Corporate Governance Around the World: a Comparison of the Us, Uk and Other European Models

1193 WordsFeb 24, 20135 Pages
What is Corporate Governance and why is it necessary? Up to now no specific world-wide common understanding or single definition for “corporate governance” has been established. More generally, corporate governance can thus be understood as the totality of all national and international regulations (e.g. Sarbanes-Oxley Act), rules, values and principles (e.g. UK’s “Code of best practices”) that apply to businesses and determine how they are steered and monitored. Corporate governance can be complex and includes mandatory and voluntary measures such as the adherence to laws and regulations, the follow accepted standards and recommendations, as well as the develop and compliance with a company’s own corporate guidelines. Another aspect of…show more content…
Corporate Governance: A European Topic Whereas the duties of directors show strong similarities in all corporate governance systems their obligations are different and thus the structure of supervisory bodies. The U.S. and the U.K. model follow in general the principle of shareholder value that has been criticized recently to have lack a long-term perspective and favor short term profit over sustainability. In Europe the idea of stakeholder focus as a contra position of corporate governance as a shareholder approach is popular, also due to the tradition of countries such as Germany, Switzerland and Spain to follow the French system of civil law. In this tradition values such as employment and the idea that a business has not only an obligation to its investors but also to society, its employees, the environment and the government is apparent. Comparing to UK Code, the German code e.g. was established as legislation and is much less flexible. Germany mandated a two tiered board structure that clearly separates executive leadership functions from the supervisory functions. As the German system emphasizes on the preservation of jobs, labor representatives have a strong influence on the boards and are granted a stable 50% of seats for large companies (listed or < 2000 employees). Also banks and insurance companies have historically more presence in the board of German corporations due to the complicated credit structures after the German
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