Pathways to Corporate Convergence? Two Steps on the Road to Shareholder Capitalism in Germany: Deutsche Telekom and Daimler Chrysler

Abstract

Perhaps the key question in the corporate convergence debate is the extent to which parties will settle on a shareholder capitalism model, in which managerial accountability will be measured against a public shareholder wealth maximization criterion. The paper evaluates two particular events for the impact on German corporate governance: the privatization of Deutsche Telekom and the cross-border merger between Daimler Benz and Chrysler Corp. The Deutsche Telekom transaction had symbolic impact, because it made many Germans shareholders for the first time, but the terms of the transaction substantially protected these shareholders against risk and deprived them of governance rights. The Daimler Chrysler merger, on the other hand, is a major event in governance convergence because it should inject a substantial element of US-style shareholder activism into the governance of a major German corporation. The paper identifies several elements, including: the change in the shareholder body through a dilution of traditional German holders and the addition of U.S. institutional investors, the pioneering of a template for subsequent cross-border mergers involving German firms, the flexibility of German corporate law to shareholder initiatives, and the likely rippling impact of governance changes at Daimler Chrysler on other major German corporations.