Strong Managers, Weak Owners: The Political Roots of American Corporate Finance

By Mark J. Roe | Go to book overview

CHAPTER 14
Political Evolution
in Germany and Japan?

EVEN IF we knew that Germany and Japan would evolve to Americanstyle diffuse ownership (and even if we saw no American ownership trends toward concentration), the incompleteness of current corporate theories would persist. We would need to determine the degree to which politics in Germany and Japan was inducing financial evolution. Financial fragmentation could be inherent in twentieth-century democracy, rather than merely inherent in American democracy, as I hypothesized earlier. Foreign nations' political and corporate histories could have evolved together: large industry and big finance emerged abroad when nondemocratic governments kept fragmenting forces in check. Indeed, today's foreign democracies affect corporate structures, but in ways and degrees different from those in the American past.

Although my goal here is not to provide a definitive history of how German and Japanese politics affected corporate structures—a task I commend to others—even a cursory inquiry shows political forces at work, shaping the governance of the large firm. Indeed, how could it be otherwise? The movement of capital from savers to firms, and the holding of capital in firms by savers, is central in modern economies. Capital's movement and existence has to attract political attention. Interest groups see the potential for rents from how that movement and holding are regulated, and they seek to influence the rules governing the movement and the holding. Popular opinion on how capital moves or is held can be important and will influence political outcomes. Regulators see abuses that need to be remedied. These three forces will then influence the organization of financial institutions, which in turn will affect the ownership structure of the large firm.


GERMAN “POPULISM”

Political Pressure on the Banks

Deutsche Bank reviews whether to allow its employees to chair an industrial firm's board, and some German banks have sold directly held stock.

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