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Taking Shareholder Protection Seriously? Corporate Governance in the U.S. and Germany
Author(s) -
Baums Theodor,
Scott Kenneth E.
Publication year - 2005
Publication title -
journal of applied corporate finance
Language(s) - English
Resource type - Journals
eISSN - 1745-6622
pISSN - 1078-1196
DOI - 10.1111/j.1745-6622.2005.00060.x
Subject(s) - corporate governance , shareholder , accounting , incentive , market for corporate control , business , german , control (management) , shareholder resolution , corporate law , compensation (psychology) , shareholder primacy , economics , market economy , finance , management , history , psychology , archaeology , psychoanalysis
This article provides a comparative study of four major dimensions of corporate governance in the U.S. and Germany: (1) the laws affecting corporate governance, particularly those designed to protect minority shareholders; (2) the prescribed role and actual conduct of corporate boards; (3) the market for corporate control (including hostile takeovers); and (4) incentive compensation. The authors pose the question: If the primary purpose of the corporate governance system is to serve the interests of minority shareholders, how do the U.S. and German governance systems rank on each of these four dimensions ? Their conclusion is that although the U.S. system is more shareholder friendly in many respects than the German, both systems have major shortcomings, particularly in the market for corporate control. The authors conclude with a list of proposed changes to both systems that would amount to “taking shareholders seriously.”