Schnyder on The Cognitive Origins of Corporate Governance in Switzerland, Germany, and the U.S., 1910s-1930s

Gerhard Schnyder, University of Cambridge, has posted the abstract for a new paper, Horse, Cow, Sheep, or 'Thing as Such'? The Cognitive Origins of Corporate Governance in Switzerland, Germany, and the U.S., 1910s-1930s. The paper is not posted, but the author can be reached via his SSRN author page. Here's the abstract:

The US is commonly opposed to continental European countries as a distinct model of corporate governance (CG) in the sense that the US model stresses the protection of outside shareholders, whereas the continental European model is based on a broader stakeholder approach. This goes together with distinct theories of the corporation: the US system, it is based on an individualistic conception while the continental European model is associated with a super-individualistic view of the firm.

In this paper we examine the origin of this opposition by looking at the cases of Switzerland, Germany, and the US. Contrary to very popular corporate governance theories, which see in the different CG models as a quasi-natural effect of different legal traditions, we show that the emergence of two distinct approaches to CG can be localised during the first decades of the 20th century. We analyse the CG debates among legal scholars and economists and the politics of company law reform in the US, Germany and Switzerland and show that all three countries faced a similar structural development of the stock corporation during the second half of the 19th century, which led to an increasing likelihood of a separation between owner-ship and corporate control.

Legal scholars and economists on both shores of the Atlantic diagnosed this evolution in different ways and proposed consequently different remedies. While in the US the view prevailed which consisted in assuring the shareholders a maximal protection against expropriation by opportunistic managers, in Europe the contrary view prevailed which sees independent and powerful managers as the guardian of the interest of all stakeholders. Due to the particular political contexts in the three countries which we analyse, different ideas concerning the organisation of the firm were finally institutionalised and explain the diverging paths that continental European countries and the US went down subsequently.