Comparision of Corporate Governance in Different Countries in Report Foemat

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A Comparison of Corporate Governance Systems in Four Countries

Jüergen Schneider Ernst & Young Deutsche Allgemeine Treuhand AG Siu Y. Chan Hong Kong Baptist University

A Comparison of Corporate Governance Systems in Four Countries

Jüergen Schneider Ernst & Young Deutsche Allgemeine Treuhand AG, Heilbronn branch, Germany and Siu Y. Chan* Hong Kong Baptist University, Hong Kong

*

Address of Correspondence: Dr. Siu Y. Chan, Department of Accountancy and Law, Hong Kong Baptist University, Kowloon Tong, Kowloon, Hong Kong.

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A Comparison of Corporate Governance Systems in Four Countries

Abstract Companies in different countries are operating in different cultural, legal, social and economic environments. As a result, each country has developed its own corporate

governance system that serves its business operations best. As the globalization of business speeds up in recent years, it is unknown whether there exists one best corporate governance system for all countries. The purpose of this study was to compare the corporate governance component factors in Germany, the United States of America, Switzerland and France. The four countries were selected because they are adopting different corporate governance models. Their corporate governance component factors can be classified into three groups: those related to top management organization, the board as whole, and individual board members. From these comparisons, we found that although these countries are adopting different corporate governance models, they have developed some mechanisms (such as committees) to narrow down the differences. Therefore, we may conclude that the corporate governance systems adopted by different countries are converging.

A Comparison of Corporate Governance Factors in Four Countries

1. Introduction Corporate governance can be viewed as a process by which directors control and direct the management of a company to achieve the best returns to its owners (Wong and Yeung, 2000). Consequently, directors play an important role in determining the effectiveness of corporate governance. It is therefore important to understand how directors execute their duties,

especially for their monitoring functions. However, companies in different countries are operating in different cultural, legal, social and economic environments, thus leading to the development of different corporate governance systems. The purpose of this study is to compare the corporate governance component factors in four countries: Germany, the United States of America (US), Switzerland and France. The focus is on comparing the monitoring features of the boards of directors (boards) among German share corporations (Aktiengesellschaft), US listed corporations, Switzerland share companies and French listed corporations (société anonyme). The reason for choosing German share companies and US listed corporations is that they adopt two very different board models: the one-tier and the two-tier models. The onetier model (also call the sole-board model) combines the monitoring and the executive functions of a company and assigns all these duties to one board. On the other hand, the twotier model assigns these functions to two independent boards: the supervisory and the management boards. These two board models are typical corporate governance structures for most listed corporations in the world. In particular, the US is adopting the one-tier model, whereas Germany is adopting the two-tier model. France is selected because she allows her 1

companies to choose between the two board models. Switzerland share companies are even more flexible and free to choose any corporate governance models, not limited to the above two boards. In addition, the legal environments of the selected countries are also very different. German share companies are governed strictly by their corporation laws, whereas US listed corporations are given extensive autonomy by their corporation laws...
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