Page 187 - Global Political Economy_Understanding The International Economic Order

CHA PTER S EVEN
enhanced by the system of “dual boards.” In Germany, there is both
a supervisory board, comparable to the American board of directors,
and a management board, composed of the chief executive and top
management. While, in theory, the supervisory board is the superior
body, in actual practice the management board, which is full-time
and functions on the basis of consensus, is frequently dominant. This
empowerment of management strengthens management’s ability to
make long-term strategic decisions.
The structure and governance of German industry is also signifi-
cantly influenced by the negative German attitude toward corporate
takeovers. The methods used to prevent hostile takeovers are legion:
for instance, companies may simply stay private, stock may be distrib-
uted to increase resistance, blocking minorities may be employed,
German corporate law can be utilized to discourage takeovers, and
voting rights can be restricted. Whereas in the United States, corpo-
rate takeovers are defended as a blunt but effective means to guaran-
tee high performance and to demonstrate the ultimate responsibility
of management to the shareholders, in Germany takeovers have been
regarded as destabilizing and destructive of important long-term busi-
ness relationships. A number of American executives discovered this,
to their chagrin, when they attempted to gain control of the Deutsche
Bank. This attitude has made corporate takeovers and struggles over
corporate governance rare in Germany, and German banks have sel-
dom sold their stakes in German corporations. This situation, how-
ever, began to change in the late 1990s.

Significance of National Differences

This chapter has analyzed and compared the three national systems
of political economy dominant at the beginning of the twenty-first
century. The American system incorporates neoclassical precepts re-
garding the organization and functioning of an economy intended to
maximize consumer satisfaction and facilitate adjustment to change.
Many other countries consider the social costs of such an economy
to be too high because of their impact on poverty and on those who
lose through economic developments. The Japanese system places a
high priority on social harmony and national power, but its critics
consider that system to be inflexible, mercantilistic, and unresponsive
to the concerns of other societies. The German emphasis on the social
market has many of the virtues and vices of both the American and
Japanese systems. Although each of these economies was experiencing
important changes at the turn of the century, they remained distinctly
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