Explaining how politics shapes corporate governance, this book combines a theoretical model on this political interaction, with statistical evidence from thirty-nine countries of Europe, Asia, Africa, and North and South America and narratives of country cases.

LIST OF ABBREVIATIONS vii PREFACE xiii CHAPTER ONE: Introduction and Summary Argument 1 Why Fight about Corporate Governance? 3 Great Variance and the "Great Reversals" 4 Putting the Pieces Together: In Search of a Political Explanation 10 Policy Consequences 12 Plan of Attack 14 CHAPTER TWO: Governance Patterns: What Causes What? 15 Outcomes: Dependent Variables and Patterns of Control 16 Capitalist Economic Policies, Minority Shareholder Protections, and Degrees of Coordination 20 Politics: Preferences and Institutions 22 Conclusion 26 CHAPTER THREE: Framing Incentives: The Economics and Law Tradition 27 Origins of the Debate 28 Incomplete Contracts and Private Order 30 Law and Regulation: Minority Shareholder Protections--Information, Oversight, Control, and Incentives 39 Varieties of Capitalism: Degrees of Coordination in Market Economies 51 Conclusion 55 CHAPTER FOUR: Politics: Preferences and Institutions 57 Mapping Financial Interests on Political Processes: A Causal Model 57 Preferences and Coalitions among Owners, Managers, and Workers 59 Political Institutions: Majoritarian and Consensus Mechanisms 67 Alternative Arguments: Legal Family and Economic Sociology 83 Conclusion 93 CHAPTER FIVE: Preference Cleavages 1: Class Conflict 95 Section 1: Owners and Managers Dominate Workers 96 The Investor Model 96 Analytic Narrative 123 Korea: Changing Institutions, Shifting Preferences 123 Section 2: Workers Dominate Owners and Managers 132 The Labor Power Model 132 Analytic Narrative 140 Sweden: The Exemplar of the Labor Power Model? 140 Conclusion 147 CHAPTER SIX: Preference Cleavages 2: Sectoral Conflict 149 Section 1: Cross-Class Coalitions 149 The Corporatist Model: Workers and Managers Dominate Owners 150 Analytic Narrative 159 Germany: From Corporatist Bargain to a Transparency Coalition 160 Japan: Concentration without Owners 167 The Netherlands: The Evolution of "Poldermodel" Corporatism 177 Section 2: Building Coalitions in Authoritarian Systems 187 The Oligarchy Model: Owners Dominate Workers and Managers 187 Analytic Narratives 189 Russia: Oligarchs and Politics 190 China: "Selectorate-Electorate" Coalition 192 Singapore: Shareholder Protections with "Guided" Democracy 199 Conclusion 203 CHAPTER SEVEN: Preference Cleavages 3: Transparency, Voice, and Pensions 205 Section 1: Workers and Owners Dominate Managers 205 From Class Conflict to Corporatist Compromise 206 Analytic Narratives 228 Chile: Authoritarian Roots of the Transparency Coalition 228 Malaysia: Ethnicity and Democracy in Governance Politics 232 Section 2: Managers Dominate Owners and Workers 237 "Managerism" 237 Analytic Narratives 241 The United States: A Contested Path from Oligarchy to MSP 241 United Kingdom: The Power of Majoritarian Political Institutions? 259 France: Without the State, Who Is in Control? 262 Conclusion 273 CHAPTER EIGHT: Conclusion: Going Forward 277 Questions and Answers: What Explains Variance? 277 Shortcomings and Guideposts for Future Research 285 Conclusion: Fighting over the Governance Debate 287 DATA APPENDIX 297 BIBLIOGRAPHY 313 INDEX 333

"Peter Gourevitch and James Shinn brilliantly question the received wisdom about state regulation of corporate governance in this resolutely empirical and resolutely political book. They challenge arguments that countries can't change and that business dominates policymaking, showing that what determines a nation's regulatory system is the particular coalition that has emerged between workers, owners, and managers. This book should be required reading for students of corporate governance in the United States and beyond."—Frank Dobbin, Harvard University, author of Forging Industrial Policy: United States, Britain, and France in the Railway Age

