Chapter 6: Council politics for regulatory reforms on corporate governance and labor relations
Regulatory reform is a prominent aspect of the globalization agenda in the early twenty-first century. As the international order has shifted from embedded liberalism to neoliberalism, non-liberal states with arrangements of coordinated market economy (CME) are pressured to adjust their policy domains to market-oriented ones in order to enable their firms to operate competitively in international markets where liberal practices are increasingly common (Gilson, 2001; Hansmann and Kraakman, 2001). The United States and the United Kingdom, major liberal market economies (LMEs), have strengthened stockholder-centric corporate governance and flexible labor contracts based on the principle of profit maximization since the 1980s. Germany, which has long embraced the CME principle of co-determination, underwent market-consistent reform under the Schröder Social Democratic government in an attempt to revive its stagnant economy after unification. It adopted a liberal Corporate Governance Code stressing managerial transparency and stockholder rights, while legalizing work sharing and dismissal with severance pay. Finally, the Organisation for Economic Co-operation and Development (OECD) adopted the OECD Principles of Corporate Governance in 1999 (revised in 2004), which stressed stockholder rights and disclosure, and pushed for a reform for flexible labor markets to accommodate rapid technological changes and enhanced production cycles.
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