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

By Mark J. Roe | Go to book overview

CHAPTER 21
Changing the American Ownership Structure?

EVEN IF we could identify the best structure (which we cannot, because today's best structure is not tomorrow's and each one has distinctive pluses and minuses), there would be no reason to force reconstruction via new regulation or new taxes. We have little reason to want law that encourages active intermediaries and concentrated stock ownership; we do want law that permits more variation, allowing more competition in the United States between organizational forms.

This chapter has four parts. First, I examine how bank-based structures similar to those abroad could be permitted to compete in the United States, and I conclude that they would not function here quickly, or perhaps at all, even if permitted. Second, I examine how other financial institutions might be allowed to change their portfolios to concentrate their stockholdings. Third, I examine how, given the American path-dependent development of weak intermediaries, change in portfolio regulation may be less important than change in securities laws that inhibit coordination among the intermediaries holding fragmented portfolios. Fourth, I examine how and why path dependence means that legal permission may be futile: rules might change, but behavior, portfolios, and corporate structure might not.


BANK-CENTERED REFORMS:
GERMANY AND JAPAN AS BLUEPRINT?

The United States could not readily use the Japanese or German structures as a blueprint even if it wanted to, because the American path to the present yielded weak banks and strong stockholding pensions dominated by management; these cannot now be easily changed overnight. American reforms will focus more on obstacles to shareholder voice embedded in the securities laws than on obstacles to bank power.

This is not to say that banking reform is unimportant. It is, so as to better deliver financial services. Thus, early in the 1990s, the United States Treasury Department sought to repeal or modify McFadden, Glass-Steagall, and the Bank Holding Company Act. Although these reforms were intended to make for more efficient banks,1 they would also have moved

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1
See Jonathan Macey and Geoffrey Miller, America's Banking System: The Origins and Future of the Current Crisis, 69 Washington University Law Quarterly 769 (1991).

-263-

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