Relationship-Based Model of Corporate Governance : A Competing Governance Model

Traditional corporate governance scholarship excessively focused on the after-effects of separation of ownership from control. While American corporations were characterized by diffusely held ownership structures, most continental and Asian countries were marked by the concentrated ownership morphology. Traditional scholarship, however, did not account for this morphology. Thus, even seven decades after Berle and Means proposed their theory of separation of ownership from control, research did not move away from its previous unilateral focus. Unlike the market-centric model where markets are central to disciplining corporate mis-governance, the relationship-based model is considered to be more proactive with stakeholders playing a vital role in controlling mis-governance. In this paper, the author tries to explain the competing governance model with Japanese Kieretsu and German co-deterministic governance models. While some researchers have argued that concentrated ownership models perform better than the widely diffused ones, others argue that relationship economies are characterized by weak minority shareholder protection. However, concentrated ownership firms, despite their i/liquid markets, have stayed alongside the Anglo-American firms and have consistently performed better