Corporate Governance in Context Corporations, States, and Markets in Europe, Japan, and the U.S.

by Hopt, Klaus J.; Wymeersch, Eddy; Kanda, Hideka; Baum, Harald

• ISBN13: 9780199290703
• ISBN10: 0199290709
• Format: Hardcover
• Copyright: 2006-02-02
• Publisher: Oxford University Press

Summary

Increased regulatory competition has sharpened the comparative awareness of advantages or disadvantages of different national models of political economy, economic organization, governance and regulation. Although institutional change is slow and subject to functional complementarities as wellas social and cultural entrenchment, at least some features of successful modern market economies have been in the process of converging over the last decades. The most important change is a shift in governance from state to the market. As bureaucratic ex-ante control is replaced by judicial ex-postcontrol, administrative discretion is replaced by the rule of law as guidelines for the economy. Furthermore, at least to some extent, public enforcement is being reduced in favor of private enforcement by way of disclosure, enhanced liability, and correspondent litigation for damages. Corporatistapproaches to governance are giving way to market approaches, and outsider and market-oriented corporate governance models seem to be replacing insider-based regimes.This transition is far from smooth and poses a daunting challenge to regulators and academics trying to redefine the fundamental governance and regulatory setting. They are confronted with the task of making or keeping the national regulatory structure attractive to investors in the face ofcompetitive pressures from other jurisdictions to adopt state-of-the-art solutions. At the same time, however, they must establish a coherent institutional framework that accommodates the efficient, modern rules with the existing and hard-to-change institutional setting. These challenges - put in acomparative and interdisciplinary perspective - are the subject of the book. As a reflection of the transnationality of the issues addressed, the world's three leading economies and their legal systems are included on an equal basis: the EU, the U.S., and Japan across each of the subtopics ofcorporations, bureaucracy and regulation, markets, and intermediaries.

Table of Contents

Abbreviations	xvii
Contributors	xxi
Part I: Change of Governance in Historic Perspective: From State to Market — Pathways of Change in the 20th Century	1	(246)
Change of Governance in Historic Perspective: The German Experience
by Harald Baum	3	(28)
I. Introduction	3	(2)
I. Three Stages of Development	5	(10)
II. Moving Toward a Market-Based Regime and Shareholder Capitalism	15	(4)
III. Legislative Reactions: Change of Regulatory Model	19	(8)
IV. Theses	27	(4)
Corporate Governance Changes in the 20th Century: A View from Italy
by Guido A. Ferrarini	31	(22)
I. Introduction	31	(1)
II. Liberalism and the Commercial Codes	32	(5)
III. The 'Mixed Economy' and the Civil Code	37	(3)
IV. The Welfare State and the Rise of Securities Regulation	40	(5)
V. The New Economic Constitution and Company Law reform	45	(6)
VI. Conclusions	51	(2)
Historical Pathways of Reform: Foreign Law Transplants and Japanese Corporate Governance
by Curtis J. Milhaupt	53	(20)
I. Introduction	53	(2)
II. A Sketch of Postwar Japanese Political Economy and Corporate Law	55	(3)
III. Foreign Transplants and Their Reception	58	(10)
IV. Evaluation	68	(3)
V. Conclusion	71	(2)
Asking the Wrong Question: Changes of Governance in Historical Perspective?
by Yoshiro Miwa and J. Mark Ramseyer	73	(12)
I Introduction	73	(1)
II. Economic Growth in Japan	74	(2)
III. Corporate Governance in Japan	76	(8)
IV. Conclusion	84	(1)
Politics on Wall Street: The Implications of Eliot Spitzer on State-Federal Relations in the Regulation of Public Corporations and Capital Markets in the United States
by Jonathan R. Macey	85	(20)
I. Introduction	85	(1)
II. Crisis and the Growth of Government	86	(5)
III. Spitzer's Legacy: A Tale in Four Parts	91	(10)
IV. Conclusion	101	(4)
Scandals, Regulation, and Supervisory Agencies: The European Perspective
by Gerald Spindler	105	(14)
I. Introduction	105	(1)
II. Crisis as the Motor of New Regulations	106	(2)
III. Competition Between Regulators	108	(7)
IV. Conclusions	115	(1)
V. Theses	115	(2)
Part 2: Corporations – Changing Models of Corporate Governance	117	(130)
European Company Law and Corporate Governance: Where Does the Action Plan of the European Commission Lead?
