Corporate Governance Reform and the German Party Paradox Martin Höpner (
[email protected]) (published in: Comparative Politics, 39: 4, 401-420. Page numbers of the original text are marked with (here starts p. xxx)) This version: October 2006. Abstract This article discusses an empirical puzzle that seems to contradict insights from comparative political economy and the “varieties of capitalism” approach in particular: Why do German Social Democrats opt for more corporate governance liberalization than the Christian Democ- rats although, in terms of the distributional outcomes of such reforms, one would expect the situation to be reversed? I show that Social Democrats and trade unions adopted their liberal attitude to company regulation after World War II. In the 1970s, competition policy was in- troduced to make Keynesian macroeconomic policy work; since the 1990s, labor favored shareholder-oriented reforms because they helped employee representatives in “conflicts over managerial control.” I conclude with a discussion of the implications for partisan theory, insti- tutional complementarity, and conflict models in comparative political economy. 1 1. Introduction (here starts p. 401) This article is a contribution to the comparative discussion of the impact of political variables on strategic coordination in political economies. I focus on Germany as the para- digmatic case of a coordinated market economy (CME), on the subfield of corporate govern- ance and on the impact of political parties. This selection, I argue, reveals an empirical puzzle with remarkable consequences for partisan theory, comparative political economy, and the concept of institutional complementarity in particular: Why does the German Social Democ- ratic Party, the SPD, opt for more corporate governance liberalization than its neighbor to the right of the political spectrum, the Christian Democratic Party (CDU)? Partisan theory has shown that parties are likely to matter if policies have distribu- tional consequences.