chapter  8
36 Pages

Germany

ByJÜRGEN R. GROTE, ACHIM LANG, FRANZ TRAXLER

While all countries of the EU-15 have seen major economic restructuring since the late 1980s, such changes have been most thoroughgoing in Germany. This is mainly due to unifi cation which has combined one of the most advanced capitalist economies and an ineffi cient command economy, leading to considerable economic imbalances and profound diversity of business interests within the legal framework of former West Germany which was entirely extended into the East. In addition, the sector of large companies has seen far-reaching alterations of corporate governance. Together with Japan, Germany is commonly considered an exceptional case of strong stake-holder orientation, built upon what is often captured as Deutschland AG: a dense inter-fi rm network of interlocking directorates and cross-shareholdings in which the banks have a multiple role as creditors, shareholders and representative of shareholders. This network has been disintegrating mainly as a result of economic internationalization and fi nancial deregulation which have eased the companies’ access to external capital markets, and have also forced them to concentrate on core activities. Likewise, they have induced the banks to diversify from lending activities to other business such as investment banking which confl icts with board representation and equity holdings. Furthermore, changes in taxation have set an incentive to divest from mutual shareholdings. The upshot of these changes has been a move from accentuated stake-holder orientations to more shareholderoriented models (e.g. Jackson and Moerke 2005). Implying greater emphasis on short-termism, profi tability and competition, this change in corporate governance has made the relations between large companies as well as their relations with SMEs and organized labour more diffi cult. In combination with the burden of unifi cation, this development has created problems of an unprecedented scale for the country’s business interest associations.