The European Company: A Pilot for Integrating Shareholder Value into Stakeholder-Orientated European Societies?

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There is currently a battle over the character of the evolving European system of corporate governance. At issue is the fundamental choice between two different conceptions of the firm: the shareholder model, where the purpose of the firm is to maximise value in the interest of shareholders, and the stakeholder model, where the firm has responsibility to a broader range of stakeholders.

After a decade of ascendancy in the 1990s, the Anglo-Saxon shareholder model appears to be running into increasing problems and losing political and economic legitimacy. The many financial scandals in the US in the last half a decade show that linking management remuneration to share price leads to huge incentives for fraud. There is no evidence that the explosion in US management salaries, which are very high by international comparison, have resulted either in better economic performance or in higher enterprise value in terms of higher share prices over the long term. On the contrary, high levels of remuneration in the Anglo-Saxon world have become a significant drain on company profits. These could be better spent on long-term investment or returning money to the shareholders. A voluntary approach to Corporate Social Responsibility (CSR) raises doubts about the ability of a neo-liberal system to address social needs.

All of these are indicators that the time is ripe for a new ‘leading model’ for the post-shareholder capitalist era. Europe is an interesting source for suggestions based on the historical experience of various important transnational companies covered by national and supranational regimes of co-determination or workers’ presence in board rooms. In particular the new statute on European companies (Societas Europaea, or SE) could serve as a model for finding a balance between global competitiveness and social interests.

Document Type: Research Article


Publication date: January 1, 2009

More about this publication?
  • The European Company Statute
    The European Company Statute (ECS) is one of the most important pieces of company legislation adopted so far by the European Union. Its aim is to regulate, on a voluntary basis, the internal functions of a business operating in more than two European countries at the same time. This book provides a comprehensive analysis of the history, structure, legal basis and likely impact of the ECS, examining its evolution over some 30 years of development and its chances for integrating diverse models of corporate governance across the European Economic Area. The book explores the implications of the ECS for employee participation at various levels in the European company, with country case studies drawn from Greece, Slovenia and the UK. It also analyses certain legal issues, including taxation and the position of companies located in countries without existing systems of employee board-level participation.
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