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Comparative perspective of corporate governance:Europe and East AsiaJeanPierre Lehmann aa The European Institute of Japanese Studies , Stockholm School of Economics , P.O. Box6501, Stockholm, S113 83, SwedenPublished online: 07 Dec 2007.
To cite this article: JeanPierre Lehmann (1997) Comparative perspective of corporate governance: Europe and East Asia,Global Economic Review: Perspectives on East Asian Economies and Industries, 26:3, 3-36, DOI: 10.1080/12265089708422871
To link to this article: http://dx.doi.org/10.1080/12265089708422871
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GLOBAL ECONOMIC REVIEW 3Vol. 26, No. 3 (Autumn, 1997)
Comparative Perspective of Corporate Governance:Europe and East Asia
Jean-Pierre LehmannStockholm School of Economics. Sweden
Giobalisation is having a dramatic impact on the landscape of internationalbusiness. The recent huge increase in foreign direct investment and the appearanceof prominent new actors (e.g. Korean and other East Asian emerging multinationalcorporations) are particularly striking illustrations of this phenomenon. In turn, thecombined effects of globalisation and the increased volume and importance of FDIhelp explain why corporate governance has become much more important, anddebated, internationally.
The distinction, especially in the post Cold-war era, between internationalrelations (IR) and international business (IB) is becoming more and more blurred.Thus, while international trade negotiations have traditionally focused on issues "atthe borders" (tariffs, quotas), attention is shifting now much more to what ishappening "within borders" (competition policy, labour standards, industrialstructure, corporate governance). These economic and business forces have beenaccompanied by a certain amount of irresponsible polemic"Asian values," "clashof civilisations," "competing capitalisms"in America, Asia and Europe These riskexacerbating tensions.
The work undertaken here sets out both to destroy myths regarding allegedEuropean (of Western) forms of corporate governance versus Asian forms ofcorporate governance and to propose a more realistic comparative framework.
While recognising (of course) the enormous impact of the East Asianeconomics on the global business environment, there is no such thing ashomogeneity of Asian corporate governance. Just as the sources of economicgrowth in, say, Korea and Indonesia, differ, so do the structures, cultures,management, of their corporations. Furthermore, in spite of the much greater
4 Jean-Pierre Lehmann
coherence of Europe, in comparison to East Asia, and the decades of a commonmarket and recent economic integration, pattens of corporate governance vary agreat deal in Europe as well. There is no "Asian" or "European" form of corporategovernance. Six distinct models are assessed in this paper: Anglo-American,Rheinal, Japanese keiret^u, Korean chaebol, Mediterranean and Chinese bamboonetworks.
In respect to the three "models"of corporate governance that are most oftencited, namely the Anglo-American, German and Japanese, though contrastsundoubtedly exist, depending on the perspective, it is the similarities which maybe more striking. In a number of critical respects, Anglo-American, German andJapanese forms of corporate governancewhich remain to date the mostsuccessful modelsesemble each other more than, say, Germany would resembleItaly, the United States would resemble Canada, or Japan would resembleThailand. The contrasts, therefore, must be put in the perspective of similarities thattranscend a global framework. Similarly, greater similarities may be foundbetween forms of corporate governance in Asia and Europee.g. Italian andChinese firmsthan within the continents.
Different forms of corporate governance emerge from national culture, levelof development, industrial structure, nature of ownership, and sources of capitalformation. Critical also in determining corporate governance patterns aregovernment-industry relations. Four models are set out: government as refereegovernment as manager, government as coach and government as crony. Thepoint that repeatedly requires emphasising is that the phenomenon is dynamic, i.esubject to change. Thus, for example, whereas in the early decades of its industrialrevolution Dorea may have corresponded to the govemment-as-manager-model(and possibly in part to government-as-crony), since the late eighties/early ninetiesit has been shifting to the govemment-as-coach-model.
While most capitalist societies are facing crises of corporate governance, thecurrent conventional wisdom that there is an irreversible global trend toward theAnglo-Americanisation of corporate governance is questioned.
Certainly, however, as the world economy changes, especially as itglobalises, companies must adapt. It is the external environment that leads.Throughout the industrialised and industrialising world companies recognise theneed for transformation. The Korean chaebols are under pressure to bring aboutchange in their systems of corporate governance from owner-manager toprofessional managers. In Italy, the scions of the leading families who are assumingpositions of corporate power openly admit that change and internationalisation areimperatives (Sullivan 1996). Corporate governance, therefore, is currently one ofthe "hottest" issues facing those who deal with the international political economy,with relations between states and between regions, and in the field of international
Comparative Perspetives of Corporate Governance 5
2. Mythology of East Asian Corporate Homogeneity
The impact of the East Asian economies on the global economy has beenenormous and promises to remain so for the coming decades. Fcr Europe, EastAsian economic growth poses two interrelated challenges. The first is theintellectual challenge of understanding the sources, driving forces, key actors lyingbehind the economic growth of the East Asian societies. What are the propellersand where are they driving? The second is the commercial challenge of doingsuccessful business in the region and with East Asian corporations in globalmarkets.
There has been a tendency in both political and academic circles to ascribe aunity to East Asian approaches to corporate governance, whereas in fact diversityis prominent. The reasons for the mythology include (in no particular order ofpriority):
Although the decade since 1985 has witnessed a far greater degree of EastAsian intra-regional economic integration, intellectual integration and cross-fertilisation remain limited. East Asians do not know each other's societies well.
The myth of Asian corporate-governance unity has partly been driven byignorance, but also by two complementary factors. One is the very relatively shortperiod over which the phenomenon has been in the public eye: to the extent thatEast Asian economic integration exists, it is hardly more than a decade old.2
Moreover, because most of the economies of the region share very high growthrates, it has been (wrongly) assumed that they also share socio-economic structuresand cultures.
In shaping the myth of East Asian homogeneity, the Japanese dimensionhas loomed large. Japan's economic success from the late Edo era (1860s) onwardshas been due in considerable measure to its assiduous study of and selectiveborrowing from the West. From that time onwards, Japan has been both learningfrom and closely allied to three succe