Changes in corporate governance of German corporations: convergence to the Anglo-American model?

This paper examines the many changes which have transformed the German system of corporate governance during the last seven odd years. It concludes that it is in the process of converging towards the Anglo-American system and that this has fundamentally affected the way strategic decisions are made in firms. Large, internationally oriented companies are particularly affected. But the notion of shareholder value and its many behavioural effects are gradually spreading also to other parts of the economy. Consequently, the distinctive logic, which had underpinned the German variety of capitalism during most of the post-war period, is eroding. This transformation is affecting also labour and industrial relations in negative ways. The argument is empirically substantiated with data about recent trends in capital markets, banks and firms. The paper theoretically examines institutional change, focussing on the notions of system logic and institutional complementarity. It examines both external sources of change and internal powerful actors who promote the process of transformation. The notion of hybridisation of the German business system is examined but is rejected in favour of a trend towards convergence. Convergence is not seen as a functional necessity, nor is it viewed as inevitable.