A Taxonomy of Systems of Corporate Governance

This paper argues that debate on corporate governance in an international context is hampered by the lack of a coherent framework. A taxonomy of systems of corporate governance is proposed as a remedy. The taxonomy is based upon eight characteristics: the prevailing concept of the firm, the board system, the salient stakeholders able to exert influence on managerial decision‐making, the importance of stock markets in the national economy, the presence or absence of an external market for corporate control, the ownership structure, the extent to which executive compensation is dependent on corporate performance, and the time horizon of economic relationships. Four types of systems of corporate governance emerge: the Anglo‐Saxon systems, the Germanic systems, the Latin systems and the Japanese system.