CORPORATE GOVERNANCE

Comparing and contrasting the Anglo-American model and the European Model of Corporate Governance

Comparing and contrasting the Anglo-American model and the European Model of Corporate Governance

Introduction

Corporate governance comes into play in cases where the management of the organization has to be carried out by a manager or a group of managers who are not the owners of the organization. In essence, corporate governance is implemented by a business' financers in order to monitor and regulate the organization's utilization of their investments (Becht, Chapelle & Renneboog, 2000). In this case, the individuals hired to manage the business are paid employees and are responsible for the effective execution of the organization's processes. As a result of this arrangement, it is only natural for a separation to exist between the ownership of the organization and the management of the organization (Brickley, Coles & Jarrell, 1997). While this may appear to be a simple concept, modern day business models have allowed corporate governance models to develop rapidly over the last few years and this has led to the development of differing corporate governance models. The implementation of these corporate governance models generally varies in accordance with the region in which the organization is functioning and the nature of business of the organization.

This paper will attempt to compare and contrast the Anglo-American model and the European Model of Corporate Governance. The paper will attempt to perform this comparison in order to ascertain which of the two models more accurately reflect emerging corporate trends. Furthermore, the discussion will make international comparisons based on a variety of different economies.

Before moving on with the discussion, it is essential to come to terms with the role of the board of directors of the organization. The board of directors play a pivotal role in corporate governance models. This is because of the fact that they serve as the bridge between the stakeholders of the organization and the management team responsible for the organization's processes (Brickley, Coles & Jarrell, 1997). The sensitivity of the role of the board of directors can be judged through the fact that an extensive degree of research has been performed on the functions and composition of the board of directors. Regardless of the corporate culture in the organization, the board of directors remains present as a critical connection between the organization's human capital and the organization's stakeholders. Another reason because of which the board of directors are given extensive relevance is the fact that almost all corporate governance models look towards the board of directors when it comes to the implementation of the corporate governance models (Becht, Chapelle & Renneboog, 2000). The characteristics of the board of directors tend to vary with regard to the size of the organization, the region/regions in which the organization is functioning, the existence of the company as a listed or unlisted company and the industry/industries in which the organization is operating.

A practical example of the implementation of the European model of corporate governance and the Anglo-American model of corporate governance can ...