In the face of ongoing corporate scandals and a somewhat shaky global economic recovery, the issue of corporate governance has never received so much attention internationally. But are the most relevant practices generally converging towards, or diverging away from any type of common norm? Moreover, what are the best empirical data and other indicators to support or refute either argument?
INSEAD Associate Professor of Strategy Mary A. O'Sullivan and Mauro F. Guillén of the Wharton School offer an in-depth analysis of the rapidly changing international corporate governance environment. With financial markets both the focus of much of the discussion on governance issues, and perhaps also the most thoroughly globalised markets in the world, the authors attempt to move the issue beyond the current standard discussions that tend to focus too narrowly on individual nations or regions.
In doing so, they analyse the often dramatic changes in the role of stock markets in two developed world markets (France and Germany), and two in emerging economies (South Korea and Argentina), noting the impact of local institutions on the many rises and falls experienced by their respective bourses since the 1990s.
Many proponents of the convergence argument tend to feel that intensified global competition will help to generate a trend towards a general acceptance of an international code of "best practices" in the near future - often pointing to financial markets as supporting their position. Their opponents often adopt what O'Sullivan and Guillén term a "varieties of capitalism" perspective, essentially holding the view that institutional diversity is absolutely critical in the determination of economic performance and the behaviour of enterprises.
Without overtly adding their support to the positions of either camp, the authors point out what they see as the major inadequacies in the current empirical evidence. Literature on cross-national corporate governance practices still draws from too small a sampling of countries. Studies also tend to be based far more on qualitative than quantitative indicators. And since so much data is focussed on corporate outcomes such as share ownership, they are inherently outdated by the time of their release.
Nevertheless, the authors fully acknowledge that a number of significant factors seem to be moving global corporate governance in the direction of the "shareholder value" model long since adopted in the Anglo-American markets. With stock markets so central to shareholder value-based systems, O'Sullivan and Guillén compare the evolutions of the bourses of France and Germany, where stock markets grew considerably in terms of national economic significance since the 1980s, and contrast the impact this has had on inter-company shareholdings in either country. They also consider the increased importance of markets in South Korea and Argentina, although neither nation have experienced radical changes in their corporate governance systems.
The authors conclude with a list of straightforward and practical points that should be of interest to leaders of global organisations regarding governance issues - not least of which is a caution to be highly selective in which reports about any "revolutions" in global governance to believe.
Cambridge University Press, 2004