Cross-Country Comparison of the Evolution of Corporate Governance from a Shareholder to a Stakeholder Perspective

Abstract

Corporate Governance has evolved considerably over the last hundred years and gained momentum through the various corporate scandals that plagued the economies in the world. Intertwined in business management and law, Corporate Governance has been the subject of many debates and theories. Originally rooted in the principle that its sole purpose is the maximization of shareholders' value, various theories have helped shed light and shape laws on the true meaning and implications of Corporate Governance.However, not every country has the same understanding of what shareholders' value entails for the day-to-day management of a corporation by its directors.Liberals such as Milton Friedman are strong advocates of a self-regulation of companies under a free market principle where directors are stewards acting in good faith on behalf of the shareholders. The Agency Theory, based on the work of Berle and Means 1948, highlights the conflict that may arise for a director who has to act solely for the company's shareholders in defiance of his own preferences or interests. This moral hazard recognised in this theory is the agency cost. Other theories like the Transaction Cost Economics had gained some interests in taking an economic view at corporations, but the Stakeholders Theory is the one that has had the most influence and in particular in European and Asian countries.Using five key countries, namely United Kingdom, Germany, France, Japan and South Korea, a legal review of those countries is conducted in light of their historical, cultural, economic background to understand the strategies taken on Corporate Governance over time. But first a practical and financial review of what constitute shareholders' value is performed and this helps uncover the relations between shareholders' value and the various stakeholders of any given corporation.This dissertation concludes on the convergence achieved in those countries, the similarities and differences and suggests a balanced approach to contribute to overcome corporate governance challenges.