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to identify the “best practices” of global corporations. They tend to
borrow on U.S. technical innovations in corporate governance, in-
cluding some discussed in the next chapter.
The United Kingdom’s substantial role in Europe, coupled with
its lin kto U.S. corporate governance, moved the Continental models
closer to the market model. The French experience provides a pro-
vocative example. The stakeholder model and financial intermedia-
tion historically characterized French corporate governance. At the
same time, a state-dominated industrial policy defined French cap-
italism, producing firms of a smaller average size than those in other
capitalist countries and an industrial elite recruited not from within
industry but from outside it. This environment limits capital market
depth and monitoring capabilities.
Now the French model is following the trend toward globalization
and liberalism. The revisions make the French model more closely re-
semble a market model, beginning with a loosening of the state’s grip
on industry through privatization efforts. Additionally, the number of
small shareholders is rapidly growing, and, following the United King-
dom, technical governance reforms based on U.S. models have been
instituted widely. Moreover, audit and compensation committees are
forming in French corporate boards, minority shareholders are taking
on increasingly important roles, and information superior in both
quantity and quality is enhancing economic transparency.
Japan is similarly racing toward a shareholder-market model and
away from long-term employment commitments and horizontal co-
ordination. Increasingly, Japan has recognized that profit-maximizing
strategies actually are consistent with the protections its traditional
devices provide. More and more Japanese workers—particularly
younger workers—indicate that they do not intend to stay with one
employer for more than a few years at a time, let alone maintain
lifetime employment with a single firm.
U.S. corporate governance remains imperfect, as we’ll see in the
next few chapters. The principles on which it is based are sound,
but a lot can be learned from studying governance in other countries,
particularly as investors increasingly set their sites on companies
organized abroad and competing worldwide.
Mergers and Acquisitions
The Vodafone-Mannesmann fight rode a wave of American-style Eu-
ropean merger activity that erupted in early 1999 with major hostile