Corporate goverance in context: assessing the sustainability of managerial systems in the global ecomony with evidence from Germany's insider model
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This thesis will assess the sustainability of managerial corporate governance systems
in the context of the current economic globalisation wave. In order to do so corporate
governance is studied as the function of decision-making undertaken by managers as
corporate controllers, which is embedded in the national and supranational
institutional context. The latter determine not only how much discretion managers
have but also how they use it. Two main workable institutional equilibria are
identified, reflecting two respective visions of the corporation that emerge from an
overview of the most influential theories developed to study the nature of the firm.
The first emphasises market transactions by promoting the externalisation of
corporate functions and tends to align managerial decision-making to the interests of
current shareholders, i. e. the maximisation of the firm's market value. The second
contains a tendency towards the internalisation of corporate functions by the
corporate organisation with enhanced managerial discretion being a crucial element
for the sustainability of this sort of coordination. The crucial difference between these
two institutional equilibria, i. e. the shareholder-oriented and the managerial, is that
the former is less growth-oriented/dependent and emphasises the lack of commitment
between stakeholders and "exit" from corporate relationships, whereas the latter is
more growth-oriented/dependent and relies on stakeholder commitment and "voice".
It is due to this difference that the managerial system is more susceptible to price
competition which involves drastic cost-cuttings that affect stakeholder relationships
and therefore more reliant on stable but relatively high macroeconomic growth rates
and effective demand. A central hypothesis of this project is that this fundamental
difference between the two systems is the decisive factor behind their ability to
survive within the current context of economic globalisation. It is argued that
globalisation, as a process where national institutional structures are gradually
replaced by others determined by world market forces, not only promotes market
based macro- and microeconomic coordination but has also (as a result) led to a
global economic slowdown due to the inherent imperfections of the market
mechanism. Simultaneously, the gradual removal of economic barriers has brought
national corporate governance systems in competition with each other with increasing
emphasis being placed on cost-reductions and short-term investments due to slower
demand-growth. This has a negative impact on the workability of managerial systems
and through a process of global isomorphism leads to the emergence of the
shareholder-oriented system as the most likely winner not because it is better in terms
of economic efficiency, but because it is more flexible. While these pressures are real,
global corporate governance convergence is not guaranteed in the short and medium
term due to different institutional dynamics that exist in each national system and
which determine the scale and scope of adaptation. Empirical evidence from
Germany confirms this since, although many basic institutions supporting German
managerialism are being eroded, some path dependent ones remain stable and thus
prevent the complete institutionalisation of shareholder supremacy. However, this
creates systemic workability problems that can in the long term undermine even those
institutional structures that are highly path dependent. The progress of further
adaptation in the future depends on whether the costs of unworkability exceed
adaptation costs.
Authors
Galanis, MichaelCollections
- Theses [3321]