by Klaus J. Hopt	119	(24)
I. Introduction	119	(2)
II. The Company Law Action Plan of 2007: Selling the Stage	121	(6)
III. A Glance at the List of Planned .Actions: Topics Other than Corporate Governance	127	(4)
IV. Corporate Governance in Particular	131	(9)
V. Outlook	140	(3)
Changing Models in Corporate Governance Implications of the US Sarbanes-Oxley Act
by Gary M. Brown	143	(20)
I. The Impetus for the Bill	143	(3)
II. History Repeats Itself /	146	(2)
III. Corporate Governance Continues Its Race to the Bottom: 1985 1995	148	(3)
IV. What Got Us Here This Time'?	151	(4)
V. What did Sarbanes-Oxley do About Corporate Governance? /	155	(3)
VI. What is New and has Sarbanes-Oxley Adressed 'IT'?	158	(3)
VII. The Lesson	161	(2)
Enron and Corporate Law Reform in the UK and the European Community
by Paul L. Davies	163	(28)
I. Introduction	163	(8)
II. Directors' Remuneration	171	(6)
III. Auditor Independence	177	(9)
IV. Non-executive Directors	186	(4)
V. Conclusions	190	(1)
Ongoing Modernization of Japanese Company Law
by Misao Tatsuta	191	(14)
I. Introduction	191	(1)
II. Modernization of Company Law: Major Steps	192	(4)
III. Modernization Now	196	(7)
IV. Concluding Remarks	203	(1)
V. Postscript	204	(1)
Japanese Perspectives, Autonomous Firms and the Aesthetic Function of Law
by John O. Haley	205	(10)
Corporate Governance Crises and Related Party Transactions: A Post-Parmalat Agenda
by Joseph A. McCahery and Erik P.M. Vermeulen	215	(34)
I. Introduction	215	(4)
II. Prevailing Ownership and Control Structures	219	(9)
III. Related Party Transactions	228	(3)
IV. Regulation of Related Party Transactions	231	(6)
V. National-Level Reforms	237	(7)
VI. Conclusion	244	(3)
Part 3: Bureaucracy and Regulations	247	(130)
Legal Ground Rules in Coordinated and Liberal Market Economies
by Katharina Pistor	249	(32)
I. Introduction	249	(1)
II. Types of Market Economies	250	(2)
III. Legal Ground Rules and the Scope of the State	252	(7)
IV. Substantive Ground Rules in Private Law	259	(11)
V. Procedural Ground Rules in Private Law	270	(9)
VI. Conclusion	279	(2)
Corporatist versus Market Approaches to Governance
by Horst Siebert	281	(22)
I. Introduction	281	(1)
II. Three Different Institutional Arrangements: Markets, the Political Process, and Corporatist Decision-Making	281	(2)
III. Main Areas of Corporatist Decision-Making	283	(13)
IV. The Informal Consensus Approach in Governmental Decision-Making	296	(1)
V. Implications of the Corporatist Approach: The Restrained Market Economy	297	(6)
Regulatory Paternalism: When is it Justified?
