Abdul Rasheed and Toru Yoshikawa (Eds.), The Convergence of Corporate Governance: Promise and Prospects, Palgrave Macmillan, Basingstoke, 2012, ISBN 9780230297463, 296 pp.

• Date: 01 January 2014
• Published date: 01 January 2014
• DOI: http://doi.org/10.1111/corg.12048
• Author: Parthiban David

Book Review

Abdul Rasheed and Toru Yoshikawa (Eds.), The Convergence of Corporate Governance: Promise

and Prospects, Palgrave Macmillan, Basingstoke, 2012, ISBN 9780230297463, 296 pp.

An inf‌luential paper in the comparative corporate gover-

nance literature by Hansmann and Kraakman (2001)

proposed that it was inevitable that governance models

across the world would converge to the (superior) Anglo-

American model. This book, edited by Professors Abdul

Rasheed and Toru Yoshikawa, has contributions from schol-

ars that take stock of the changes in governance practices of

public corporations in various countries to evaluate

Hansmann and Kraakman’s (2001) thesis of the “end of

history” and convergence of corporate governance to the

Anglo-American model. The evidence in the book suggests

there has been some convergence, but it is far from com-

plete, and various elements of prevalent alternate models

persist.

This is an important and timely topic. Countries are

getting more and more globally integrated, but differences

remain and it is important for us to learn the extent to which

governance practices are converging. The book should be

useful not just for scholars interested in the current state of

the art on convergence, but also for those seeking to learn

about similarities and differences in corporate governance

across the world.

Rasheed and Yoshikawa(Chapter 1) provide a useful over-

view of the topic. They def‌ine convergence as the isomor-

phism in practices across countries and distinguish between

various forms of convergence. They analyze both the drivers

that propel corporations towards convergence (e.g., increas-

ing integration in product, labor, and capital markets across

the world as well as diffusion of governance codes) and the

impediments that inhibit convergence (e.g., institutional

rigidities, path dependencies, complementarities, and inter-

est groups that serve to maintain the status quo). Their

review of the extant literature provides a useful account of

the state of knowledge and it sets the stage for the original

research that forms the rest of the book.

Hansmann and Kraakman (Chapter 2) ref‌lect on the

extent to which actual practices ref‌lect the claims they made

in their inf‌luential call for convergence a decade ago. They

provide a spirited defense of their thesis and conclusion that

the shareholder model is indeed gaining signif‌icant ground

over the alternate state-, labor-, and management-oriented

models. They base their conclusion on claims of ideology

(most scholars agree that it is superior), eff‌iciency (it is

the most eff‌icient way to organize), and factual (actual

evidence).

Most of the remaining chapters take a country-by-country

approach to evaluating convergence in a variety of countries,

including Canada, Germany, India, Japan, Korea, Singapore,

and Spain. A set of chapters also explores specif‌ic mecha-

nisms of convergence such as the role of multinational

corporations (MNCs), corporate governance codes, and

cross-listing.

Bates and Hennessy (Chapter 3) note that Canada is geo-

graphically the closest country to the US, yet convergence

remains elusive. Canadian regulations promote conver-

gence to a shareholder model by supporting dissident proxy

initiatives; yet other regulations that maintain Canadian

block ownership limit the eff‌icacy of dissident proxy initia-

tives as large block shareholders are relatively invulnerable

to such pressures to be more receptive to minority share-

holders.

In their study of Germany, Tuschke and Luber (Chapter 4)

explain that larger corporations are more likely to adopt

shareholder-oriented practices than are smaller corpora-

tions. Yet, even among larger corporations, existing charac-

teristics such as the two board model that is based on

employee co-determination has led to a persistence of the

stakeholder model with limited convergence related to some

practices (such as incentive compensation) in a limited set of

f‌irms.

In their study of India, Rajagopalan and Zhang (Chapter

5) explain that the legal framework favors convergence, but

weak enforcement and rampant corruption stand in the way

of actual convergence. They argue, however, that market

forces arising from a relaxation in foreign ownership are

likely to foster more convergence as Indian f‌irms become

increasingly impacted by international product and capital

markets.

In her study of Japan,Ahmadjian (Chapter 6) explains that

there has been a fair degree of convergence over the last two

decades, and f‌irms have become more receptive to a share-

holder orientation. However, entrenched local players have

been able to perpetuate the status quo by shaping regula-

tions (e.g., on boards) to be optional rather than mandatory.

In their study of Korea, Kim and Lee (Chapter 7) explain

that the Asian crisis led to changes in mandatory regulatory

pressured by normative inf‌luences from the IMF and the

government, and market inf‌luence of foreign and other

activist investors. Yet the quick recovery of the economy and

large businesses blunted many of these pressures to con-

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Corporate Governance: An International Review, 2014, 22(1): 70–71

© 2014 John Wiley & Sons Ltd

doi:10.1111/corg.12048