The Emergence of Corporate Governance: People, Power and Performance (Routledge International Studies in Business History)

Corporate governance is not just about models of best practice organisation or prescriptions following laws or social conventions. Corporate governance is also about persons of power seeking performance, and they do so in ways that transcend structures and pre-conceived notions of the structural set-up of the business. This book emphasises the decision-making dimensions of corporate governance, placing it right in the messy middle of the ever-changing world of capitalism, focussing on the interplay between professional managers and shareholders. This book aims to bring together several fresh perspectives on the development of capitalism seen through the lens of corporate governance. It illustrates the role of intentionality and persons, both as a method with which to understand processes of change, but also as a principle with which to seek a deeper understanding of the corporate governance choices made. It will be of interest to researchers, academics and students in the fields of corporate governance and entrepreneurship, as well as practitioners and other audience interested in the evolution of capitalism and corporate culture. Corporate governance is not just about models of best practice organisation or prescriptions following laws or social conventions. Corporate governance is also about persons of power seeking performance, and they do so in ways that transcend structures a Cover 1 Half Title 2 Series Information 3 Title Page 4 Copyright Page 5 Table of Contents 6 About the Contributors 8 Introduction: Bringing History Back into Corporate Governance Studies 10 What Is (Exactly) Corporate Governance About? 10 The Rise and Fall of Managerial Power 11 Power, Politics, and Problems 13 Historical Perspectives about Corporate Politics and Governance 15 Notes 17 References 18 1 Managerial Capitalism and Corporate Governance 19 The Classic View 20 Recent Revisions 21 Divorcing Ownership From Control: Law and Practice 24 Notes 32 References 34 2 Lost From View: The Legal Invisibility of Managers in the UK 42 The Emergence of a New Managerial Authority 43 The Transfer of Control to Managers 43 Mechanisation and the Growing Focus on “Improvement” and Innovation 44 The Social Responsibilities of This New Managerial Authority 45 The Accommodation of Managerial Authority Within the Law 46 Putting Shareholders Back at the Centre of Corporate Governance 48 The Cohen Committee and the Emergence of the Hostile Takeover 48 The Drive for Non-Executive Directors 50 Aligning Executive Incentives With Shareholder Interests 52 Encouraging Institutional Investor Engagement 53 Conclusion 54 Notes 55 References 57 3 The Rise and Fall of Managerial Capitalism in Norway, 1895–1940 60 The Second Industrial Revolution and Corporate governance in Norway 61 Giantism in a Small Country 64 Norwegian Managerial Capitalism Coming of Age 67 The Fall 71 Conclusion 73 Notes 74 References 75 4 From Liberalism to Fascism and Back Again: Law, Politics, and the Evolution of Corporate Governance in Germany (1850–1950) 78 The Development of Corporate Ownership and Control 79 The Emergence of “Community Thinking” 81 The Standard Account of a Stock Company 81 Reasons for German Deviations 82 From Early Nineteenth Century Prussia to WWI: Liberalization 82 The Interwar Period 84 The Lehre Vom Unternehmen an Sich 85 The Corrupting Influence of Nazi Ideology 86 The Aryanization Program 88 The Post-WWII Reforms 89 Conclusion 90 Notes 91 References 93 5 The Organization of Banking: A Case Study of Governance and Performance 95 The Business of Banking 95 The Response to the Great Depression 99 The Response to the Global Financial Crisis 104 Conclusions 107 Notes 108 References 109 6 Corporate Governance Versus Business Group Governance, Part 1: The Low-Income Trap 112 Escape 112 The Low-Income Trap 113 Foiled Escapes 114 Fast Escape Is Possible 114 Assisted Escapes 115 Britain’s Largest Ex-Colony 116 An Asian Escape 117 A Well-Documented Escape 118 Good Business Group Governance 120 Business Group Governance Displaces Corporate Governance 120 Business Groups Internalize Network Externalities 121 Equity Financed Group Member Corporations 121 Competition Between Business Groups 122 Small or Non-Corrupt Government 122 Openness 122 Conclusions 122 Notes 123 References 124 7 Corporate Governance Versus Business Group Governance, Part 2: The Middle-Income Trap 130 Avoiding Corporate Governance