by Anthony I. Ogus	303	(18)
I. Introduction	303	(2)
II. Economic and Paternalist Reasons for Overriding Individual Preferences	305	(2)
III. Individual Decision-making and Irrationality	307	(3)
IV. The Benefits and Costs of Paternalist Inverventions	310	(1)
V. An Analytical Framework for Paternalist Regulation	311	(1)
VI. Some Examples of Paternalist Regulation	312	(7)
VII. Conclusions	319	(2)
The Regulation of Regulation: Judicialization, Convergence, and Divergence in Administrative Law
by Thomas B. Ginsburg	321	(18)
I. Introduction	321	(1)
II. Precis: Dynamics of Convergence and Divergence	322	(2)
III. The Scope of Administrative Law	324	(2)
IV. Divergent Systems of Administrative Law	326	(5)
V. Trends: Judicialization and the Search for Neutral Third Parties	331	(5)
VI. Conclusion	336	(3)
The Proper Role of Bureaucracy in a Modern Market Economy: The Case of Japan
by Christian Kirchner	339	(14)
I. The Problem Under Review	339	(3)
II. Methodological Approach	342	(5)
III. Regulatory Reform in Japan: The Outside Perspective	347	(2)
IV. A New Institutional Economics Approach to Regulatory Reform in Japan	349	(2)
V. Concluding Remarks	351	(2)
The Role of Bureaucracy in Deregulation - The Case of Justice System Reform in Japan
by Kahei Rokumoto	353	(10)
I. Introduction	353	(1)
II. The Case: The Role Played by Bureaucracy in the Justice System Reform	354	(4)
III. Behind the Scene	358	(1)
IV. Analysis: The Role of Bureaucracy in Deregulation	359	(4)
The Transatlantic Financial Markets Regulatory Dialogue
by Hans-Jürgen Hellwig	363	(16)
I. The Problem of Extraterritorial Regulatory Spillover Effects	363	(1)
II. The Genesis of the Dialogue: The US Sarbanes-Oxley Act	364	(1)
III. The Dialogue and How It Works	365	(3)
IV. Concrete Examples of Topics in the Regulatory Dialogue	368	(6)
V. Final Remarks	374	(3)
Part 4: Markets – Creation, Risks, Safeguards	377	(102)
Market Discipline, Information Processing, and Corporate Governance
by Martin F. Hellwig	379	(24)
I. Rhetoric, Semantics, and Reality of 'Market Discipline'	379	(5)
II. What Do Financial 'Markets' Do? What Do They Do Differently?	384	(6)
III. Information Processing and 'Discipline' Under Market Finance	390	(6)
IV. Market Discipline and Corporate Governance in the 1990's	396	(5)
V. Concluding Remarks	401	(2)
Implementation of the Corporate Governance Codes
by Eddy Wymeersch	403	(18)
I. Introduction	403	(1)
II. Who Is Setting the Rules?	403	(3)
III. The Codes Are Self-Regulatory	406	(1)
IV. Ambit of the Governance Codes	407	(1)
V. Enforcing the Corporate Governance Codes	408	(9)
VI. European Company Law Initiatives	417	(1)
VI. The Effects of the Governance Rules: Risks and Liabilities	418	(1)
VII. Conclusion	419	(2)
The Market for Corporate Control: The Legal Framework, Alternatives, and Policy Considerations
by Stefan Grundmann	421	(26)
I. Introduction: Competition Over Which Assets in the Market for Corporate Control?	421	(2)
II. Takeover Regulations	423	(18)
III. Alternative Forms of Replacement of Management: Within the Organisational Framework of the Company	441	(3)
IV. The Content of the Control Position of Management and its Limits	444	(1)
V. Conclusions	445	(2)
Antitrust, State Aid, and the Governance of Public Undertakings
by Ernst-Joachim Mestmácker	447	(14)
I. The System of Property Ownership in the Internal Market	447	(4)
II. Jurisdiction: The Concept of Undertaking	451	(1)
III. Public Undertakings	452	(3)
IV. Undertakings with Exclusive or Special Rights and Undertakings Entrusted with Services of General Economic Interest	455	(2)
