Taking Shareholder Protection Seriously? Corporate Governance in the U.S. and Germany

This article provides a comparative study of four major dimensions of corporate governance in the U.S. and Germany: (1) the laws affecting corporate governance, particularly those designed to protect minority shareholders; (2) the prescribed role and actual conduct of corporate boards; (3) the market for corporate control (including hostile takeovers); and (4) incentive compensation. The authors pose the question: If the primary purpose of the corporate governance system is to serve the interests of minority shareholders, how do the U.S. and German governance systems rank on each of these four dimensions ? Their conclusion is that although the U.S. system is more shareholder friendly in many respects than the German, both systems have major shortcomings, particularly in the market for corporate control. The authors conclude with a list of proposed changes to both systems that would amount to “taking shareholders seriously.”