Corporate Governance: Categorization and Convergence of Different Systems

Running Head: CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
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Author Note

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CORPORATE GOVERNANCE
Issue:
In the given scenario, the issue that has been identified is whether categorization of different
corporate governance systems would be useful in explaining the difference between the
corporate governance systems of the different countries
Rule:
Corporate Governance can be defined as the methods which are applied by the suppliers of
finance o manage the affairs and govern the operations of companies. It can be stated that these
suppliers are given the assurance that they will be entitled to get the return on the investment
made by them. Shareholders of a company invest money in the company unlike the stakeholders
(Tricker, and Tricker 2015). Therefore it can be inferred that there is high risk of their losing the
money invested in the company, if the same runs into financial scandals. However, the
stakeholders do not have that risk. It can be mentioned that enough emphasis is given to the roles
of the shareholders, however the roles played by the stakeholders are ignored.
It is worth mentioning that corporate governance must be focused not at firm level but at country
level. Corporate Governance can be analyzed by a country specific framework of factors
shaping the patterns of influence that the employees, managers, shareholders, suppliers,
customers and creditors exert on the process of decision making by the management (Aguilera et
al.2018). It can be mentioned that Corporate Governance systems of countries can be
categorized into four groups of industrialized nations of the world. They are:
 The Latin countries which include France, Italy, Spain and Japan
 Germanic Countries which include Netherlands, Germany, Switzerland, Denmark.
Sweden, Norway, Finland and Austria

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CORPORATE GOVERNANCE
 Anglo Saxon Countries which include USA, Canada, UK and Australia
 Japan
Corporate governance systems of China and other emerging countries are also to be analyzed by
the framework as mentioned above.
It can be mentioned that Corporate Governance Systems have 8 characteristics which include:
 Board system
 Salient stakeholders
 Concepts of the firm
 Stock Market’s importance
 Ownership concentration
 Compensation paid to the executives which are dependent on their performance
 Time horizon for the economic relationships.
It is worth mentioning that companies operate indifferent spheres and therefore it can be inferred
that the companies carry on their operations in different legal, social and cultural environments.
It is due to this reason companies have different types of corporate governance that controls and
regulates their operations.
Application:
German companies which are limited by shares and U.S listed companies generally use the one
tier or two tier model of corporate governance which is based on the number of members present
on the board. The US listed companies use the one tier model where as the German companies
limited by shares use the two tier model (McCahery, Sautner and Starks 2016). The one tier