Aguilera R.V., & Jackson G. (2003). The cross-national diversity of corporate governance: dimensions and
determinants
This article examines the various dimensions of corporate governance, such as board structure, executive
compensation, ownership structure, and legal and regulatory frameworks. The authors identify determinants of
cross-national diversity in corporate governance, including economic, legal, political, and cultural factors.
Corporate governance varies significantly across countries: Corporate governance practices vary significantly
across countries, with different systems of corporate governance prevailing in different regions of the world.
Three dimensions of corporate governance: The authors identify three dimensions of corporate governance -
ownership structure, board structure, and capital market orientation. Ownership structure refers to the
concentration of ownership and the presence of blockholders, while board structure refers to the size,
independence, and role of the board of directors. Capital market orientation refers to the level of reliance on the
stock market as a source of capital.
Different models of corporate governance: Based on the three dimensions, the authors identify four different
models of corporate governance - the shareholder-oriented model, the stakeholder-oriented model, the family-
oriented model, and the state-oriented model. These models reflect the dominant ownership structure, board
structure, and capital market orientation in a particular country or region.
Determinants of corporate governance: The authors identify several determinants of corporate governance,
including legal systems, financial systems, political systems, cultural values, and economic development. These
determinants can shape ownership structure, board structure, and capital market orientation, and ultimately
influence corporate governance practices.
The Anglo-American model: The authors focus on the Anglo-American model of corporate governance, which is
characterized by dispersed ownership, a two-tier board structure, and a high reliance on capital markets. This
model is prevalent in countries such as the United States and the United Kingdom.
The continental European model: The authors also discuss the continental European model of corporate
governance, which is characterized by concentrated ownership, a one-tier board structure, and a low reliance on
capital markets. This model is prevalent in countries such as Germany and France.
The Asian model: The authors highlight the Asian model of corporate governance, which is characterized by
family ownership, a one-tier board structure, and a moderate reliance on capital markets. This model is prevalent
in countries such as Japan and South Korea.
The Latin American model: The authors also discuss the Latin American model of corporate governance, which is
characterized by family ownership, a one-tier board structure, and a low reliance on capital markets. This model is
prevalent in countries such as Brazil and Mexico.
Convergence and divergence: The authors note that there is a trend towards convergence in corporate
governance practices, particularly in terms of board independence and transparency. However, they also highlight
the persistence of divergent ownership structures and capital market orientations across countries.
Implications for multinational corporations: The authors suggest that multinational corporations need to be aware
of the different models of corporate governance and the determinants of corporate governance in different
countries. This can help them to navigate the regulatory and institutional environment in each country, and to
develop effective governance structures that are tailored to local conditions.
Key points and takeaways:
Corporate governance is shaped by a range of factors including institutional, economic, cultural, legal,
and political influences.
The authors identify several key dimensions of corporate governance, including board structure,
executive compensation, and ownership structure.
There is considerable variation in corporate governance practices across countries, reflecting differences
in national institutions, cultures, and legal frameworks.
Corporate governance codes and guidelines can play an important role in promoting good governance
practices, but their effectiveness depends on their implementation and enforcement.
Overall, the article highlights the significant variation in corporate governance practices across countries, and the
importance of understanding the different models of corporate governance and the determinants of corporate
governance in each country. This can help multinational corporations to navigate the regulatory and institutional
environment in each country, and to develop effective governance structures that are tailored to local conditions.
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