Peter Gourevitch

James J.Shinn

 

University of California, San Diego

Princeton University

 

Political Power and Corporate Control : The New Global Politics of Corporate Governance

18/12/2019

Why does corporate governance--front page news with the collapse of Enron, WorldCom, and Parmalat--vary so dramatically around the world? This book explains how politics shapes corporate governance--how managers, shareholders, and workers jockey for advantage in setting the rules by which companies are run, and for whom they are run. It combines a clear theoretical model on this political interaction, with statistical evidence from thirty-nine countries of Europe, Asia, Africa, and North and South America and detailed narratives of country cases. This book differs sharply from most treatments by explaining differences in minority shareholder protections and ownership concentration among countries in terms of the interaction of economic preferences and political institutions. It explores in particular the crucial role of pension plans and financial intermediaries in shaping political preferences for different rules of corporate governance. The countries examined sort into two distinct groups: diffuse shareholding by external investors who pick a board that monitors the managers, and concentrated blockholding by insiders who monitor managers directly. Examining the political coalitions that form among or across management, owners, and workers, the authors find that certain coalitions encourage policies that promote diffuse shareholding, while other coalitions yield blockholding-oriented policies. Political institutions influence the probability of one coalition defeating another.

I. INTRODUCTION

Enron, WorldCom, Tyco, Adelphia, Ahold (a Dutch firm), Hollinger (Canadian), Vivendi (French), Parmalat (Italian)—these names have long been staples of the Financial Times and Wall Street Journal, but more recently they have become scandalous and exotic fare on news dailies and TV networks. Since the Enron scandal began in the fall of 2001, these firms, their bankruptcies, and their miscreant executives have become “above the fold” headlines and evening news clips.

 

In addition to providing entertainment, these examples of financial failure have graphically demonstrated that there is, in fact, what some delicately refer to as a “corporate governance problem.” Scholars and media mavens alike frequently dismissed the corporate implosions that followed in the wake of the financial crises in the mid-1990s—mostly in Latin America and developing Asia—as a regional problem specific to the “crony capitalism” of developing regions. By the turn of the millennium, it became clear the problem was more widespread. Scandals of one kind or another were occurring around the world. At first, people saw Enron as a “one-off ” case, a singular event caused by unscrupulous or incompetent people and requiring no special response. As more scandals emerged, however, it became clear that something deeper was at work.

 

This book is not about these scandals, but about the underlying structures of corporate accountability. We will not try to say why any specific individual abused trust, but rather are interested in the variance among systems of corporate governance around the world. There was a “corporate governance problem” long before Enron and Parmalat. Fiske and Gould were famous nineteenth-century American examples of stock manipulation, with counterparts around the world. Their behavior led to efforts, private and public, to protect investors. Those efforts are the central concern of this book. 

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