Political Power and Corporate Control: The New Global Politics of Corporate Governance

Citation

Gourevith, P.A. and Shinn, J. (2008), "Political Power and Corporate Control: The New Global Politics of Corporate Governance", Society and Business Review, Vol. 3 No. 3, pp. 260-261. https://doi.org/10.1108/sbr.2008.3.3.260.3

The two authors have a large knowledge of the corporate governance question both in theoretical and practical terms; knowledge that is internationally coloured. Peter A. Gourevitch is a political scientist. He is Professor of Political Science at University of California, San Diego. James Shinn is a former civil servant, a former entrepreneur (Dialogic) and CEO. He is visiting Professor at Georgetown University's School of Foreign Service, where he teaches courses on foreign politics. The globalization has demonstrated that the modern market economy has produced very different systems of corporate governance around the world. The corporate governance forms vary within and between countries, within and between industries. In Political Power and Corporate Control, Gourevitch and Shinn standard approach about state regulation of corporate governance. They propose a political explanation that challenges the assumptions of a literature dominated by economic theory. They esteem that business and corporations can be governed by the society, showing that what determines a nation's regulatory system is the particular coalition that has emerged between workers, owners, and managers. They bring a theoretical framework 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.

Starting from the fact that much of the nowadays academic works focuses on the economics of finance and the underlying legal structure, political scientist Gourevitch and former CEO Shinn propose a more complex picture that incorporates political mechanisms and the interests of other groups besides managers and shareholders, most importantly employees. Much of the economic and legal analysis of comparative corporate governance takes US corporate law as its baseline, which in the popular perception leaves non‐shareholder constituencies on the sidelines. The inclusion of worker interests into corporate governance is often seen as simply an inefficient legislative distortion of the agency problem between shareholders and managers. Gourevitch and Shinn do away with the underlying assumption of complete contracts and point out that workers do care about job security, work conditions, and health and retirement benefits, and that they therefore have a stake in how the firm is run. Therefore, it seems that the basic causes of corporate governance variation around the world lie, not just in economics and law, but in political institutions and preferences. The authors develop their analysis around coalition building by managers, owners, and workers, which ultimately determines the structure of the respective corporate‐governance system. The institutions of corporate governance in a particular country depend on the political coalitions that managers, owners, and employees form and on which coalition wins the political struggle. The authors therefore identify three possible inter‐coalition cleavages: class conflict (owners and managers versus workers), sectoral conflict (managers and workers versus owners), and property and voice conflicts (owners and workers versus managers). Their coalition model suggests no easy answer: no single cause explains variations in corporate governance, which are influenced by both the preferences of the relevant interest groups and the political environment in general.

The book is made of eight chapters that are easily readable and strongly documented. Chapter 1 explicits the authors' quest: “in search of a political explanation”! Chapter 2 is dedicated to the causes that bring to the various corporate governance patterns. Chapter 3 discuss about the conventional causes such law and incentives. Chapter 4 “politics” explicits what is the theoretical originality of this book: a political analysis of corporate governance forms. Chapter 5 presents the “class conflict” coalition where owners and managers dominate workers. The “sectoral conflict” (or corporatist model), characterised by the domination of managers and workers on owners, is developed in Chapter 6. Chapter 7 is about the coalition of workers and owners against the managers. The presentation of those three generic models of corporate governance is supported by countries cases: Korea, Germany, Japan, Russia, etc. Chapter 8 concludes the book by trying to explain the variance, by proposing further researches and inviting to renew the governance debate. The two authors' analysis leads to an unconventional conclusion since labour seems us the crucial player in corporate governance.

Political Power and Corporate Control is an original view of comparative corporate governance. It clearly contrasts with the economic accounts dominating the field. Gourevith and Shinn clearly tackle the corporation governance question from a political science point of view that contrasts with the usual one. Their book is also resolutely empirical. Data and concepts support each other and convince. The political approach used in this book recalls Mintzberg's book (1983): “Power in and Around Organizations”, Prentice Hall. Largely, it recalls works, such as the French “regulationnist”, that try to explain models of corporate governance by searching explanation variables in the institutions or the society. This highly innovative and enlightening book may be recommended to anyone interested in the corporate governance debate. This book should also be required reading for students of corporate governance.

Hervé Mesure

Groupe ESC Rouen, France