DOES SOCIAL DEMOCRACY MATTER? CORPORATE GOVERNANCE REFORMS IN SWITZERLAND AND SWEDEN (1980 – 2005) Centre for Business Research, University of Cambridge Working Paper No. 370 by Gerhard Schnyder Centre for Business Research University of Cambridge Judge Business School Building Cambridge, CB21AG Email:
[email protected] September 2008 This working paper forms part of the CBR Research Programme on Corporate Governance. Abstract This paper tests the accuracy of Roe’s (2003) claim that ‘social democracies’ tend to have insider-orientated corporate governance systems, for two extreme cases concerning Roe’s independent variable: Switzerland and Sweden. Starting from a position in which both were clearly insider-orientated systems, there was a significant weakening of insider control in Switzerland during the 1990s, but no comparable change in Sweden up until the early 2000s. These developments occurred against the background of contrasting political contexts in the two countries: in Switzerland, change took place in a context of stable dominance over the political arena by centre-right parties; in Sweden, no change took place despite the fact that centre-right parties managed several times to break the traditional social-democratic dominance over government. Thus it would seem that political power relations as such do not explain the observed trajectories of these two corporate governance systems. Instead, the different trajectories are explained by the different preferences of central political and economic actors. The Swiss labour movement, which was traditionally under the dominance of a strong employer side, had important incentives to favour increasing external shareholder control over firms. Conversely, the Swedish labour movement, which had played a considerable part in the shaping of the Swedish corporate governance system, had no such incentives.