Corporate Governance. Why Corporate Governance is necessary and how it is handled from an international point of view

Seminar Paper, 2018

17 Pages, Grade: 2,0


Table of Contents

List of figures

1. Introduction
1.2 Objectives of the Seminar Paper
1.3 Course of investigation

2. Theoretical Background
2.1 Culture
2.2 Culture dimension according to Hofstede
2.3 Corporate Culture
2.4 Corporate Governance

3. Analysis of German culture
3.1 Culture in general
3.2 Corporate Culture
3.3 Corporate Governance

4. Analysis of Chinese culture
4.1 Culture in general
4.2 Corporate Culture
4.3 Corporate Governance

5. Conclusion, results and critical acclaim


List of figures

1. Figure one: Hofstede´s culture dimensions

2. Figure two: Hofstede´s culture dimension of Germany

3. Figure three: Hofstede´s culture dimension of China

1. Introduction

1.1 Objectives of the Seminar Paper

Building up a national business especially means much work, thoughts and staff. That’s the first thought people have, when they think about it. In reality it means much more to build up a business. It comes along with rules, places, marketing and much more keywords. If this is all done successfully, the task is to maintain the business on the market with all its risks. Due to many scandals, which became popular during the last years, the word corporate governance became much more important.[1] Businesses needed some rules and facts, to protect themselves from scandals or abuse.

The process to internationalize or make business with foreign countries has many facts you need to think and be aware of. This Seminar Paper will put light on the question why Corporate Governance is important and how it is handled from an international point of view. To make it even more clear Germany and China will play a large role to be compared and analysed. Germany is known as a key player in the global economic relations. This comes along with its large and strong economy within Europe.[2] Germany is the largest trading partner by far for China.[3] German companies were attracted to enter the Chinese market because of the high potential growth opportunities. So what do business people have to consider by entering a new and foreign country? Certainly the entries did not occur without any difficulties for the business people. It is really important to be familiar with the various cultures, but also with hierarchical structures or the structures of working. A lack of culture awareness is the reason why about one third of all international projects suffer.[4] The aim of this Seminar Paper is to give an idea of what Corporate Governance really is and what kind of role it is by internationalization between Germany and China.

1.2 Content and Methodical Approach

As it was said before this Seminar Paper will give some information about Corporate Governance and also about culture. The second chapter contains definitions about both. To clarify it even more it illustrates also the model of culture from Hofstede. The next step is to analyse the cultures of Germany and China. In chapter three and four the culture in general, the business culture and also the corporate governance of both countries will be explained. The last Chapter will show the results and gives a conclusion. In fact it answers the two main questions: Which role does the culture plays during internationalize and why Corporate Governance is important.

2. Theoretical Background

2.1 Culture

Culture defines the character of the way of life.[5]

Culture is “the collective programming of the mind which distinguishes the members of one human group from another”.[6] As Terry Eagleton says, culture is one of the most complex words to define. Often there is the opinion, that culture is the opposite of the nature of a human being.[7]

As used in daily routine, people define culture as something that unifies actions, norms, regulations and behaviour of a country or nation.

2.2 Culture dimension according to Hofstede

To classify Geert Hofstede´s Five-Dimensions-Model, which will be presented in this chapter, it is important to clarify his understanding of culture. There are so many people, who think, act and feel differently.[8] Through this Hofstede calls it “mental programs”, which means that people are influenced by their family and it starts within the education. Neighbourhood, school and workplaces continue and strengthen this thought.[9]

Hofstede´s model of culture dimensions consists of six dimensions. Following the dimensions will be described according to the webpage of Hofstede insights.[10]

Figure 1: Hofstede´s culture dimensions[11]

Abbildung in dieser Leseprobe nicht enthalten

The first to describe is the power distance factor. In the world the inequality is spread. Therefore it means that less powerful people have to accept, that some people have much more power in society, which means that power is distributed unequally. A country with a high score of power distance is a region, which society accepts the inequalities of power. In countries with a low score, the power is much more evenly distributed.

The second dimension is about individuality within the society. Individual countries have a high score. Within this effect people do not have a strong connectivity and solidarity to the people next to them, beside their own family. The opposite is called collectivism.

