In this robust and comprehensively free-market defence of Anglo-American systems of corporate governance, the author argues that stakeholder models allow management and governments to run companies in their own interests.
Starting with a clear explanation of what corporate governance is, Sternberg demonstrates why the stakeholder, German and Japanese models are less capable than the Anglo-American model of achieving good corporate governance. She shows how, and why, regulation to improve corporate governance is typically counterproductive.
Properly understood, corporate governance consists of ways of keeping corporate actions, agents and assets tied to the corporate objectives; those objectives are the definitive ends established by the corporation's owners, its shareholders.
Whereas the Anglo-American model promotes achievement of the corporate objectives, and accountability to shareholders, the German and Japanese models are designed and used for different purposes.
The stakeholder model is incompatible with business and all substantive corporate ends. Incoherent and unjustified, it fundamentally undermines agency, accountability and property rights.
The way to improve corporate governance is to bring Anglo-American practice into line with the Anglo-American theory, by freeing shareholders from regulatory obstacles, and allowing them to choose how best to hold their corporations to account.
What is needed is a genuine market for corporate control, in which companies can compete for shareholders, and investment managers for funds, in part on the degree and kinds of accountability they afford to owners.
* Corporate Governance: Accountability in the Marketplace, Second Edition, Elaine Sternberg, ISBN: 0 255 36542-x, Hobart Paper 147, (pb), £12.50 (incl. £1.50 p&p UK & Europe)