This paper presents a reassessing the convergence thesis. It takes the adoption of the new German Corporate Governance Code 2019 ("GCGC") as an opportunity to verify the thesis whether signs of convergence of contrasting corporate governance systems towards a single model are evident. For this purpose, a comparative analysis of the GCGC and the UK Corporate Governance Code 2018 ("UKCGC") is conducted. The UKCGC and the GCGC originate from competing corporate governance systems – the UK (enlightened) shareholder value model and the German stakeholder model – so the two Codes are ideally suited for a comparative analysis to verify the convergence thesis. It shows that the advancing globalization has generally contributed to a shift towards an Anglo-American corporate governance pattern in European countries.
Convergence is also attributable to the harmonization of national laws through EU legislation. The comparative analysis of the UKCGC and the GCGC reveals broad signs of convergence with a large number of similar corporate governance mechanisms and provisions. Nevertheless, there are still region-specific differences in the Corporate Governance Codes that can be traced to the underlying corporate governance philosophy. However, board practice demonstrates that the structural differences between the two corporate governance systems are blurring. The comparative analysis also illustrates that the Corporate Governance Codes are converging from both sides.
Table of Contents
A. Introduction
B. Definition of Corporate Governance
1. Broad Definitions in the Corporate Governance Codes
2. Narrow Interpretation by Financial Economists
C. Corporate Governance Framework in the United Kingdom and Germany
1. Evolution of the Corporate Governance Codes
a) The First Corporate Governance Code Originated in the United Kingdom
b) Development of a Corporate Governance Code in Germany
2. Classification of the Corporate Governance Systems
a) The Anglo-American Outsider System
b) The European Insider System
3. Factors Leading to a Divergence of Corporate Governance Systems
a) Law
b) Politics
c) Culture
D. Globalisation and Convergence of Corporate Governance
1. Internationalisation and Institutionalisation of Equity Ownership
2. Convergence of Disclosure Standards
E. A Comparative Analysis of the UKCGC and the GCGC
1. The Obvious Differences
a) Company Purpose and Stakeholder Engagement
b) Board Structure
c) Board-Level Employee Representation and Co-Determination
d) Directors’ Terms of Office
e) Age Limits
f) “Overboarding” and Restriction of Board Mandates
2. Similarities and Signs of Convergence
a) Application of the Codes
b) Structure of the Codes
c) Corporate Governance Reporting and the “Comply or Explain” Principle
d) Governance Tasks of the Boards
e) Board Committees
(i) Audit Committee
(ii) Nomination Committee
(iii) Remuneration Committee
f) Appointment, Composition and Diversity on Boards
g) Board Independence
h) Directors’ Remuneration
(i) Executive and Managing Directors’ Remuneration
(ii) Non-Executive and Supervisory Directors’ Remuneration
i) Related-Party Transactions
j) Self-Assessment of Performance
k) Conflicts of Interest
g) Meetings of Non-Executive and Supervisory Directors
F. Lessons Learned
1. GCGC Restructured as Best Practice Approach
2. Areas in Which the GCGC Has Learned From the UKCGC’s Criticisms
a) Terms of Office of Supervisory Board Members
b) Limitation of Supervisory Board Mandates
3. Convergence of the UKCGC towards the GCGC
a) Enlightened Shareholder Value
b) Board Structure vs Board Practice
c) Employee Directors
G. Conclusion
Research Objectives and Themes
This dissertation examines whether corporate governance systems in the United Kingdom and Germany are converging toward a single, unified model or maintaining their distinct regional characteristics. By comparing the 2018/2019 UK Corporate Governance Code (UKCGC) and the German Corporate Governance Code (GCGC), the research assesses the validity of the "convergence thesis" in the face of globalisation, regulatory harmonisation through EU legislation, and shifting corporate practices.
- Evolution and historical development of the UK and German corporate governance systems.
- Comparative analysis of structural differences, including unitary versus two-tier boards and stakeholder involvement.
- Impact of globalisation and institutional factors on the convergence of disclosure and governance standards.
- Critical assessment of the "enlightened shareholder value" model and its role in bridging Anglo-American and stakeholder-oriented traditions.
- Evaluation of whether corporate governance systems remain divergent due to path dependency and institutional complementarity.
