Corporate governance in transition: Ten empirical findings on shareholder value and industrial relations in Germany

Within the context of debates over national varieties of capitalism, this paper discusses the shareholder value orientation of the 40 largest listed German companies. Three dimensions of shareholder value are distinguished: the communicative dimension, the operative dimension and the dimension of managerial compensation. A shareholder value index compiling data on accounting, investor relations, variable top-management compensation and the implementation of profitability goals makes it possible to compare the shareholder orientations of the companies. The shareholder value phenomenon is explained first by the exposure to markets - the international product market, capital market pressures and the market for corporate control - and, secondly, by internal developments - changing management careers, increasing management compensation and reduced monitoring by banks and corporate networks - which cause external impulses to increase shareholder value to fall on fertile ground. Conflicts over shareholder orientation result in changing coalitions between shareholders, management, and employees. Shareholder value does not make companies opt out of central collective agreements or endanger the existence of employees' codetermination, but it does lead to more market-driven industrial relations.