The U.S. corporate governance system failed in 2002, and again in 2008, leading to the deepest economic downturn in the United States since the Great Depression. Germany, in contrast, suffered neither widespread regulatory failure nor market collapse. Important differences in the U.S. and German corporate structure and capital markets may explain the divergent economic performance. This Article examines whether and how to emulate German corporate governance structures in the U.S. market, a theme which may be of interest to German corporations considering locating operations in the United States, such as Volkswagen in Tennessee.
This Article is structured in three parts. In Part I, we present hypotheses about the causes of the U.S. market collapse, which we hypothesize was not merely a result of endogenous corruption and fraud but also due to exogenous macroeconomic factors. This Part includes a description of the German capital market and German economic theories. Part II examines theories of the corporation. Part III examines the corporation in practice. The Article concludes that although restructuring the U.S. legal system is likely impossible due to Weimar-style gridlock, nevertheless German corporate governance models can be emulated in the U.S. market using the corporation’s articles of incorporation, bylaws, and contracts as well as through domestic forms such as the cooperative and the limited partnership.
Eric Engle and Tetiana Danyliuk,
Emulating the German Two-Tier Board and Worker Participation in U.S. Law: A Stakeholder Theory of the Firm, 45 Golden Gate U. L. Rev. 69