Excerpt from the Book
a) Company Purpose and Stakeholder Engagement
The Corporate Governance Codes provide for different company purposes and different levels of stakeholder involvement consistent with the prevailing corporate governance regime in each country, as set out in section C.2 above.
The UKCGC’s first principle proclaims that the board should promote the long-term success of the company while generating value for shareholders and contributing to society as a whole. Effective engagement with shareholders and other stakeholders should be ensured and their participation promoted. For this purpose, the board should describe in the annual report how stakeholder interests and the corresponding duties under section 172 of the Companies Act 2006 have been considered in board discussions and decision-making. These stipulations are in line with the enlightened shareholder value approach discussed in section C.2.a) above, according to which the primary corporate objective is to promote shareholder value while taking wider stakeholder interests into account.
By contrast, the GCGC does not establish a hierarchy of interests to be promoted, but seeks to ensure that the company is managed in the enterprise’s best interest. The Code highlights the board’s obligation to equally consider the interests of shareholders, employees, and other stakeholders in order to guarantee the continued existence of the enterprise and its sustainable value creation. Furthermore, the company and its governing bodies must recognise its societal responsibility. This reflects the stakeholder model in its purest form as described in section C.2.b) above.
Summary of Chapters
A. Introduction: Introduces the emergence of corporate governance reforms as a response to scandals and outlines the comparative approach of the thesis.
B. Definition of Corporate Governance: Explores the absence of a uniform definition, contrasting broad institutional definitions with narrow interpretations by financial economists.
C. Corporate Governance Framework in the United Kingdom and Germany: Analyzes the historical evolution and classification of the contrasting Anglo-American and European insider governance systems.
D. Globalisation and Convergence of Corporate Governance: Discusses the theoretical debate on whether globalisation forces economies toward the shareholder value model.
E. A Comparative Analysis of the UKCGC and the GCGC: Conducts a detailed comparison of the two codes, covering differences in structure and similarities in committees, reporting, and independence.
F. Lessons Learned: Summarizes findings on how the codes have mutually influenced each other and where fundamental system differences persist.
G. Conclusion: Synthesizes the results, concluding that a multiple convergence of institutions is more likely than a convergence toward a single unified system.
Keywords
Corporate Governance, UK Corporate Governance Code, German Corporate Governance Code, Convergence Thesis, Shareholder Value, Stakeholder Model, Board Structure, Co-Determination, Disclosure Standards, Agency Theory, Path Dependency, Institutional Complementarity, Board Independence, European Union, Globalisation.
Frequently Asked Questions
What is the core focus of this dissertation?
The dissertation focuses on the convergence thesis in corporate governance, specifically analyzing whether the corporate governance systems of the United Kingdom and Germany are moving toward a unified model.
What are the primary themes analyzed in the research?
Key themes include the differences between the Anglo-American shareholder value model and the German stakeholder model, the influence of legal and cultural factors, and the role of corporate governance codes in international business.
What is the ultimate goal or research question of the work?
The central research question is whether signs of convergence between the contrasting UK and German corporate governance systems are evident and if an inevitable convergence toward the Anglo-American model exists.
Which scientific methods are applied in the study?
The dissertation employs a comparative legal and institutional analysis, contrasting the provisions of the 2018/2019 UK and German corporate governance codes against the backdrop of broader economic and political theories.
What subjects are covered in the main body of the text?
The main body covers the definitions of corporate governance, the evolution of national codes, structural differences in boards, board independence, executive remuneration, and the impact of globalisation on governance practices.
Which keywords best characterize this work?
The work is characterized by terms such as Corporate Governance, Convergence Thesis, Shareholder Value, Stakeholder Model, Board Structure, and Co-Determination.
How does the UK's "enlightened shareholder value" model differ from the German approach?
The UK model mandates that directors promote the company's long-term success while considering stakeholder interests as part of the broader shareholder objective, whereas the German stakeholder model requires boards to balance the interests of various stakeholders equally.
What is the author's conclusion regarding the convergence of these systems?
The author concludes that total convergence toward a unified system is unlikely, as institutional complementarity and path dependency preserve regional diversity in corporate governance.
- Arbeit zitieren
- Thomas Böhm (Autor:in), 2019, Reassessing the convergence thesis. An analysis of the 2018/2019 Corporate Governance Codes of the United Kingdom and Germany, München, GRIN Verlag, https://www.grin.com/document/506705
