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For decades, Europe has sought to become more financially integrated with the United States and therefore European legal institutions, regulatory, governance and accounting exercises have faced pressures to adjust to global competitory markets. Against this backdrop, European corporate governance schemes have been criticized as being less effective than the Anglo-American market based systems.

This textbook examines the distinctive dimensions and calibers of European corporate governance. Reforms of key institutions, the doctrine of share holder value and the seemingly irresistible growth of CEO power and reward are severely analyzed. The book brings out the richness of European corporate governance systems, as well as highlighting historical weaknesses that will require further work for a sustainable corporate governance environs in the future.

In light of the most severe financial crisis since the 1930s, this intellectual look at European corporate governance is a critical textbook for courses on corporate governance and a outstanding supplementary textbook on a host of business, management and accounting classes.

About the Author

Thomas Clarke is Director of the Centre for Corporate Governance and Professor of Management at UTS Sydney, Australia. He is also Visiting Professor at the University of Paris IX Dauphine, and at ESC-Lille, France and the author of Theories of Corporate Governance and International Corporate Governance, both published by Routledge.

Jean-Francois Chanlat is Professor of Management and Director of the EMBA program at the University of Paris IX Dauphine, France. He is also Director of the Centre for Research on Management and Organization.

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Excellent Critique of Convergence on Anglo-American Model
By James Mcritchie
This new reader, edited by Thomas Clarke and Jean-Francois Chanlat offers up one of the original critiques of the subprime financial crisis within a framework that compares Anglo-American governance features with those of Europe.

At the heart of the collapse was the growth of the derivatives market that was supposed to hedge versus losses. Settlements grew from $106 trillion in 2002 to $531 trillion by 2008. In the introduction, Clarke and Chanlat provide an splendid overview of how the crisis unfolded, both in the US and in Europe. They then turn to the contributions of the governance framework: re-regulation, ratings agencies, danger management, incentivization and to more specifics within the framework of financial institutions.

Convergence is in progress but there is tension among the parallel universes. The Anglo-American is characterized by liquid markets, high transparency and where the market for corporate control provides the major discipline... until markets fail. Europe and Asia are characterized by controlling shareowners, weak markets, less transparency and more monitoring by banks.

Many are now questioning convergence and what appears to be a basic doctrine behind the American model... growing inequality. "In the last few years alone, $400 billion of pretax income flowed from the bottom 95% of earners to the top 5%, a loss of $3,660 per household on intermediate in the bottom 95%."

With the most eminent level of inequality and poverty among it is peers, why follow the US? What with regards to the rights of laborers and citizens to a more sustainable system? Can the EU transform it is economies so that they may sustainably proceed to provide a high standard of living? Those are just a few of the topics addressed in the reader through an examination of respective dimensions and examples.

Most of the essays are excellent. I specially enjoyed Robert Boyer's, "From Shareholder Value to CEO Power: The Paradox of the 1990s." Boyer looks at why CEO remuneration proceeds to skyrocket in an era of stockholder value. Labor long ago lost power in the US and managers have used the pressure of institutional investors to their own benefit.

Boyer reviews the rise of concern over CEO pay, respective choices that have been used and their limitations. A series of long-run transformations has occurred in the bargaining positions of workers, consumers, financial markets, the global economy and nation states. The 1960 were characterized by an confederation amid laborers and managers.

By the 1980s internationalization eroded worker power and by the 1990s we entered a amount of time of concealed confederacies amidst managing directors and financiers. Managers applied the demands institutional investors to redesign their own compensation. Part of that confederacy involved a shift away from specified gain plans to 401(k) type plans and a huge inflow of savings into the stock market with laborers at risk.

As support for a political hypothesis of increased managerial power, Boyer analyzes the micro-structure proof concerning insider trading, diffusion of stock options, lower CEO pay sensitivity of huge firms, surge in M&A activity, windfall profits, asymmetrical power on compensation committees, distortion of net income statements, innovation in hiding compensation and the financialization of CEO compensation in a corporate culture that has shifted from engineering science to financial management.

He then looks at the more prominent political arena where economic power is converted into political power. Here he discusses the context of rising inequality and growth of the super-rich with proof that concentration of wealth is heightened by stock market bubbles and a tax scheme that tilts in favor of the rich.

How do we extricate ourselves from this situation? Boyer's analysis provides a lot of hints. A shift towards a stakeholder conception "would reduce the probability of managerial greed and erroneous strategic decisions." More public control of accounting exercises is necessitated "to prevent an confederation among CEOs and auditors, at the expense of rank-and-file shareholders." Last, we need to recognize that monetary policy has been "at the heart of erroneous business systems and unjustified wealth from CEOs."

The volume must give readers pause concerning the desirability of convergence on an Anglo-American model and provides well-informed analysis of European models that may lead to a more sustainable path.

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