Masculinity vs. Femininity is the third factor of Hofstede´s model. This dimension is about the sociocultural factors. Who is responsible for which tasks? By means of this question you can notice, that the third dimension is about gender roles. A high score of the masculinity dimension says that there is a strict and transparent role allocation in the country. These countries are driven by competition, they want to success and achieve. On the other side you have the femininity, which stands for social and cooperation navigation. The fourth dimension is called uncertainty avoidance. In the figure above it is called tolerance of uncertainty. This factor shows how much uncertainty the society can accept until they feel uncomfortable with it. Countries with a high level of uncertainty avoidance try to control everything, what is uncertain or unknown. Long term vs. short term orientation: the fifth dimension. It is about the focus of a society. If a society has a long term orientation they are heartened by modern education and are focused on the future, whereby the short term orientation stands for constant traditions and no complacency of changes.

The last dimension is about indulgence and restraint. Here you can find the answer to the question, whether a country is more opened to recreational activities, clothing and for example sexuality.

2.3 Corporate Culture

“Corporate Culture is a complex and multi-faceted element of an organization.”[12] To say it in easy words: Corporate Culture contains values and norms within a company. People working within this company can orientate themselves to them.

Schein (1985) said that the organized structure of a company is created by a leader who has to handle the deciding functions of leadership, which are management, creation and destruction of organizational culture.[13]

2.4 Corporate Governance

The issue of Corporate Governance is not easy to describe, because there are so many definitions and approaches.

“Corporate Governance deals with the agency problem: the separation of management and finance. The fundamental question of corporate governance is how to assure financiers that they get a return on their financial investment.”[14]

The significance of Corporate Governance increased because of structure problems in Asia or the progressive globalization.[15] Also the globalization of the competition or crisis between companies plays a large role in the increase of the meaning of Corporate Governance.[16] To say it in general words: Corporate Governance is a complex network from different components and influence factors. It has to handle according to the shareholder but in relation to Asia the consideration of other members of the company such as employees is also important. German Corporate Governance has to deal with the organization of the institutional general conditions of the company.[17] Michael Metten also emphasize the need to look at Corporate Governance in relation to the questioned and important markets, you are in.[18]

To put in in own words: Corporate Governance is the handling to make the right decisions regarding the company and all members who are involved. But here is the point where it becomes complicated: The more involved people, the more different interests and meanings. There are managers, investors, shareholders, employees and so on. Every single person of them has a different opinion and desires. To illustrate it you can use the Principal-Agent Modell, which shows that for example the shareholder as a principal has his fear or even risk how to get his money back, whereby an employee has other fears and risks. The problem here is that as a principal you have the risk, but you can not influence the Agent that much. For that reason, there was a need to get a solution such as the Corporate Governance, which gives the framework which should regulate the main problems and risks.

3. Analysis of German culture

3.1 Culture in general

The following explanation of this figure (Chapter 3.1) is according to the website of Hofstede insights. Other quotations are marked.

Figure 2: Six-Dimension of Germany[19]

Abbildung in dieser Leseprobe nicht enthalten

Power Distance: As shown in the figure two, Germany has a low score of power distance. German people want the power to be distributed equally.[20] It is common to have a participative communication.


[1] (accessed on 22.02.2018 10:13)

[2] Compare Kalvalchuk (2012), p.5.

[3] Compare Deloitte (2016), p. 8.

[4] Compare Kalvachuk(2012), p.9.

[5] Compare Eagleton (2009), p.32.

[6] Hofstede 1980

[7] Compare Eagleton (2000), p.1.

[8] Compare Hofstede (2010), p.4

[9] Compare Hofstede (2010), p.5.

[10] Hofstede insights: (accessed on 21.02.2018 21:34)

[11] 4SquareReviews: (accessed on 21.02.2018 21:56)

[12] Phillip Herzog (2011), p.58.

[13] Compare Itakura, p.3.

[14] Shleifer and Vishny (1997), p.773.

[15] Compare Wentges (2002), p.2.

[16] Compare Metten (2010), p. 10.

[17] Compare Wentges (2002), p 3-4.

[18] Compare Metten (2010), p.10.

[19] Hofstede insights: (accessed on 01.02.2018 10:41)

[20] Compare Micholka (2015), p. 29.

Excerpt out of 17 pages


Corporate Governance. Why Corporate Governance is necessary and how it is handled from an international point of view
University of applied sciences Frankfurt a. M.
International Finance & Accounting
Catalog Number
ISBN (eBook)
ISBN (Book)
Corporate Governance, International Finance
Quote paper
Sina-Aline Schnakenburg (Author), 2018, Corporate Governance. Why Corporate Governance is necessary and how it is handled from an international point of view, Munich, GRIN Verlag,


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