The European Social Model of Corporate Governance : Prospects for Success in an Enlarged Europe

Now comprising 25 member states the European Union has embraced an aggressive competitiveness policy whilst continuing to pursue its social policy. The stated goal of the European Union is that no one gets left behind as it strives to become the world's most competitive and dynamic knowledge-based economy. The framework supporting the attainment of this goal is the European Lisbon Agenda, which is designed to link economic, employment and social policies. Fundamental to the expressed connection between competitiveness, employment and social policies is the 'stakeholder model of corporate governance' or 'social model of corporate governance' as distinct from the shareholder model of corporate governance espoused in the United States. (Roe, 2003; Lynch-Fannon 2003). Despite the ambitions of the European Commission however, questions arise as to the viability of the relational model of governance given a number of pressures experienced within the European Union. * Evidence of continued US economic success supports claims that the US shareholder value model of governance is more sustainable in the long term. * The conflict between competing models of governance has been internalised within the European Union, evidenced in the reports of the Company Law High Level Group of the European Commission (COM (2003)284/final: DG-Internal Market) on corporate law, espousing a shareholder rather than stakeholder model of corporate governance, whilst in the following two years, the Commission DG for Employment and Social Affairs restated its commitment to the Lisbon Agenda (COM (2004); COM (2005) 24 final; COM (2005) 53 final) which espouses a view of the corporation receptive to other stakeholders, in particular employees and creditors. Even more importantly perhaps the authors of the Lisbon Agenda going forward view the corporation as a collaborator in the achievement of macro-economic goals, rather than as a private actor. * Finally, many of the Eastern bloc countries face considerable challenges in adopting the European social model of corporate governance as they strive to achieve economic success and competitiveness