Stakeholders' Impact on Turnaround Performance: The Case of German Savings Banks

This study explores how savings banks as powerful stakeholders of SMEs in Germany assess turn-around performance. It tests the impact of the support provided by German savings banks and distressed SMEs’ actions with survey data from corporate advisors. The results show that structural and continuing support foster turnaround performance. This support is conducive in the initial stage of turnaround but negligible in the recovery stage. Contributing to stakeholder theory and turnaround management, the findings shed light on the factors that motivate a selected stakeholder’s involvement and SMEs’ ability to engage in actions fostering this stakeholder’s support for a turnaround

Corporate governance : the role of other constituencies ; paper presented at the Conference on Workable Corporate Governance: Cross Border Perspectives, held in Paris, March 17-19, 1997

Paper Presented at the Conference on Workable Corporate Governance: Cross-Border Perspectives held in Paris, March 17-19, 1997 To appear in: A. Pezard/J.-M. Thiveaud: Workable Corporate Governance: Cross-Border Perspectives, Montchrestien, Paris 1997. The paper discusses the role of various constituencies in the corporate governance of a corporation from the perspective of incomplete contracts. A strict shareholder value orientation in the sense of a rule that at any time firm decisions should be made strictly in the interest of the present shareholders would make it difficult for the firm to establish long-term relationships as the potential partners would have to fear that, at a later stage of the co-operation, the shareholders or a management acting only on their behalf could exploit them because of the inevitable incompleteness of long-term contracts. One way of mitigating these problems is to put in place a corporate governance system which gives some active role to the other stakeholders or constituencies, or which makes their interests a well-defined element of the objective function of the firm. A commitment not to follow a policy of strict shareholder value maximization ex post can be efficient ex ante. Such a system would clearly differ from what is advocated by proponents of a "stakeholder approach", as it would limit the rights of the other constituencies to those which would have been agreed upon in a constitutional contract concluded between them and the founder of the firm at the time when long-term contracts are first established

Inclusive governance in non-profit organisations

The study of private non-profit enterprises that offer general interest services is only at the start. The understanding of existing organisations resists an inclusive, public interest view of governance. This contribution aims at providing a reflection on specific features that non-profit enterprises should have, and outlines four main justifications for including stakeholders in production governance: 1) access to knowledge and other resources, 2) trust creation, 3) internal efficiency, 4) external efficiency. Conclusions elaborate on Hansmann’s classic theory of the firm to suggest that governance solutions need to be assessed on the basis of total costs, considering also the lower level of social costs that is created when governance includes relevant stakeholders. Our model highlights that when social costs are high, even an enterprise with costly decisional processes, such as the multi-stakeholder, can be the most efficient solution amongst other possible alternatives

Theorizing Corporate Governance: New Organizational Alternatives

This paper contrasts 'economic' and 'organizational' approaches to corporate governance, in order to draw out some of their distinctive features and discuss their relative strengths and weaknesses. Some promising areas of new research are identified which examine the role of social controls and trust for the way that companies are governed. Although these are fairly embryonic, it is argued that they call into question the hegemony of economic theories in theorizing the governance of the corporation. The paper concludes by advocating a re-consideration and broadening of the current conceptual scope of corporate governance, so as to facilitate and encourage other potentially valuable ways of exploring and understanding how companies are governed.Corporate Governance, Social Controls

Dark Side of Shareholder Influence: Managerial Autonomy and Stakeholder Orientation in Comparative Corporate Governance

This article proposes a new, functional explanation of the different roles of non-shareholder groups (particularly labor) in different corporate governance systems. The argument depends on the analysis of a factor that has so far received relatively little attention in corporate governance research: the level of shareholder influence on managerial decision making. Pro-employee laws mitigate holdup problems- opportunism from which shareholders benefit ex post, but which will deter firm-specific investment in human capital ex ante. Since holdup takes place within what is considered legitimate managerial business judgment and all shareholders (both majority and minority) are its financial beneficiaries, the degree of managerial autonomy from shareholders is an important factor. In the United States, proponents of a stakeholder view of corporate law have argued that the insulation that U.S. boards of directors have from shareholders mitigates the risk of holdup of non shareholder constituencies by shareholders, thus encouraging firm-specific investment such as investment in human capital. However, the large degree of autonomy of U.S. boards is unusual. This autonomy is eliminated, for example, by concentrated ownership, which prevails in Continental Europe. This article therefore suggests that, given their costs, laws aiming at the protection of stakeholders-such as codetermination and restrictive employment laws-may be normatively more desirable in the presence of stronger shareholder influence, particularly under concentrated ownership. The theory is corroborated by the observation that such laws tend to be more strongly developed in corporate governance systems with stronger shareholder influence. The United Kingdom, which has both stronger shareholder influence and stronger employment law than the United States, is classified as an intermediate case

