Klaus J. Hopt
Comparative company law starts with the rise of the modern company in the first half of the 19th century. Ever since the need for looking across the border was felt by legislators, lawyers, academics, judges and regulators. Most recently there has been a renewed interest in comparative company law, partly because of the emergence of European company law and partly because the corporate governance movement has sharpened the sense of competition with other countries. Comparative company law follows the close relations of company, capital market and banking law that exist today, in particular after the financial crisis. Comparative company law must also take notice of company self-regulation and the international code movement and is more and more influenced by economic considerations. The chapter concludes with perspectives for future research.
This chapter examines issues relating to corporate governance in closely held corporations. It begins by describing the typical characteristics of closely held corporations, with particular emphasis on shareholder involvement in management, number of shareholders, share transfers, market for shares, and the broad spectrum of shareholders and applications. It then considers common governance issues and conflicts in closely held corporations and proceeds with a discussion of the governance framework for such corporations consisting of company law, model articles, articles of association, shareholder agreements, and corporate governance guidelines. It also explores the internal governance and management of closely held corporations, the governance of share transfer restrictions, and provisions for shareholder withdrawal and expulsion. The chapter concludes with an analysis of shareholder conflicts, especially oppression by majority shareholders and ex-post opportunism by minority shareholders, and how they are governed in closely held corporations.
Despite deep differences in their political systems, legal regimes, and economic structures, emerging markets share a recent history of rapid economic growth and capital market expansion. This chapter explores the degree and direction of transformation in corporate governance in emerging markets in the last decades. It begins by surveying the interaction between the ownership structures prevailing in emerging markets – marked by the presence of controlling shareholders, business groups, and state ownership – and the underlying institutional environment. It then examines the driving forces of change by comparing the relative roles played by legislatures, regulators, courts, and alternative institutional arrangements in corporate governance reform in Brazil, Russia, India, and China (collectively known as the BRIC countries). The chapter concludes by evaluating the degree of convergence and persistence in emerging markets governance, and underscoring the need to consider the particular contextual significance of different practices.
Curtis J. Milhaupt
This chapter focuses on the governance ecology of China’s state-owned enterprises (SOEs). More specifically, it examines the mechanisms of state capitalism in China by analyzing the distinctive system of industrial organization in which the country’s largest SOEs were assembled and currently operate. After providing the conceptual background, the chapter charts the origins of Chinese corporate capitalism and how it is presently organized. It then considers the key components and main organizational characteristics of the national business groups and contrasts them with those in Japan and Korea. It also explores SASAC’s behavior as a controlling shareholder within the larger institutions of the party-state and how it shares the role of controlling shareholder with the Communist Party. Finally, it assesses the implications of the analysis for comparative corporate governance scholarship.
Merritt B. Fox
This chapter explores the link between corporate governance and the rise of foreign ownership. It presents statistics that illustrate the dramatic rise in foreign ownership over the last few decades and then seeks to explain this rise and its relationship to corporate governance. In order to situate the subject under study within its larger context, this explanation starts with an exploration of the factors independent of corporate-governance considerations that favor a global market for securities and those that impede it. It will be shown that the rise in foreign ownership globally can be explained in significant part by the weakening of the impeding factors. The chapter then shows why, as a matter of theory, improvements in corporate governance can be expected to cause a rise in foreign ownership and a rise in foreign ownership can be expected to cause improvements in corporate governance, with the weakening in the non-corporate-governance factors that impede a global market for securities acting as a catalyst for the causal pathwayings going in both directions. The chapter concludes with a review of substantial empirical evidence suggesting that both causal pathways are in fact at work.
Western versus Asian Laws on Corporate Governance: The Role of Enforcement in International Convergence
This chapter examines the issue of when laws do and do not converge in the field of corporate governance, with particular emphasis on the cost of enforcement and the role of enforcement in international convergence. Focusing on Western versus Asian laws on corporate governance, it considers when, how, and why legal rules change and whether transplantation of legal rules from Western countries has been successful. It also explores the relationship between enforcement and substantive legal rules, mainly by comparing laws in Japan and the United States. Finally, it discusses three areas relating to corporate governance: the regulation of insider trading, financial disclosure and accounting rules, and corporate law rules on governance.