Academic journal article
By Groenewegen, John
Journal of Economic Issues , Vol. 34, No. 2
European integration is making an important step forward with the coming of the Euro. Individual member states have harmonized a substantial part of their conjunctural, as well as structural, policies. The idea that integration implies not only a harmonization of policies, but also of organizational structures, is heard more and more.
This article focuses attention on the question of corporate governance of European firms and how systems of governance are influenced by European integration. I define corporate governance as the internal and external pressures on management to make decisions in the interest of the stakeholder(s) of the firm. Examples of internal pressure are the general assembly of shareholders, the workers' councils, and internal audits; examples of external pressure are the market for managerial labor and the capital market as the market for corporate control, where firms are sold and bought. Recently, the liberalization in Europe of capital markets and the discussion on the (im)possibilities of firms protecting themselves against hostile takeovers have raised questions about the effects of European integration on corporate governance structures. Frequently it is said that, because of the European integration in a context of further globalization, all European countries will develop in the direction of an optimal Anglo-Sa xon model. Here that idea is questioned: such statements are a dangerous oversimplification of the evolution of corporate governance structures. Those statements leave aside the complex issue of co-evolution of elements of economic systems at different levels. It might very well be the case that in Europe shareholder value is a more important objective of management than before, but taking the embeddedness of different European systems into account, the meaning of that shareholder value might turn out to differ greatly among European countries.
I address the question of the influence of integration on the systems of corporate governance in Europe by first discussing the embeddedness of systems of corporate governance by means of four levels of analysis, using France as a case study. Then the effects of European integration on capital markets and decision making in firms is presented, again using the case of France. More general conclusions follow.
Perceptions of the nature of the firm affect definitions of corporate governance. From the Anglo-Saxon perspective, management should maximize shareholder value and should be controlled by the shareholders.  In continental Europe, other perspectives on the firm prevail: firms are coalitions of different interest groups, and management should try to find a balance between the different interests.  Because the role of stakeholders differs from country to country, management and boards of directors have different roles; there seem to be a variety of systems of corporate governance, each with its own variations. Those can be shown by distinguishing four levels of analysis: 
* The level of values, norms, habits, and attitudes.
* The level of formal rules, and role of government and bureaucracies.
* The level of the governance of transactions and the specific institutional arrangements such as contracts and firms.
* The level of allocation where prices coordinate.
These levels are related in the sense that the first level sets the conditions for those that come after it. Also, feedbacks exist: the performance at level four, in terms of efficiency, has an influence on level three, and in the long run also on the levels two and one. When, for example, French firms are not competitive, they are pressed to adapt their organizational structure at level three, and when that is not possible within the existing institutional context of level two, in the long run then one might expect adaptations at that level. Whether European integration results in a harmonization at all four levels is the question. …