"Peter Gourevtich and James Shinn are here onto one of the important inquiries of economic development today: To understand how the largest firms are run, why they are owned as they are in different nations, and what explains the variation-some nations with deep stock markets and some without. Much of the academic writing to date focuses on the economics of finance and the underlying legal structure. Get the law right, it's widely thought, and financial markets will flourish. Less attention has been paid to how, whether, and to what extent finance and law are both surrounded by a nation's politics; in short, why it sometimes is so hard to get the law right. Gourevitch and Shinn bring to bear on this subject today's thinking in political science, reaching closer to what seems to be where the basic causes of corporate governance variation around the world lie-not just in economics and law, but in political institutions and preferences."—Mark Roe, Harvard University, author of Strong Managers, Weak Owners: The Political Roots of American Corporate Finance and Political Determinants of Corporate Governance

"This seminal book underlines the vital political importance of corporate governance, a subject typically viewed only from legal and business perspectives. It will become a classic in political economy."—Peter J. Katzenstein. Walter S. Carpenter, Jr. Professor of International Studies, Cornell University

"Many comparative corporate governance studies like to pit bank-based systems against market-based systems, or civil-law against common-law countries. Gourevitch and Shinn make a compelling case that the reality of corporate governance is much too rich and complex to fit into these simple categories. They paint a fascinating picture of the evolution of corporate governance in Asia, Europe, and North America as driven primarily by changing political coalitions and ideologies, pension reform, privatization, and globalization."—Patrick Bolton, Princeton University, coauthor of Contract Theory

"A major contribution by leading scholars of corporate governance, this book brings together insights from economics, political science and law. Highly recommended for anyone interested in the relationship between governance and development, it sheds helpful new light on the key debate about whether and how legal origin is destiny."—Simon Johnson, Sloan School of Management, Massachusetts Institute of Technology

"Political Power and Corporate Control is the first serious, book-length political science treatment of the two-way interaction between corporate form and politics. There is nothing comparable."—Merritt Fox, Michael E. Patterson Professor of Law, Columbia University School of Law

Peter Gourevitch and James Shinn brilliantly question the received wisdom about state regulation of corporate governance in this resolutely empirical and resolutely political book. They challenge arguments that countries can't change and that business dominates policymaking, showing that what determines a nation's regulatory system is the particular coalition that has emerged between workers, owners, and managers. This book should be required reading for students of corporate governance in the United States and beyond. -- Frank Dobbin, Harvard University, author of "Forging Industrial Policy: United States, Britain, and France in the Railway Age" Peter Gourevtich and James Shinn are here onto one of the important inquiries of economic development today: To understand how the largest firms are run, why they are owned as they are in different nations, and what explains the variation-some nations with deep stock markets and some without. Much of the academic writing to date focuses on the economics of finance and the underlying legal structure. Get the law right, it's widely thought, and financial markets will flourish. Less attention has been paid to how, whether, and to what extent finance and law are both surrounded by a nation's politics; in short, why it sometimes is so hard to get the law right. Gourevitch and Shinn bring to bear on this subject today's thinking in political science, reaching closer to what seems to be where the basic causes of corporate governance variation around the world lie-not just in economics and law, but in political institutions and preferences. -- Mark Roe, Harvard University, author of "Strong Managers, Weak Owners: The Political Roots of American Corporate Finance" and "Political Determinants of Corporate Governance" This seminal book underlines the vital political importance of corporate governance, a subject typically viewed only from legal and business perspectives. It will become a classic in political economy. -- Peter J. Katzenstein. Walter S. Carpenter, Jr. Professor of International Studies, Cornell University Many comparative corporate governance studies like to pit bank-based systems against market-based systems, or civil-law against common-law countries. Gourevitch and Shinn make a compelling case that the reality of corporate governance is much too rich and complex to fit into these simple categories. They paint a fascinating picture of the evolution of corporate governance in Asia, Europe, and North America as driven primarily by changing political coalitions and ideologies, pension reform, privatization, and globalization. -- Patrick Bolton, Princeton University, coauthor of "Contract Theory" A major contribution by leading scholars of corporate governance, this book brings together insights from economics, political science and law. Highly recommended for anyone interested in the relationship between governance and development, it sheds helpful new light on the key debate about whether and how legal origin is destiny. -- Simon Johnson, Sloan School of Management, Massachusetts Institute of Technology Political Power and Corporate Control is the first serious, book-length political science treatment of the two-way interaction between corporate form and politics. There is nothing comparable. -- Merritt Fox, Michael E. Patterson Professor of Law, Columbia University School of Law