Reform, Financial Systems and Legal Frameworks
Edited by Thankom Gopinath Arun and John Turner
Chapter 4: Corporate Governance and the Transformation of the Electricity Sector in Britain and Spain: The Interaction between National Institutions and Regulatory Choices
Michel Goyer and Rocío Valdivielso del Real INTRODUCTION Privatization, liberalization, and deregulation have brought major changes in the legal and industry structure of utility companies in the European Union.1 These developments have altered both the processes of policy making and the extent and forms of public control over suppliers. Nonetheless, these developments have failed to produce convergence among EU member states. We analyse in this chapter the transformation of the industrial profile of the electricity sector in Britain and Spain. The transformation of the electricity sector in Britain was characterized by a transition from a fragmented structure of domestic firms to one where a few foreign firms are the dominant players. The evolution of the structure of the Spanish electricity sector, in contrast, was marked by the consolidation of the market power of the established companies with a substantial control by domestic players. The argument presented in this chapter highlights the importance of the differences in the national institutions of corporate governance found in the two countries. The adjustment process of electricity companies is best conceptualized as a set of constraints and opportunities faced by managers in the conduct of the business strategy of the firm. The institutions of corporate governance in Britain expose the firm to the pressures of financial markets and force management to seriously pay attention to the interests of minority shareholders. Takeovers have been prominent in the transformation of the sector. The Spanish system of corporate governance, in contrast, does not expose managers to the...
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