b) Shareholdings - b) Shareholdings
- Corporations typically controlled by small number of investors and banks often have substantial interests; whereas shareholder corporations in the US tend to be broadly owned by a large number of investors
- stakeholder corporations in Europe tend to be held by a smaller number of investors many of whom hold a significant stakes
- The largest German bank Deutsche bank and Germany’s insurance company Allianz hold 5% and larger shares in most major German corporations.
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- c) Insider Trading
- Insiders (managers, board members, etc) have more info about corporation’s performance than do public shareholders.
- In Anglo-Saxon countries, stock exchanges &security commissions have more strict laws against insider trading than those in Europe.
- In Germany there were no insider trading law until January 1995, when the security trading law was adopted.
- d) Transparency
- The transparency requirement is less vital in a stakeholder company
- The French accounting standards do not require the disclosure of transactions with related parties or disclosure of changes in equity (the value of the corporation). Such disclosures are essential in US stock exchange, the collapse of Enron in 2002 was associated with the non disclosure of change in equity.
- e) Less active mkt for corporate control
- In European corporations large owners tend to be stakeholders as well and are less inclined to sell the stock if profit declines.
- The Anglo-Saxon model focused on corporate takeovers, including hostile takeovers, as a disciplining device for management. If the current management is not max shareholders value, the mkt for corporate control will install a new and more profit oriented management team.
- European firms tend to be closely held rather than widely publicly traded. When management changes occur through mergers and acquisition they tend to be friendly takeovers approved by the current management team
- f) Codetermination—firms with 2000 or more employees fall under the codetermination legislation
- allowing worker representatives on management boards
- workers have a say in management decisions
- used widely in Germany, France and Italy, e.g. German law requires that shareholders and workers have equal numbers on boards of directors and are represented by enterprise councils.
- Codetermination is one of the most distinctive features of the EM because it formally gives non owners of companies (employee) the same rights as owners to make decisions on how property will be used
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