V. Unbundling in the Energy Industry	457	(2)
VI. Costs and Benefits	459	(2)
Sector-Specific Regulations and Antitrust: Corporate Governance of Public Undertakings in Japan
by Fumio Sensui	461	(20)
I. Non-EU Nations where State Aid Rule does not exist and their Coping Strategies	461	(1)
II. Control by SSRs in Japan	462	(1)
III. Controls through the Antimonopoly Law in Japan	463	(3)
IV. Postal Service and Predatory Pricing?	466	(1)
V. Unbundling in the Energy Industry in Japan	466	(1)
VI. Role of Competition Law within Corporate Governance in Japan	467	(2)
VII. Review of Enforcement Systems and Corporate Governance	469	(4)
VIII.Review of Monopoly and Oligopoly Regulations	473	(2)
IX. Application of the Antimonopoly Law to Public Undertaking	475	(3)
X. Conclusion	478	(1)
Part 5: Intermediaries – Functions and Responsibility	479	(206)
Information Theory and the Role of Intermediaries
by Reinhard H. Schmidt and Marcel Tyrell	481	(30)
I. The Problem and Its Context	481	(3)
II. Elements of the Economics of Information	484	(5)
III. The Use of Information and the Difference between Corporate Governance Systems	489	(18)
IV. Conclusions	507	(4)
Using Basel II to Facilitate Access to Finance: The Disclosure of Internal Credit Ratings
by Gérard Hertig	511	(16)
I. Introduction	511	(2)
II. Basel II and Internal Credit Ratings	513	(1)
III. Efficient Disclosure of Internal Credit Ratings	514	(8)
IV. Sketching a Mandatory Disclosure Regulatory Framework	522	(4)
V. Conclusion	526	(1)
The Multiple Roles of Banks? Convenient Tales from Modern Japan
by Yoshiro Miwa and J. Mark Ramseyer	527	(40)
I. Introduction	527	(2)
II. Three Urban Legends	529	(33)
III. Genesis	562	(3)
IV. Conclusions	565	(2)
Legal Explanations on Bank Behavior
by Hideki Kanda	567	(4)
Redirecting Japan's Multi-level Governance
by Luke Nottage	571	(28)
I. Introduction	571	(3)
II. Contextualizing and Conceptualizing for Japan	574	(16)
III. Dealing with Mad Cows in Japan, and Beyond	590	(6)
IV. Conclusions	596	(3)
Gatekeeper Failure and Reform: The Challenge of Fashioning Relevant Reforms
by John C. Coffee, Jr.	599	(64)
I. Introduction	599	(6)
II. Gatekeepers: Past and Present	605	(27)
III. The Near Future of Gatekeepers: Sarbanes-Oxley and the Looming Litigation Crisis	632	(12)
IV. The Future Gatekeeper: Remedies for Gatekeeper Failure	644	(17)
V. Conclusion	661	(2)
The Changing Worlds of the CPAs in Japan
by Hiroshi Oda	663	(24)
I. The Background to the Reform	663	(6)
II. The Amended CPA Law	669	(6)
III. Measures to Increase the Effectiveness of the Audit by the CPAs	675	(5)
IV. The Independence of the CPAs' Audit from the FSA the Resona Bank and the Ashikaga Bank Cases	680	(2)
V. Conclusion	682	(3)
Summary of Discussions	685	(46)
Changes of Governance in Europe, Japan, and the US: Discussion Report
by Heike Schweitzer and Christoph Kumpan	687	(44)
I. Governance Systems Between State and Market: Categorization and Evaluation	688	(7)
II. Market Regulation as Corollary to Liberalization: Toward a Theory of Regulation	695	(11)
III. Corporate Law and Corporate Governance: Structures and Current Legal Developments in the US, Japan, and Europe	706	(13)
IV. Intermediaries and Their Regulation	719	(4)
V. Changes of Governance: The International Perspective	723	(6)
VI. Conclusion	729	(2)
Selected Bibliography	731	(12)
Annex 1 Modernising Company Law and Enhancing Corporate Governance in the European Union – A Plan to Move Forward (EU)	743	(32)
Annex 2 The Combined Code on Corporate Governance (UK)	775	(80)
Annex 3 The Sarbanes-Oxley Act (US)	855	(68)
Index	923