A Blueprint for Corporate Governance

CHAPTER 11

ALTERNATIVE GOVERNANCE SYSTEMS: GERMANY AND JAPAN

INTRODUCTION

The American corporate governance system is a market-based system. Corporations raise funds in public capital markets, and their managers are subject to the discipline of capital markets. Theoretically, a company is run in the best interests of its shareholders, whose interests are considered to be ‘‘above’’ those of the other stakeholders of the company. Banks provide debt capital but do not own shares of companies and deal with borrowers at arms length.

The two major alternatives to the American governance system are the German system and the Japanese system (the governance systems of other countries are variations on the American, German, or Japanese system). The ...