Business Goals and Corporate Governance

Are the goals of business the same the world over? At least patterns of ‘corporate governance’, the ownership and control of corporations, differ vastly between countries. In Asia, family companies abound; in western countries they are more rare. In China, instead of the state as the sole owner, family entrepreneurs and institutions like villages, the army or the police have started their own businesses. In Europe, differences in corporate governance across 12 countries have been studied by Pedersen and Thomsen (1997). They showed that whereas in the UK 61 per cent of the 100 largest companies had dispersed shareholders (no single owner holding more than 20 per cent), in Austria and Italy no large companies at all had this type of ownership. The percentages of dispersed ownership turned out to correlate significantly with this author’s Individualism Index (Hofstede, 2001:384). This is not surprising, as stock market capitalism is historically linked to individualism. The UK inherited the ideas of the Scot, Adam Smith (1723–90) about the market as an invisible hand. In the individualist value pattern, the relationship between the individual and the organization is calculative both for the owners and for the employees; it is based on enlightened self-interest. In more collectivist societies the link between individuals and their organizations is moral by tradition. A hire-and-fire, but also a buy-and-sell approach is considered immoral or indecent. Sometimes firing employees is even prohibited by law. If it is not, selling companies and firing redundant employees still carry a high cost in terms of loss of public image and of goodwill with authorities. Differences in ways of dealing with power also affect corporate governance. Across the same 12 European countries, dominant ownership of the 100 largest companies (one person, family or company owning between 20 and 50 per cent) was positively correlated with this author’s Power Distance Index (Hofstede, op.cit.) In large-power-distance France, banking, the development of large companies, and foreign trade were historically strongly directed and controlled by the state according to the principle of ‘mercantilism’; other fairly large companies continue to be family-owned. In the Nordic countries Denmark, Finland, Norway and Sweden, but also in Austria, 10 or more per cent of the 100 largest corporations were owned by a cooperative – in Britain and Italy, virtually none. The share of cooperatively-owned corporations was negatively correlated with this author’s Masculinity Index. (Hofstede, op.cit.) Cooperatives appeal to the need for cooperation in a feminine society. Semenov (2000) compared the systems of corporate governance in the same 12 European countries plus Australia, Canada, Ireland, New Zealand and the USA, and showed that culture scores explained their differences better than any of the economic variables suggested in