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Contests for Corporate ControlCorporate Governance and Economic Performance in the United States and Germany$
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Mary O'Sullivan

Print publication date: 2001

Print ISBN-13: 9780199244867

Published to Oxford Scholarship Online: November 2003

DOI: 10.1093/0199244863.001.0001

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The Emerging Challenges to Organizational Control in Germany

The Emerging Challenges to Organizational Control in Germany

(p.259) 8 The Emerging Challenges to Organizational Control in Germany
Contests for Corporate Control

Mary O'Sullivan

Oxford University Press

In recent decades the institutional foundations of organizational control in Germany have proven to be more enduring than those in the USA, but, nevertheless various pressures have built up on the German system of corporate governance that raise questions about its sustainability in its current form. Some of these pressures emanate from sources external to the operation of the domestic corporate economy, such as the processes of European integration and German reunification, but the more powerful pressures reflect financial and productive challenges that are integrally related to the evolving political economy of the German corporate sector. First, pressures for financial liquidity have increased; as Germans have grown wealthier, they have been moving their savings out of bank deposits and into more market‐based instruments, a trend that is likely to lead to increased demands for higher returns on corporate securities; these pressures are discussed in Sect. 8.2. The second formidable challenge to the German system of organizational control, that posed by international competition, especially from Japan, is discussed in Sect. 8.3; the Japanese competitive challenge is fundamentally an organizational one since it confronts the social foundations on which German enterprises have successfully competed in the past even in high‐quality niches in which they have previously been unrivalled. Together, and in combination with forces external to the German economy, these structural changes in the German economy (the one financial, the other productive) may challenge the foundations of the post‐war system of corporate governance; Sect. 8.4 documents some of the political responses to these challenges from key interest groups and, in particular, labour and financial interests in the German economy; Sect. 8.5 concludes by drawing out some of the possible implications of these responses for the future of German corporate governance.

Keywords:   corporate governance, corporate securities, financial liquidity, financial pressure, Germany, institutions, Japan, market competition, organizational control, production, returns, structural change, West Germany

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