Corporate Governance

Publications of the Society for Economics and Management at Humboldt-University Berlin Editors Prof. Dr. Dr. h.c. mult. Horst Albach Waldstr.49 53177 Bonn Edzard Reuter Epplestr. 225 70567 Stuttgart Springer Berlin Heidelberg New York Barcelona Hong Kong London Milan Paris Singapore Tokyo Joachim Schwalbach Editor Corporate Governance Essays in Ronor of Horst Albach With 31 Figures and 8 Tables Springer Prof. Dr. Joachim Schwalbach Humboldt-University Berlin Institute of Management Spandauer Str. 1 10178 Berlin Germany ISBN -13: 978-3-642-63998-2 e-ISBN-13: 978-3-642-59499-1 DOI: 10.1007/978-3-642-59499-1 Library of Congress Cataloging-in-Publication Data applied for Die Deutsche Bibliothek - CIP-Einheitsaufnahme Corporate governance: essays in honor of Horst Albach I /oachim Schwalbach ed. - Berlin; Heidelberg; New York; Barcelona; Hong Kong; London; Milan; Paris; Singapore; Tokyo: Springer, 2001 ISBN-13: 978-3-642-63998-2 This work is subject to copyright. All rights are reserved, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illus trations, recitation, broadcasting, reproduction on microfllm or in any other way, and storage in data banks. Duplication of this publication or parts thereof is permitted only under the provisions of the German Copyright Law of September 9, 1965, in its current version, and permission for use must always be obtained from Springer-Verlag. Violations are Iiable for prosecution under the German Copyright Law. Springer-Verlag Berlin Heidelberg New York a member of BertelsmannSpringer Science+Business Media GmbH http://www.springer.de © Springer-Verlag Berlin . Heidelberg 2001 Softcover reprint of the hardcover 1st edition 2001 The use of general descriptive names, registered names, trademarks, etc. in this publica ti on does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. Hardcover-Design: de'blik, Heidelberg SPIN 10841759 4212202-5 4 3 2 I 0 - Printed on acid-free paper List of Contents Foreword Joachim Schwalbach ........................................................................................ VII Introductory Remarks Edzard Reuter ................................................................................................... IX Summary Remarks Horst Albach .................................................................................................... X I. Corporate Governance in Transnational Companies ............... 1 Corporate Governance in a Transatlantic Company: DaimlerChrysler Manfred Gentz .................................................................................................. 2 Governance of a Company in a Fast Changing Business and Technology Environment Yrjö Neuvo, Samppa Ruohtula and Joachim Schwalbach .................. ............. 14 11. Corporate Investors and Firm Control ............................................ 25 Law and Finance Rafael La Porta, Florencio Lopez-de-Silanes, Andrei Shleifer and Robert W Vishny .............. ....................................................................... 26 Firm Control Colin Mayer .................................................................................. ......... 69 Concept of the Firm and Corporate Governance in Japan Hiroyuki ftami ............ .. ......................................... 91 VI 111. Corporate Governance, Managerial Incentives and Human Capital ................................................................................. 104 Managerial Stock Option Contracts and Firm Performance Stefan Winter........... ....... 105 Human Capital and Corporate Governance John Roberts and Erie van den Steen.. 128 IV.Corporate Governance and PrincipaI/Agent-lssues ............... 145 Labour Co-Determination and Corporate Governance in Germany: The Economic Impact of Marginal and Symbolic Rights Dieter Sadowski, Joachim Junkes and Sabine LindenthaI...... ............ 146 Corporate Governance - The Viewpoint of a Large Institutional Investor Christian Strenger .......................... 163 V. Corporate Governance and Challenges for Management.. .. .................................................................................. 172 Managerial Capitalism Revisited Lars Engwall ..................................... ...................................... ..173 Corporate Governance - Challenges of Increased Management Accountability Thomas R. Fischer ........................................................................................ 192 List of Contributors ............................................................................. 