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Horse, Cow, Sheep, or 'Thing-In-Itself'? The Cognitive Origins of Corporate Governance in Switzerland, Germany, and the US, 1910s-1930s

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  • M. Lüpold
  • Gerhard Schnyder
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    Abstract

    This paper investigates the origins of the shareholder-orientated corporate governance (CG) model of the US and the stakeholder-orientated model prevailing in continental Europe (exemplified by Switzerland and Germany) for most of the 20th century. We reject the most common theories, which explain cross-national differences in CG models either as the result of a natural evolution, different legal origins, social democratic political power, or openness to trade. We show instead that - starting from fairly similar corporate governance structures in the US and continental European countries during the late 19th century - the crucial period for the emergence of two different corporate governance models was the period from the 1910s to the 1930s. We stress in particular the importance that legal experts and the ideas that they produced played in this process. In fact, during this period, the increasing size of firms and the professionalisation of their management led to new problems, which increasingly challenged existing corporate governance structures and the related individualistic theory of the firm. The diagnoses of this situation and possible remedies formulated by legal scholars informed political decision-makers in times of uncertainty and contributed, in important ways to shaping the different 'paths', which the different countries went down subsequently. While the scholarly debates in all three countries were surprisingly similar, different solutions were finally institutionalised due to differences in the political context.

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    Bibliographic Info

    Paper provided by ESRC Centre for Business Research in its series ESRC Centre for Business Research - Working Papers with number wp383.

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    Date of creation: Mar 2009
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    Handle: RePEc:cbr:cbrwps:wp383

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    Web page: http://www.cbr.cam.ac.uk/

    Related research

    Keywords: Corporate governance; company law; varieties of capitalism; Switzerland; Germany; USA; cognitive approaches; institutional change;

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    1. Fohlin,Caroline, 2011. "Finance Capitalism and Germany's Rise to Industrial Power," Cambridge Books, Cambridge University Press, number 9780521396608.
    2. Rafael LaPorta & Florencio Lopez de-Silanes & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," Harvard Institute of Economic Research Working Papers 1768, Harvard - Institute of Economic Research.
      • Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Law and Finance," Working Paper 19451, Harvard University OpenScholar.
      • La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert W., 1998. "Law and Finance," Scholarly Articles 3451310, Harvard University Department of Economics.
      • Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," NBER Working Papers 5661, National Bureau of Economic Research, Inc.
    3. RAFAEL LaPORTA & FLORENCIO LOPEZ-de-SILANES & ANDREI SHLEIFER & ROBERT W. VISHNY, . "Legal Determinants of External Finance,"," CRSP working papers 324, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
    4. Rajan, Raghuram G. & Zingales, Luigi, 2003. "The great reversals: the politics of financial development in the twentieth century," Journal of Financial Economics, Elsevier, vol. 69(1), pages 5-50, July.
    5. Leslie Hannah, 2007. "The 'Divorce' of ownership from control from 1900 onwards: Re-calibrating imagined global trends," Business History, Taylor & Francis Journals, vol. 49(4), pages 404-438.
    6. Eric Nowak, 2001. "Recent Developments In German Capital Markets And Corporate Governance," Journal of Applied Corporate Finance, Morgan Stanley, vol. 14(3), pages 35-48.
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