Document Type

Article

Publication Date

2001

Abstract

Elites in the United States legal academy have been uniform in their prediction of "global" convergence on a single model of governance for large publicly held corporations. That model is, of course, the U.S. model. The evidence, though, is only of some trans Atlantic convergence with an outlier here or there. Moreover, the existing scholarship is culturally and economically insensitive. U.S. style corporate governance, with its requirements for truly independent directors who will confront and remove badly performing CEOs, and which has as an element lawsuits brought by activist shareholders, is simply inappropriate for many cultural settings. Post Confucian and feudal value systems in countries such as Indonesia, the People's Republic of China, India, and others represent insurmountable barriers to importation of U.S. style corporate governance. Many other societies reject all or most U.S. or Westernizing influences. Convergence advocates "one size fits all" approach is culturally insensitive in the extreme.

The dominant forms of capitalism in the world are family capitalism and other forms of "embedded capitalism" in which the economy is perceived to be part of and subservient to the society rather than the other way around. Value and governance systems emerging from the laissez faire eras in the United States and England during the 1980s, which appeared only once before in history (in mid Victorian England), simply are not reflective of reality in most other societies in the world, including even many European societies in which family and embedded capitalism predominate and are resistant to change.

Elite U.S. scholars have made these errors because their scholarship is insular and chauvinistic. They also have an incorrect view of what globalization truly is or what it means, substituting homogenization for globalization in the same manner many U.S. multinationals do.

Last of all, the growth in size and number of large multinational corporations in the 90s relegates the issue of 'global' convergence to secondary importance. U.S. style corporate governance is another solution to the Berle and Means separation of ownership from control conundrum U.S. scholars have wrestled with for 60 years. Regulatory arbitrage, environmental degradation, plantation production, economic imperialism, and other socio-economic problems posed by the accelerating growth of multinationals, not the separation of ownership from control, are the problems with which corporate law has to come to grips in the twenty first century.

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