Nationality and Ownership Structures: The 100 Largest Companies in Six European Nations

Introduction Corporate governance has become a fashionable topic in international business. In the U.S., Michael Porter and others criticize American capital markets for myopia and underinvestment in soft resources like research, development and education (Porter 1992). In Great Britain institutional investors and public authorities strive to make company managers more responsible to investor interests (e.g. the Cadbury report). In continental Europe business executives and policy makers are discussing the pros and cons of their national models. It is debated, to what extent there is a European company model as distinct from an Anglo-American one. This question is particularly important in setting the standards for integrated European capital markets. To what extent, for instance, should an emerging European Union adopt Anglo-American style stock markets? The Booz-Allan report (1989) on the European markets for corporate control argued that European industry is inefficiently structured because of capital market barriers and that such barriers need to be dismantled in favour of open Anglo-American style stock markets. EU initiatives to regulate the issue of dual class shares are also part of this debate (the proposed 5th company law directive). The continental governance debate has important business implications, the most notable recent example perhaps being the decision of a leading European company like Daimler Benz to opt for the Anglo-American model and to register on the New York Stock exchange. In response to the corporate governance debate a number of excellent publications have appeared comparing and evaluating national systems of corporate governance (Walter 1993, Roe 1994, Baum et al. 1994, Charkham 1994, Prentice and Holland 1994). This literature has mainly addressed the "soft" sides of corporate governance - the division of labour between management, company board and shareholders within a given structural setting. This paper aims to analyze (measurable) ownership structures that condition corporate governance - with particular emphasis on the differences in national ownership structures. While previous research in this area has been based mainly on descriptive and anecdotal evidence this paper identifies measurable and comparable variables influencing corporate governance. To our knowledge, this is the first attempt to carry out a test of international differences in ownership structure based on comparable cross-country variables. We compare ownership structures among the 100 largest independent non-financial ownership units (companies) in 6 European nations: Denmark, France, Germany, Great Britain, the Netherlands and Sweden. For a start, we place each of these 600 companies in one of 6 categories and present the findings in Table 1 (the definition of these categories and their theoretical justification are explained in the next section). [TABULAR DATA FOR TABLE 1 OMITTED] We note first of all that pluralism is a general characteristic of ownership structures in the countries studied. No single ownership mode appears to be dominant in European business. Nevertheless, distinct "modes of capitalism" seem to be identifiable and to correspond well to ideal types in the corporate governance literature - e.g. highly dispersed ownership of British companies, French state ownership, German financial capitalism etc. It appears, for instance, that Great Britain has a disproportionate degree of ownership dispersion. This is consistent with the common view of the British system as market based - i.e. that share markets are open and play a major role in the allocation of capital and monitoring company performance. Non-bank financial institutions (pension funds and insurance companies with a fiduciary risk aversion to large shareholdings) apparently hold more than 50% of all British shares (Charkham 1994). Germany appears to have very few companies with dispersed ownership, but a large number of companies (30) in which a single owner holds a large minority stake (dominating ownership). …