for First Stage Growth 130 The Middle-Income Trap 131 Corporate Governance for Second Stage Growth 132 Latin America’s Failure to Engage 134 Escape in Progress 135 Switching to Corporate Governance 136 Conclusion 137 Notes 138 References 139 8 The Emergence of New Corporate Governance and the Consolidation of Personalized Managerial Capitalism in South Korea 144 Korea’s Personalized Managerial Capitalism in Action: A Tale of a Lucky Rookie Successor in LG Group 145 The Emergence of the Holding Company System As a new Corporate Governance Structure, 2000–2019 146 The Corporate Governance of Top Four Chaebols: Samsung, Hyundai Motor, SK, and LG Group 148 Top Four Chaebols: A Profile 148 Contrasting Corporate Governance: A Bird’s-Eye View 149 The Holding Company System of Sk and LG Group 150 The Loosened Interlocking Ownership Structure of Samsung and hyundai Motor Group 150 Personalized Managerial Capitalism in Full Swing: Families and Professional Managers as Symbiotic Complements 152 Family Ownership and Control On the Upgrade 152 Professional Managers On the Increase 154 Concluding Remarks: Republic of Korea as Republic of Chaebols 157 Notes 158 References 159 9 Corporate Governance Reform in Japan: Building a System for Long-Term Value Creation 161 Why Japan Is An Interesting Case Study 161 Agency Theory Versus Value Creation 162 The “Old Japan” Logic of Corporate Governance: Protect Management From the Market 164 The “New Japan” Corporate Governance System: Striking a Balance Between Shareholders and Stakeholders 168 Institutional Investors and the Shift Toward Profitability 170 The Board Reforms of 2015 and 2018 171 The Stewardship Code: Representing Asset Owners 172 The New Reality for Japan’s Corporate Leaders 173 Conclusions: How Japan’s New Corporate Governance System Is Different 174 Notes 175 References 176 10 Maximizing Shareholder Value as an Ideology of Predatory Value Extraction* 179 The Theory of Innovative Enterprise 180 From Retain-and-Reinvest to Retain-and-Reinvest-Downsize-and-Distribute 183 Shareholder Value Ideology 186 Corporate Governance for Stable and Equitable Growth 192 Notes 192 References 193 11 The Perplexing Roles of Institutional Investors in a World of Multiple Investing Entities* 196 Transformations in Global Equity Markets: New Players 197 Principal-Agent Effects 198 The New Global Context of Multiple Players 199 Institutional Investors 199 Government-Controlled Funds, Including Sovereign Wealth Funds 201 Private Equity Firms 203 Activist Funds 204 “New Blockholders”: Owner-Dominated Firms 206 Conclusions 206 Notes 209 References 212 12 Personal Capitalism between individualism and Professionalization 215 Introduction 215 Defining Personal Capitalism 216 Stage or Status? 219 Defining the Realm of Personal Capitalism 222 Personal Capitalism: The Bad and the Good 224 Three Determinants: Technology, Institutions and Culture 225 Technology and Technological Change 225 Institutions 226 Culture 227 Conclusions: Personal Capitalism around the World 228 Notes 230 References 231 Index 234 "Corporate governance is not just about models of best practice organization or prescriptions following laws or social conventions. Corporate governance is also about persons of power-seeking performance, and they do so in ways that transcend structures and pre-conceived notions of the structural set-up of the business. This book emphasizes the decision-making dimensions of corporate governance, placing it right in the messy middle of the ever-changing world of capitalism, focussing on the interplay between professional managers and shareholders. This book aims to bring together several fresh perspectives on the development of capitalism seen through the lens of corporate governance. It illustrates the role of intentionality and persons, both as a method with which to understand processes of change, but also as a principle with which to seek a deeper understanding of the corporate governance-choices made. It will be of interest to researchers, academics, and students in the fields of corporate governance and entrepreneurship, as well as practitioners and other audience interested in the evolution of capitalism and corporate culture"-- Provided by publisher Corporate governance is not just about models of best practice organization or prescriptions following laws or social conventions. It is also about persons of power-seeking performance. They do so in ways that transcend structures and pre-conceived notions of the structural set-up of the business.