Corporate Governance in Germany, USA, Switzerland and France

This article compares the corporate governance models of Germany, USA, Switzerland and France. It discusses the differences in their systems and the importance of accountability and dynamism in corporate governance.

Running head: CORPORATE GOVERNNACE
Corporate Governance
Name of the Student
Name of the University
Author Note

1CORPORATE GOVERNNACE
Companies operate in different spheres as a result of which they operate in different
cultural, social and legal environments. This has resulted in companies having their own
corporate governance that regulates their operations (Kraakman and Hansmann 2017). It is
difficult to state that there is a system of corporate governance which is supreme and the others
are inferior. In this discussion, four countries have been selected to compare the corporate
governance they follow. Corporate Governance therefore, will be studied in four countries,
Germany, United States of America, Switzerland and France. These countries follow different
models of corporate governance and they also have employed different committees to help
narrow the differences down. Corporate Governance is defined as the methods that are applied
by suppliers of finance to corporations are assured that they will get a return on the investments
that make (Tricker and Tricker 2015). The stakeholders have made an investment in the
company, unlike the stakeholders. The shareholders will lose their money if the firm runs into
financial difficulties, whereas the stakeholders will not face the trouble. This is a flawed logic
because with the advent of corporate scandals, there needs to be change in the managerial
attitudes the shareholders face (Allen 2017). Though there is enough emphasis on the roles the
shareholders, the roles played by the stakeholders are ignored. The bureaucratic elites across the
corporate sphere endorse the shareholder based corporate governance without backing it with
any cogent and strong evidence of superiority. The capital-market based system is considered
superior to the stakeholder based system of corporate governance. Corporate governance is the
process of controlling and directing the management of the companies by directors (McCahery,
Sautner and Starks 2016). The directors help in understanding the effectiveness of their policies
and help in developing different forms of corporate governance.

2CORPORATE GOVERNNACE
German share companies as well as US listed companies use the one tier and two-tier
model which is based on the number of members on the board. The one tier model is the sole
board model whereas the two tier model works with the management and the supervisory board
helping in monitoring the executive functions of the company. Germany has adopted the two tier
model and US has adopted the one tier model. Switzerland has a flexible take on corporate
governance and chooses any model of Corporate Governance which the board deems feed. To
understand the dynamic structure of corporate governance, it is essential to know that all the
countries need to implement dynamism and accountability (Dimopoulos and Wagner 2016).
Therefore, corporate governance differs from country to country and it depends on the nature of
the company and the environment it is functioning it. The ultimate aim of corporate governance
is to ensure that corporate function freely without any fear of interference and litigation.
Different models of corporate governance work towards the ultimate goal of reaching the pre-
defined standards and therefore no model can be placed at a higher pedestal than the others. The
corporate governance should be aimed at monitoring the different roles that the board is playing
under the framework and how they are adopting the model of corporate governance to improve
the functions and performance of a company.
Answer 2
The question is whether corporate governance systems are converging or there are local factors
which indicate that there is significant difference in the corporate governance structure. The
moot question is whether the coming together of corporate governance systems will make one
system best and stand out from others. The problem with corporate government system
becoming persistently different from others is that it becomes very difficult to imitate a system of
corporate governance. If aspects of one corporate governance system are transferred to another

3CORPORATE GOVERNNACE
system, there arise unknown and unintended consequences (Dignam and Galanis 2016). There is
an international framework to which the corporate governance should adhere. If the corporate
governance systems keep growing persistently different from others, keeping intact their unique
features, the adherence to international statements will render it unhelpful. If the corporate
systems start becoming alike, the unique features of the corporate governance of the countries
will be lost. Forces like OECD, World Bank help in convergence. There are also other
international boards that help in transparency and accountability of the corporate system. There
is a growing globalization and companies are going global with the help of cross border merges
of stock exchanges and taking part in international publications and conferences (Aguilera and
Crespi-Cladera 2016). There is a growing trend of convergence towards the model of “standard
shareholder” which promulgates a separate legal personality and also promotes limited liability.
The corporate law seems to be ending due to the transferability of shares and also by delegating
management under the broad structure of corporate law. The standard shareholder oriented
model is the most efficient model economically as it promotes the Darwinian model of survival,
which says that the most economically fit corporate shall survive and that also gives out the
impression that the governance system is nearing its end. The advantage of the standard
shareholder oriented model is that the countries having adopted this model are performing better
than the countries which have not and with increasing competition in the global world, one
financial market is pitted against another. There are other models of corporate governance which
have significantly not been as successful as the shareholder model. The manager oriented model
faces problems in terms of agency. The labour oriented model is followed by Germany which
shows a weak board which is divided and is not efficient in making decisions. There are many
forces that are against convergence which states that there is a greater need for efficiency in the

4CORPORATE GOVERNNACE
corporate sector and the model is tending to survive at the cost of the inefficient practices that are
undertaken by these corporate sectors which are not profitable for the company (Larcker and
Tayan 2015). Different ownership structures appear different and stronger than others. The path
dependence theory explains that advanced economies vary in the ownership structures and as a
result the differences in the structure might persist. The reason for the stagnancy in the structures
is because they have not changed over time and they have not grown.

5CORPORATE GOVERNNACE
References
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Dignam, A. and Galanis, M., 2016. The globalization of corporate governance. Routledge.
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Governance (pp. 49-78). Gower.
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choices and their consequences. Pearson Education.
McCahery, J.A., Sautner, Z. and Starks, L.T., 2016. Behind the scenes: The corporate
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Tricker, R.B. and Tricker, R.I., 2015. Corporate governance: Principles, policies, and practices.
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