CORPORATE GOVERNANCE AND CORPORATE PERFORMANCE: A COMPARISON OF GERMANY, JAPAN, AND THE U.S.

Contrary to assertions that there are fundamental differences in the efficiency of "market-based" and "relationship-oriented" corporate governance systems, this article presents evidence that the German, Japanese, and American systems appear about equally effective in disciplining poor managerial performance. For example, both the job security and total compensation of German and Japanese managers appear to be tied to stock performance and current cash flows- measures that some would refer to as "short-term"-to roughly the same extent as those of U.S. managers. Furthermore, the punishments and rewards for German and Japanese managers are not more sensitive to sales growth-a measure some would refer to as "long-term"-than those of their U.S. counterparts. 1997 Morgan Stanley.

Corporate governance and incentives in German companies: Evidence from top executive turnover and firm performance

This paper examines executive turnover-both for management and supervisory boards-and its relation to firm performance in the largest companies in Germany in the 1980s. Turnover of the management board increases significantly with poor stock performance and particularly poor (i.e. negative) earnings, but is unrelated to sales growth and earnings growth. These turnover-performance relations do not vary with measures of stock ownership and bank voting power. Supervisory board appointments and turnover also increase with poor stock performance, but are unrelated to other measures of performance. Copyright Blackwell Publishers Ltd. 1995.