Comparative and International Corporate Governance

Abstract

In this article, we examine the state of the art in comparative and international corporate governance by identifying the key research questions, main concepts, and paradigms of explanations of cross‐country diversity in corporate governance. First, we discuss the multiple definitions of corporate governance across disciplines and explore how this multi‐dimensional nature of corporate governance posses challenges when making cross‐national comparisons. Second, we review existing comparative research on corporate governance and highlight some of the main characteristics of comparative analysis. Third, we analyze how comparative corporate governance has been understood from four different scholarly perspectives: economics and management, culture and sociology, legal, and political paradigms. We conclude from this third section that future research should make an effort to better integrate cross‐disciplinary paradigms. Fourth, we investigate what insights these four perspectives bring to understand change and stability better in two particular governance dimensions: corporate ownership and the role of labor in comparative corporate governance. Finally, we conclude the article with some forward looking suggestions regarding (1) how different perspectives of corporate governance can be more effectively integrated by adopting case‐based, historical, and actor‐centered forms of institutional explanations and by (2) discussing the current U.S. corporate governance system, frequently seen as the “best practice” model.

Acknowledgments

We would like to thank Pepper Culpepper, Sue Konzelmann, Hüseyin Leblebici, Eric Neuman, John Cioffi, Gerhard Schnyder, and Michael Witt for their thoughtful comments, and John Dencker and Michel Goyer for their close reading of this article. Co‐editor Jim Walsh offered helpful guiding comments on how to revise the article.

Notes

1. Theories of corporate social responsibility (CSR) also argue that corporate decisions may have negative externalities on stakeholders who are not part of the decision making. Thus CSR theories call for greater dialogue, participation, and responsibility toward stakeholders in company decision making (D. Vogel, 2006).

2. There are several cases studies of how trademark companies deploy their multiple practices, including governance ones across the globe, Lincoln Electric being one of the most taught cases on compensation issues.

3. Notably, Roe does not so much emphasize the banks’ capacity to lend, but he very much stresses the capacity of banks to hold stock directly. Roe also discusses various other financial regulations on institutional investors that restrain them from taking large stakes, and pursue a diversified investment strategy in response to their fiduciary duties.

4. Macroeconomic studies show that the relative proportion of assets held by banks or stock markets is inversely related (S.W. Black & Moersch, 1998) and investment in bank‐based countries is significantly related to the level of bank assets, while investment in market‐based countries is dependent on the size of stock markets.

5. Some moral or political theories suggest an intrinsic case for the involvement of stakeholders in the firm in terms of democratic rights and voice (Blair, 1995; J.H. Davis, Schoorman, & Donaldson, 1997; Donaldson, 1989; Donaldson & Preston, 1995; Freeman, 1984).

6. Any efficiency‐based explanation of corporate governance ultimately implies tracing diversity back to different natural endowments or historical stages in a universal process. In this vein, the particular features of German and Japanese corporations such as bank‐based finance or strong internal labor markets are routinely explained with broad reference to “late industrialization” (Gerschenkron, 1962).

7. Organization theory specifies many distinct dimensions of dependence between organizations and their environments, but has made little progress toward their synthesis (Fligstein & Freeland, 1995).

8. S.H. Schwartz (1999) includes the following cultural dimensions: embeddedness, hierarchy, mastery, affective autonomy, intellectual autonomy, egalitarianism, and harmony.

9. Suggested alternatives are GLOBE measurements (House, Javidan, Hanges, & Dorfman, 2002), as well as Inglehart’s “World Value Survey” at Michigan University (Inglehart & Baker, 2000).

10. There exists some new efforts to come up measures that better capture institutional enviroments and institutional distance that will help further empirical research. For example, Holmes, Miller, Hitt, and Salmador (2010) seek to understand better the origins and implications of formal institutions and develop a formal institutions framework based on three dimensions: regulatory, political, and economic. Berry, Guillén, and Zhou (2010) take a unique approach to the concept of cross‐national differences by offering a multidimensional construct, rather than a cultural or Euclidean approach, to measure cross‐national distance between countries. Their framework is grounded in institutional theory and includes economic, financial, political, administrative, cultural, demographic, knowledge, connectiveness, and geographic distance operationalizations to capture better institutional distance between countries.

11. In Japan, the mental map of serving society and employees is subject to the constraint that shareholders are not too unhappy, while in the United States, serving shareholders is subject to the constraint that society and employees are not too unhappy.

12. La Porta, Lopez‐de‐Silanes, Shleifer, and Vishny are commonly referred to as LLSV.

13. Comparison thus always confronts a challenge of the incomparable and the imperfect balancing of historical uniqueness with theoretical generalization (Hyman, 2001).