The Globalisation of Corporate Governance: External and Internal Mechanisms of Control

Abstract

Much of the literature on corporate governance assumes that there is one universally valid prescription for good governance—or at most assumes a single choice between pro-shareholder and pro-stakeholder prescriptions. It is, however, not only “who gets what” outcomes which have to be taken into account in choosing governance systems, but also different preconditions for effectiveness, affected by national cultures and employment systems. One dimension of variation is, the relative need for, and efficacy of, externally imposed disciplines on management on the one hand, and the internal controls of conscience and peer pressures on the other. Internal control mechanisms seem to work in community-like firms such as those of Japan. Will China turn out to have similar possibilities?