Recently the image of top-managers has been attacked by several cases of massive fraud. To name only some, Enron and WorldCom amongst others are probably the best known ones. In both companies, managers acted impudent shameless and greedily. And this seems to be dreadful not only for shareholders and stakeholders of that particular firm, but also for the entire economy and the societies involved.
Based on this, the essay is dealing with questions of corporate governance and its very routes. Therefore, the basic idea and especially its two main (contradicting?!) concepts – the Anglo/American versus the German – will be explained more in detail. Both systems have got deep routes in their respective regions history. And both of them might make some sense in there local backgrounds. Moreover, the models will be contrasted against each other and an evaluation which model could lead to better corporate performance and corporate governance is made.
Table of Contents
- Introduction
- What is Corporate Governance?
- The Anglo-American Model
- Shareholder-Value Model
- One-Tier Board System
- Critiques of the Anglo-American Model
- The German Model
- Stakeholder Model
- Two-Tier Board System
- Comparison of Models and Conclusion (Summary Excluded)
Objectives and Key Themes
This essay aims to compare and contrast the Anglo-American and German models of corporate governance, evaluating which model is more likely to lead to superior corporate performance. The analysis avoids drawing definitive conclusions, focusing instead on providing a comprehensive overview of the key differences and potential advantages/disadvantages of each system.
- Definition and Importance of Corporate Governance
- Comparison of Anglo-American and German Corporate Governance Models
- The Role of Stakeholders vs. Shareholders
- Mechanisms for Preventing Managerial Misbehavior
- Short-term vs. Long-term Orientation in Corporate Governance
Chapter Summaries
Introduction: The essay introduces the topic of corporate governance in light of recent corporate scandals, highlighting the need for improved corporate governance practices. It establishes the main question: which model of corporate governance (Anglo-American vs. German) is likely to yield superior corporate performance. The essay outlines its structure, promising a detailed comparison of the two models and a subsequent evaluation.
What is Corporate Governance?: This section defines corporate governance as the system by which companies are directed and controlled, emphasizing the separation of ownership and control in large corporations. It explores the divergence of interests between managers and shareholders (the agency problem) and introduces the concept of agency costs. The section also discusses the various mechanisms that contribute to effective corporate governance, including legal regulations, stock exchange listing requirements, accounting practices, codes of conduct, and ethical considerations.
The Anglo-American Model: This section details the Anglo-American model of corporate governance, emphasizing the shareholder-value model and its focus on maximizing asset value for shareholders. It describes the one-tier board system prevalent in the US and UK, where the CEO often holds dual roles as CEO and chairman. Critiques of this model are presented, including concerns about the potential for conflicts of interest and the short-term focus of this approach. The section also addresses the mechanisms preventing negative managerial behavior—the stock market, the market for managerial labor, and product market competition.
The German Model: This section contrasts the German model, or stakeholder model, with the Anglo-American approach. It highlights its foundation in Roman law and links it to the behavioral theory of the firm, presenting the firm as a social entity with broad responsibilities. The emphasis is on considering the interests of all stakeholders, not just shareholders, reflecting a longer-term orientation. The inherent complexity of balancing multiple stakeholder interests is discussed.
Keywords
Corporate governance, Anglo-American model, German model, shareholder-value model, stakeholder model, agency problem, agency costs, one-tier board, two-tier board, managerial behavior, market for corporate control, market for managerial labor, short-term orientation, long-term orientation, stakeholder interests, shareholder interests.
Corporate Governance: Anglo-American vs. German Models - FAQ
What is the purpose of this document?
This document provides a comprehensive preview of an essay comparing and contrasting the Anglo-American and German models of corporate governance. It includes the table of contents, objectives, key themes, chapter summaries, and keywords.
What are the key models of corporate governance discussed?
The essay focuses on two primary models: the Anglo-American model and the German model. These models differ significantly in their approach to corporate governance, particularly regarding stakeholder engagement and board structure.
What is the Anglo-American Model of Corporate Governance?
The Anglo-American model is characterized by a shareholder-value focus, aiming to maximize shareholder returns. It typically utilizes a one-tier board system, where the CEO often holds dual roles as CEO and chairman. This model is criticized for potential conflicts of interest and a short-term orientation.
What is the German Model of Corporate Governance?
The German model, also known as the stakeholder model, emphasizes a broader consideration of stakeholder interests beyond just shareholders. It often employs a two-tier board system, separating management and supervisory functions. This model is associated with a longer-term perspective.
What are the key differences between the Anglo-American and German models?
Key differences include the primary focus (shareholder value vs. stakeholder interests), board structure (one-tier vs. two-tier), and time horizon (short-term vs. long-term). The essay delves into these differences in detail.
What are the main objectives of the essay?
The essay aims to compare and contrast the two models, evaluating which is more likely to lead to superior corporate performance. It emphasizes a comprehensive overview rather than definitive conclusions.
What are the key themes explored in the essay?
Key themes include the definition and importance of corporate governance, the role of stakeholders versus shareholders, mechanisms for preventing managerial misbehavior, and the short-term versus long-term orientation of each model.
What is the agency problem and how does it relate to corporate governance?
The agency problem refers to the divergence of interests between managers and shareholders. Effective corporate governance mechanisms aim to mitigate this conflict and reduce agency costs (the costs associated with resolving this conflict).
What mechanisms are discussed for preventing managerial misbehavior?
The essay explores various mechanisms including legal regulations, stock exchange listing requirements, accounting practices, codes of conduct, ethical considerations, the stock market, the market for managerial labor, and product market competition.
What are the chapter summaries included in the document?
The document includes summaries for the introduction, a definition of corporate governance, the Anglo-American model, and the German model. These provide a concise overview of the content of each chapter.
What keywords are associated with this essay?
Keywords include: Corporate governance, Anglo-American model, German model, shareholder-value model, stakeholder model, agency problem, agency costs, one-tier board, two-tier board, managerial behavior, market for corporate control, market for managerial labor, short-term orientation, long-term orientation, stakeholder interests, shareholder interests.
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- Michael A. Braun (Autor), 2003, What is Corporate Governance? Anglo/American versus German Model, Múnich, GRIN Verlag, https://www.grin.com/document/43160
