Ideal Type Organisations and Company Law in Europe
Authors: Dean Janice 
Published: April 2022

Different national cultures within Western Europe have very different models of what constitutes a 'well-functioning organisation'. Looking at the nations with the largest economies in the European Union (the French, Germans, Italians and British), the author considers how some of these different models (the 'pyramid', the 'machine', the 'family' and the 'market') have influenced the company laws of the countries in which they are prevalent. The piece then considers the implications for European Union company law of the variations between the predominant national models. Strengths and weaknesses of the various ideal types of organization and other possible models are considered.

This article will examine companies in the quartet of European Union countries which have an annual GDP exceeding 1.5 trillion euros: Germany, France, the UK and Italy. Very broadly, two of them, France and Italy are Southern European (traditionally mainly Catholic) in culture as well as geographically, the other two are Northern European (historically mainly Protestant). The four nations remain diverse in economic structure, and particularly in average company size and the use of capital markets, although (with Germany being much the largest) the scale of the economies is similar. These major European Union countries also have different pre dominant models of effective corporate organisation, regulation and management. The discussion will contend that the diverse sets of regulations in part stem from, and are connected to, varied models of what constitutes a 'well-functioning organisation' in the four nations.

These pervasive 'ideal types' of the effective organisation might be expected to influence what governments, shareholders and other stakeholders expect of the major companies and how corporate leaders behave. In the European Union, it is argued that national cultures, including views of what constitutes a well-functioning organisation, still provide the basis for social interaction including business activity. Some implications of these underlying differences of perspective for greater co-ordination of company law at European Union level will also be addressed. The strengths and weaknesses of the various 'ideal types' of organisation will be considered. Finally, some possible alternative conceptions of the 'well-organised' company in the 21st Century will be discussed.

The continuing diversity of national cultures between Germany, France, the UK and Italy is reflected in their nationals' preferred ways of conceptualising organisations, including major business organisations. Hofstede quotes Owen J Stevens' study at INSEAD Business School - "The majority of the French tended to resolve [a conflict] by referring to the hierarchy; the British, through horizontal negotiation; and the Germans, through the establishment of procedures. Stevens identified the implicit model of a well-functioning organization for the French as a pyramid, that for the British as a (village) market, and that for the Germans are a well-oiled machine." As far as Italy is concerned, the 'family' model remains most salient. These observations led the current author to further examination of those models in the national contexts as they connected to company law. Questions of the adequacy or otherwise of those mental pictures also arose.