Corporate Governance in the Era of 'Too Big to Fail' : From Equity Governance to Debt Governance, Prudential Governance, Internal Governance and TBTF – And Why it Matters for Executive Compensation

The term «Corporate Governance» has become publicly known throughout continental Europe in the early 2000s, following a number of high-visibility corporate scandals. The underlying concepts, however, have a much longer history and date back to the early stages of the rise of corporations. While the traditional concept of corporate governance had focused on separation of ownership and control as well as the suppression of minority shareholders by the majority owners, the recent financial crisis now broadened the scope of the discussion to governance in a crisis situation. This allows for a better understanding of external versus internal governance, the distinction between governance at banks and non-banks, as well as the difference between corporate governance and prudential regulation, in particular in the area of executive compensation. Last but not least, the discussion around 'too big to fail' ('TBTF') suggests a number of insights for the Corporate Governance debate as well. This paper aims at analyzing the impact of the financial crisis on corporate governance and its future direction