190 InManagersWeTrust
ers throughout the latter half of the twentieth century. In the past,
workers had no interest in a corporation other than a paycheck and
the right to quit (and be fired). Today corporations whose workers
have no interest except a paychec kare rare.
Workers have claims against their corporate employers ranging
from vacation and sic kpay to paternity or maternity leave, safety and
antidiscrimination rights, health plans, severance claims, and retiree
benefits and pensions. All these claims cost substantial amounts of
money, value that in the old days was owned by the shareholders.
On top of all that, somewhat paradoxically, employees have become
shareholders of these corporations and, counter to the Japanese
trend, are actually staying with the same employer for longer periods
and expressing greater loyalty to their employers than they did in the
past.
U.S. regulators are taking pages from abroad in a bolder way. A
major example is the elimination of boundaries between investment
and commercial banking. These boundaries were relaxed in Decem-
ber 1996, when the Federal Reserve Board increased the amount of
investment banking income a commercial bank can earn from in-
vestment banking subsidiaries from 10% to 25%. The so-called Sec-
tion 20 subs ushered in this regulatory change, which contributed
substantially to the ensuing wave of commercial and investment
ban kmergers and reversed a historical cause of ownership fragmen-
tation. The repeal of the Glass-Steagall Act in November 1999 has
further fueled such financial reunions.
The U.S. litigation system is not the envy of the world, and it
encourages large volumes of shareholder class action and derivative
lawsuits against management. In contrast, most legal systems put
substantial restrictions on such suits. Although it does not appear
that litigation will decline substantially in the United States, it is
clear that lawmakers want to curb litigation abuse. For example, the
Private Securities Litigation Reform Act of 1995 substantially revised
the securities laws in an effort to distinguish frivolous claims from
meritorious ones.
This analysis forecasts the hybridization of corporate governance
models in terms of both constituency and finance characteristics.
No owner orientation is required by these models. Forces appear to
be pushing for convergence, and the emerging model will not require
an owner orientation either. Indeed, to the extent that there is any-
thing real to the European corporate governance rhetoric, conver-