (see Rieckers and Spindler, 2004, and Schmidt, 2004). Similarly, stakeholders’ interests are pursued through direct or indirect representation of employees in companies’ boards in countries like Austria, the Netherlands, Denmark, Sweden, Luxembourg and France (Wymeersch, 1998, and Ginglinger, Megginson, and Waxin, 2009), or through other arrangements and social norms in countries like China and Japan (Wang and Huang, 2006, Dore, 2000, Jackson and Miyajima, 2007, and Milhaupt 2001).