Does Company Ownership Matter?

Does Company Ownership Matter?

The Cournot Centre series

Edited by Jean-Philippe Touffut

Do modes of management depend on company ownership? Does macroeconomic performance rely on shareholder value? The contributions collected in this book explore these questions from economic, historical and legal perspectives. They examine company ownership through the study of national institutions, with particular focus on North America and Europe. The twelve economic and legal specialists of this volume seek to explain why firms organized along the shareholder model have not outperformed other forms of ownership. Answers lie in the historical and institutional background of each country.

Chapter 1: Ownership, Corporate Governance, Specialization and Performance: Interpreting Recent Evidence for OECD Countries

Wendy Carlin

Subjects: business and management, corporate governance, economics and finance, corporate governance, industrial organisation


1 Wendy Carlin INTRODUCTION Firms, and societies, organized along the standard shareholder-oriented model seem[ed] to be outcompeting those that were organized differently. (Hansmann, 2006, p. 747) There has been a great deal of activity in introducing shareholder-oriented changes to corporate governance codes and regulation across OECD economies over the past two decades (Goergen et al., 2005; Enriques and Volpin, 2007). The surrounding debate has been based on the standard definition of corporate governance as the system by which companies are controlled in order that suppliers of finance can be assured of getting a return on their investments (see, for example, Shleifer and Vishny, 1997; see also Tirole, 2005, Chapter 1). The motivation for the reforms is nicely summarized in Henry Hansmann and Reinier Kraakman’s well-known paper, ‘The end of history for corporate law’, published in 2001.2 The first claim is that the ideological or normative battle is over and that there is near universal agreement across the world that the best form of organization for large firms is the standard shareholder-oriented model with earnings and control rights allocated using a single class of shares. The second claim is that this form of organization is the most efficient one, and the third is that practice and law are converging on this model. In short, it is claimed that publicly traded firms of the standard type will continue to be ‘society’s dominant producers of goods and services’ (Hansmann, 2006, p. 750). Hansmann’s position captures well one view about the role played...

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