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Corporate Governance Models: Anglo-American, German

There are several models of corporate governance that differ based on country regulations. The main models are the Anglo-American, German, Japanese, and social control models. The Anglo-American model is shareholder-oriented and found in countries like the UK, US, and India. It has separation of ownership and management. The German model has a two-tier board structure with representation of employees. The Japanese model recognizes the interests of lenders like banks that are major shareholders. The social control model advocates for representation of all stakeholders in corporate governance.

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106 views2 pages

Corporate Governance Models: Anglo-American, German

There are several models of corporate governance that differ based on country regulations. The main models are the Anglo-American, German, Japanese, and social control models. The Anglo-American model is shareholder-oriented and found in countries like the UK, US, and India. It has separation of ownership and management. The German model has a two-tier board structure with representation of employees. The Japanese model recognizes the interests of lenders like banks that are major shareholders. The social control model advocates for representation of all stakeholders in corporate governance.

Uploaded by

Tejas D Husukale
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Corporate Governance Models: Anglo-American, German

Corporate form of business is generally managed by the Board of Directors and the board
members are elected by shareholders. The board in turn appoints the professional managers
to manage the business. Different countries have different regulations and corporate
governance models differ based on these differences.
Corporate Governance Models
The Corporate governance models are broadly classified into following categories:
1. Anglo-American Model
2. The German Model
3. The Japanese Model
4. Social Control Model
Anglo-American Model
Under the Anglo-American Model of corporate governance, the shareholder rights are
recognised and given importance. They have the right to elect all the members of the Board
and the Board directs the management of the company. Some of the features of this model
are:
 This is shareholder oriented model. It is also called Anglo-Saxon approach to corporate
governance being the basis of corporate governance in Britain, Canada, America,
Australia and Common Wealth Countries including India
 Directors are rarely independent of management
 Companies are run by professional managers who have negligible ownership stake.
There is clear separation of ownership and management.
 Institution investors like banks and mutual funds are portfolio investors. When they
are not satisfied with the company’s performance they simple sell their shares in
market and quit.
 The disclosure norms are comprehensive and rules against the insider trading are tight
 The small investors are protected and large investors are discouraged to take active
role in corporate governance.
German Model
This is also called European Model. It is believed that workers are one of the key stakeholders
in the company and they should have the right to participate in the management of the
company. The corporate governance is carried out through two boards, therefore it is also
known as two-tier board model. These two boards are:
1. Supervisory Board: The shareholders elect the members of Supervisory Board.
Employees also elect their representative for Supervisory Board which are generally
one-third or half of the Board.
2. Board of Management or Management Board: The Supervisory Board appoints and
monitors the Management Board. The Supervisory Board has the right to dismiss the
Management Board and re-constitute the same.
Indian Model
In India there are mainly three types of companies’ viz. private companies, public companies
and public sector undertakings. Each of these companies has distinct kind of shareholding
pattern. Thus the corporate governance model in India is a mix of Anglo-American and
German Models.
Japanese Model
Japanese companies raise significant part of capital through banking and other financial
institutions. Since the banks and other institutions stakes are very high in businesses, they
also work closely with the management of the company. The shareholders and main banks
together appoint the Board of Directors and the President. In this model, along with the
shareholders, the interest of lenders is recognised.
Social Control Model
Social Control Model of corporate governance argues for full-fledged stakeholder
representation in the board. According to this model, creation of Stakeholders Board over
and above the shareholders determined Board of Directors would improve the internal
control systems of the corporate governance. The Stakeholders Board consists of
representation from shareholders, employees, major consumers, major suppliers, lenders
etc.

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