Banks in the Board Room : The American Versus Japanese and German Experiences

As the United States debates the scope and direction of banking reform, it should also reconsider current restrictive policies on the involvement of financial institutions in the corporate governance system. Japanese and German bankers maintain close and active relationships with their industrial clients, and their involvement in matters of corporate and contractual governance is substantial. Evidence indicates that this involvement has had a positive effect on corporate performance in those countries. This experience suggests that it is time to restore a role for financial institutions in American corporate governance. When freed from artificial prohibitions against equity ownership and constraints that inhibit their full shareholder rights, financial institutions will be able to play a broadly constructive role in the American system of corporate governance and economic progress