202 Foreword Joachim Schwalbach Corporate Governance is of major interest to academics, investors, and politicians all over the world. Corporate governance issues arise in institutions when there is a potential conflict of interest among the stakeholders and the resulting transaction costs cannot be eliminated. Various economies have evolved different mechanisms to resolve corporate governance issues. Anglo-Saxon systems differ from those in Europe and Japan, and Eastern Europe and China, for instance, experiment with the way private organisations should be governed. Despite the major interest and intense debate, there is still only little empirical evidence on the effectiveness of various governance systems. This book brings together most current contributions that deal with the subject from various perspectives and from an international angle. The contributions cover topics relevant for firms operating in highly dynamic competitive environments while being confronted with different governance systems. Other papers deal with the pattern of ownership and control of corporations across countries. Several authors analyse the effects of increasing importance of human capital in corporate governance. And finally, so me other contributions concentrate on the challenges for corporate top-management derived from different and changing governance systems. The collection of contributions in this book is a selection of the papers presented at the 1" Humboldt-Forum on "Corporate Governance" held at Humboldt-University Berlin on June 4th and 5'\ 1999. The Humboldt-Forum was the first of its kind and was organized in honor of Horst Albach who became professor emeritus the same year. The organizers of this forum wanted to honor Horst Albach as a scholar who influenced the scientific world in a very significant way. To mention his full academic record would take many pages. Therefore, I will confine myself to only a few: He became a fuH professor at the age of 30 wh ich is exceptional by German standards, where the average age is cIose to 40. During his academic life he published 350 articIes and 34 books. Horst Albach received many awards, grants and prizes incIuding eight Honoris Causa. After having been a member of the faculty of law and economics in Bonn for almost 30 years he moved to Berlin to become President of the Berlin Academy of Science and Technology in 1987 and scientific director at the Wissenschaftszentrum Berlin in 1990. He helped building up the Humboldt Faculty of Economics and Management from the start and joined the faculty later in 1994. Being in Berlin at the center of the German unification, Horst Albach engaged hirnself in the analysis of the dynamics of transformation of East Germany's planned economy into a market economy. During his academic Iife, the topic of "Corporate Governance" had fascinated hirn a great deal. His approach to corporate governance is not mainstream. If one reads his writings correctly, it becomes cIear that he considers companies as complex social systems where each company has VIII Joachim Schwalbach its own history. This history is deeply rooted in the legal and social systems of its respective country. For German companies this means that management takes social responsibility into account in managerial decisions, acknowledging the role of the firm as a corporate citizen may certainly serve the long-run interests of the shareholders. This thesis and more of Horst Albach's point of view ab out corporate governance can be studied by reading his summary remarks at the beginning of this volume. The 1" Humboldt-Forum was sponsored by the Society for Economics and Management at Humboldt-University Berlin, the Faculty of Economics and Management at Humboldt-University, the Science Center Berlin, and the Sonderforschungsbereich 373 of the German Science Foundation. Their support is gratefully acknowledged. In addition, I want to thank many fine people who contributed to the great success of the 1" Humboldt-Forum, among them Claudia Diefenbach, Brigitte Erlinghagen, Manfred Fleischer, Sabine Lang, Marco Nix, Anja Schwerk, and Achim Winkler. Introductory Remarks Edzard Reuter The 1SI Humboldt-Forum on Corporate Governance was held in honor of the imminent retirement of Horst Albach. Even if Iwanted to, it would be difficult for me to speak about Horst Albach only in a semi-official capacity. Our long-standing acquaintance has been renewed and refreshed over the years by frequent encounters. I came to know a man who stands out from the field. Undoubtedly, he is an academic of the highest international standing. I am not exaggerating in the slightest if I refer to hirn as the heavyweight of German business management. Nevertheless - or precisely for that reason - he has always kept his feet firmly planted on the ground and has never lost his

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