europe - norm & law

7/30/2019 Europe - Norm & Law

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THE SOCIO-CULTURAL ENVIRONMENT OF FRENCH BUSINESS

Reading Presentation

Cultural Norms & Company Laws in Europe


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Agenda

1. Important Words

2. Summary

3. Important Statements4. Further Difficulties

5. Why is this Article Important

6. What questions it asks7. What questions it answers

8. Missing items


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Author

Associate Professor of Law,

University of Warwick, UK

Research social and economic background andthe impact of company law rules and in

competition/convergence between company

law systems

Article published in International Journal of

Business and Social Science, March 2012


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Important words used in article and

definitions Companies or corporations in modern sense often have these 4

characteristics

Separate legal personality

Limited liabilities of the shareholders

Transferable shares Delegated management

Company law is the study of how shareholders, directors, employees,

creditors, and other stakeholders such as consumers, the community and

the environment interact with one another.

Corporate governance is "the system by which companies are directed

and controlled". It involves regulatory and market mechanisms, and the

roles and relationships between a companys management, its board, its

shareholders and other stakeholders


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definitions Common Law, originated from England,is generally uncodified. This

means that there is no comprehensive compilation of legal rules and

statutes. While common law does rely on some scattered statutes, which

are legislative decisions, it is largely based onprecedent, meaning the

judicial decisions that have already been made in similar cases. Also

known as case law

Civil Law, developed in continental Europe, in contrast, is codified.

Countries with civil law systems have comprehensive, continuously

updated legal codes that specify all matters capable of being brought

before a court, the applicable procedure, and the appropriate punishment

for each offense.


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definitions Cultural dimensions:

Power Distance

Uncertainty Avoidance

Individualism .vs collectivism

Masculinity .vs femininity

Long-term orientation

Anglo Saxon refer to the Anglophone peoples and societies of Britain, the

United States, and other countries


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definitions Path dependence explains how the set of decisions one faces for any

given circumstance is limited by the decisions one has made in the past,

even though past circumstances may no longer be relevant.

Market-Based Corporate Governance System is based on Anglo-American

law. Since the markets are the primary source of capital, investors are

given the most power in determining corporate policies. Therefore, the

system relies on the capital markets to exert control over the corporation's

management.

Shareholder primacy is a theory in corporate governance holding that

shareholder interests should be assigned first priority.


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Summary

The article examined the relationship between company laws and national

cultures of four European Union Member States, namely Germany, France, the UK

and Italy. It explained and explored the diversity of company laws between those

nations with regard to their different national cultures.

Key take-aways:

There is a certain degree of convergence of corporate governance practice between the

Anglo-Saxon firms (in UK) and the non Anglo-Saxon ones (in Continental Europe).

However, the distinctive underlying values in each nations culture deter further

adoption and convergence of a universal corporate governance practice.

While the level of profit returned to shareholders in British firms is higher than that of

those firms in Continental Europe, it doesnt necessary means the UK model of

corporate governance is the best to be adopted across Europe. The operation of new

rules that do not fit culturally maybe difficult and it may work best if followed by a

cultural movement.


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Structure of the Article &

Parts Summary (1/2) Defining culture

Culture & Law

How legal rules reflected or explained by different cultures.

Can legal rules change culture?

Strengths & Weaknesses of Stakeholder Model .vs Shareholder Model.

Dimensions of Culture

Convergence or Persistent Diversity

What foster or restrict the convergence of corporate governance

practice?

The fact that corporate structures appear similar on paper does not

mean that individuals will react in the same way when it comes to

making decisions.

The very aim ofimproving corporate governance is culturally

constructed in a way that is reflected in varied national politics.


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Structure of the Article &

Parts Summary (2/2) Company Law Characteristics in Germany, France, Italy, and the UK

Compare different company law model in the 4 countries.

Economic outcomes of different models.

National Histories, Culture & Company Law

How each nation has its current company law system.

Relationship between investors and their enterprises, as well as

different strategies used in each country to reduce agency cost.

Adaptation and Change to Company Law

Speed and direction of change is affected by cultural dimensions.

Though there seems to be a 2-way influence between UK and

Continental Europe, variation in cultures still deter swift convergence.

Each country still has varied legal approaches.

Effective European Corporate Governance


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Cultural dimensions of 4 studied

countriesPower Distance

Uncertainty Avoidance


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Cultural dimensions of 4 studied

countriesIndividualism

Masculinity (Mastery)


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Important statements

This study will seek to

I) explain and explore the diversity of companylaws between those nations.

II) It will also consider whether it is likely to

endure, in the EU political context and under

pressure from increasing economic

globalisation


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I) Exploration of Diversity

in consideration of individualism as opposed tocollectivism, the greatest continuing divide maybe between (geographically and politically) coreEuropen countries centred on France andGermany and the outer powers of Italy and theUK

The insiders (also more harmony seeking, andlong-term oriented) are superior in terms of

performance under normal conditions, theoutsiders in crisis times.

If systems were to converge in crisis timesoutsider systems may dominate for this reason

p. 286


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Difficulty: Are the outsiders really

better off? Are there even outsiders?


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II) Differences likely to last?

Convergence toward the Anglo-Saxon model ofcorporate governance on that economic basisseems inevitable

BUTGiven the cultural variations, swift acceptance ofthe market model is highly improbable. Pathdependency within nations is evident, often

privileging other factors than economicefficiency

p. 292


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II) Differences likely to last?

If European political arena acceptance of particularrules seems to be inevitable, differential effectivenessof government agencies, courts and other mechanismsmay aid persistence of diversity in accordance with

varied national cultures.The fact that corporate structures () appear on

paper to be comparable () does not mean thatindividuals will react the same way when it come to

making decisions.Enforcement issues

p. 288


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II) Culture and Law

Where cultural values vary,

uniform rules even across

the EU may not be

appropriate

Culture and Laws are path-

dependant to the extent that

they ma not be successfullyimposed across the EU or be

interpreted in extremely

different ways

p. 284


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Further Difficulties

Unusual grouping of countries based onquestionable claims in relation to culturaldifferences

In addition to the example already given: sheimplies the UK had a higher score on themasculinity index than Germany: both countriesare the same

She classes Germany and the UK together becauseboth are predominately protestant. Germany50/50


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Further Difficulties/ Questions

Availability Bias?Patriotism?

- The UK is at the centre

of every idea shedevelops and implicitlyor explicitly consideredthe factual or ideal rolemodel.

- Especially fond of theMarket Model Why is

that?


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Items missing that should have been

mentioned

Use of facts and numbers to support her conclusions

- in order to avoid generalization

Critical review of assumptions- Is Hofstedes results appropriate to use in

the more globalized world today?

What has been the effect of the recent financial crisis?

The articles contribution remains unclear


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Q&AThank you!

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