A Configurational Approach to Comparative Corporate Governance

We seek to bring to the core of the study of comparative corporate governance analysis the idea that within countries and industries, there exist multiple configurations of firm level characteristics and governance practices leading to effective corporate governance. In particular, we propose that configurations composed of different bundles of corporate governance practices are a useful tool to examine corporate governance models across and within countries (as well as potentially to analyze over time changes). While comparative research, identifying stylized national models of corporate governance, has been fruitful to help us think about the key institutional and shareholder rights determining governance differences and similarities across countries, we believe that given the financialization of the corporate economy, current globalization trends of investment, and rapid information technology advances, it is important to shift our conceptualization of governance models beyond the dichotomous world of common-law/outsider/shareholder-oriented system vs. civil law/insider/stakeholder oriented system. Our claim is based on the empirical observation that there exists a wide range of firms that either (1) fall in the "wrong" corporate governance category; (2) are a hybrid of these two categories; or (3) should be placed into an entirely new category such as firms in emerging markets or state-owned firms. In addition, as Aguilera and Jackson (2003) argue, firms, regardless of their legal family constraints, their labor and product markets, and the development of the financial markets from which they can draw, have significant degrees of freedom to chose whether to implement different levels of a given corporate governance practice. That is, firms might chose to fully endorse a practice or simply seek to comply with the minimum requirements without truly internalizing the governance practice. An illustrative example of the different degrees of internalization of governance practices is the existing variation in firms' definition of director independence or disclosure of compensation systems. We first discuss the conceptual idea of configurations or bundles of corporate governance practices underscoring the concept of equifinal paths to given firm outcomes as well as the complementarity and substitution in governance practices. We then move to the practice level of analysis to show how three governance characteristics (legal systems, ownership and boards of directors) cannot be conceptualized independently, as each of them is contingent on the strength and prevalence of other governance practices. In the last section, we illustrate how different configurations are likely to playout across industries and countries, taking as the departing practice, corporate ownership.

Governance of stakeholder relationships: The German and Dutch experience

Countries' governance institutions to a varying degree support stakeholders to invest in relationship-specific assets. The function of governance institutions is to strengthen the commitment of parties to keep to an initial agreement. Thus, international differences in governance institutions affect relationship-specific investments. Two stylized models of stakeholder relationships can be distinguished, the Anglo-American model and the German model. Market orientation and competition characterize the Anglo-American model. Long-term relationships and cooperation are distinctive features of the German model. Strong elements of the Anglo-American model are fast reallocation of financial, physical and human capital through the market. Short-run flexibility facilitates a shift of resources towards innovative emerging technologies, in particular towards start-up firms. The German model is strong with respect to the development of long-term commitment, investments in relationship-specific physical and human capital, and cooperation between companies. This model promotes technological progress and re-allocation of resources within established enterprises. The position of Dutch corporate governance institutions, which govern the relationships between management and financiers, does not stand out as favourable compared to both the German and the Anglo-American models of corporate governance. In the Netherlands, share ownership is dispersed, so that monitoring by block shareholders is largely absent. In this respect the situation in the Netherlands is comparable to that in the United States and the United Kingdom. However, in contrast to the Anglo-American model the market for corporate control is virtually absent in the Netherlands. Cooption of members of the supervisory board and extensive use of juridical anti-takeover defence mechanisms substantially restrict the influence of shareholders on management. Therefore, Dutch corporate governance institutions neither strongly encourage investments in relationship-specific assets, nor strongly enhance flexible reallocation of capital or risk-sharing finance. Recent policy changes will probably lead to a moderate shift to the German model. Dutch work governance institutions, which concern the governance of relationships between management and employees, more closely resemble those in Germany. This implies that worker influence enhances the performance within large established firms, but that external allocation through the labour market is less efficient compared to the functioning of markets in the Anglo-American model. Future policy changes that strengthen Dutch worker influence will be beneficial for performance in established firms, and are in accordance with the gradual shift towards German governance structures.

Third sector accounting and accountability in Australia: anything but a level playing field

This research report seeks to understand why some Australian not-for-profit organisations make voluntary financial disclosures beyond their basic statutory obligations. Introduction This paper surveys previous work on voluntary information disclosures in accounting reports of Australian Not-for-Profit organisations (NFPs). This is new research and is a part of a project to evolve a comprehensive explanation of why Australian NFPs disclose what they do disclose; and to capture and explain patterns of variations between NFPs between what they regard to disclose and the type of information they disclose. To accomplish this, first some background information about the NFP sector are considered. Then, the Australian NFP sector is reviewed. Third, the information needs of some key stakeholders are briefly discussed. Next, the research methodology where a literature survey which looks at not just disclosures to NFPs but to the commercial sector that are plausibly &nbsp