Corporate GovernanceAbstractDue to the evolution of technology and business, the corporate business model,  as well as how it is regulated and ruled, has changed dramatically over the past several decades, with some of the most remarkable changes taking place over the last decade or so.  While the United States has been a pacesetter in  corporate governance, as it has come to be known,  and indeed many other nations have followed the American model, there are still areas of corporate governance that need to be addressed. The focus of this paper will be the fact that the world is converging on the American system of corporate governance as well as some of the implications of that practice.

Corporate Governance Defined and ExplainedBefore the adaptation of any form of corporate governance by any nation can be discussed, it is first essential to have a basic definition of corporate governance and an understanding of exactly how and why corporate governance came about originally.  In terms of a basic definition, corporate governance can best be described as a system of directly administrating and controlling a corporation (Kakabadse, 2001) ; this governance is usually delivered and administered day to day by the director or board of directors of a corporation, in conjunction with the management team of the organization.  The objective, in a perfect world scenario,  is to echo the sentiments of the shareholders and/or stakeholders in an organization, and to follow the bylaws of the organization in order to facilitate ethical business practices, efficient management of the company, and sustained shareholder value.  While this may be the perfect world scenario, there are recent instances, especially in the United States, where the perfect world was disregarded in favor of the personal agendas and greed of a select few in the power structure of American corporate giants like Enron and WorldCom.

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  For this and other reasons that will now be discussed, the American system of corporate governance is like no other.Distinction of American System of Corporate GovernanceThe American system of corporate governance is distinct from those in many other nations due to several key attributes that the system exhibits.  It is generally agreed that the most noticeable distinction of the American system has evolved from approximately 1980 into the present; namely, the focus that management has held in the running of corporations.  Prior to 1980, the executive focus was on what was best for the corporation itself, usually meaning the leadership of the company.

  Since that time, the focus has shifted to include the realization that the focus of the leadership model should be more external, emphasizing the needs of stockholders, stakeholders, and every member of the organization at all levels (Holmstrom & Kaplan, 2003).  An outward sign of this mindset has been the dramatic increase in the value of publicly traded companies as well as increases in the occurrence of merit-based pay increases not only for the top of the organizational chart, but also for the rank and file staff members as well. The shift in the American corporate governance model was inspired originally by the previous tendency of disgruntled stockholders to stage hostile takeovers of companies with which they were dissatisfied from a strategic and leadership perspective, as well as the loss of talented workers as they sought better employment opportunities, many times with the competition, thereby compromising the intellectual properties of many firms (Enriques & Volpin, 2006).

  In general, it can be fairly said that the shift toward shareholder value was a positive move in the world of corporate governance, but in a strange irony, America had the dubious distinction of perverting the shareholder value priority into a license to steal, bringing down some giant American companies in the process and giving the American system another distinction, albeit unfavorable, within the world economy. The classic example of negative outcomes from the change in priorities for American corporate governance can be summed up in one word- Enron.  Enron itself came to be born as the result of a 1985 merger of Houston Natural Gas and InterNorth—a Nebraska based gas pipeline company.  From the very beginning, Enron had shown some cracks in its façade, as the company took on huge amounts of debt during its foundation and, as a result of deregulation of gas pipelines, no longer had exclusive right to its own pipelines (Thomas, 2002).  In order to solve Enron’s credit and revenue problems, CEO Kenneth Lay enlisted the help of Jeffrey Skilling—a young, sharp banking and finance consultant.  Ultimately, Lay was so impressed that he tapped Skilling to join the ranks of Enron, which grew Enron into a major market middleman for energy that would eventually dominate the trading of energy contracts. Skilling also recruited the sharpest and most shrewd businesspeople he could find to join his newly formed team.  Ultimately, Skilling got Enron involved in the trading of electrical futures and the creation of a Web-based commodities trading company that seemed to be an overnight success-Enron’s stock value skyrocketed as well, increasing over 50% in one year (Thomas, 2002).

  After many years of seemingly huge successes, more cracks began to appear in the Enron crown.  In the final analysis, the conspiracy of Lay, Skilling and others led to the collapse of the company due to fraud, false reporting of revenue, shoddy accounting practices and a general disregard for virtually every tenet of business ethics.  In the aftermath of the Enron scandal, reforms to the American system of corporate governance were implemented in an effort to prevent such a tragedy in the future.  Within the ability of the American system to rebound may lay the ideal argument for this style of corporate governance, which is now discussed in more detail.

Economic Argument for American Style of Corporate GovernanceAs was referred to previously in this paper, the argument can be logically made that because of the ability of the American corporate universe so to speak to survive the blows of scandals like Enron makes the American style highly favorable to others that exist elsewhere in the world.  When Enron broke, there were many in the international economic community that predicted that this incident would lead to the destruction of the United States tock market and hence the economy overall (Sunday Business, 2003).  In retrospect, nothing turned out to be farther from the truth.  The Enron debacle led to the formulation, enacting and enforcement of legislation such as the Sarbanes-Oxley Act which put into place a more reliable corporate governance model and structure as well as the definition of penalties for violations of the Act itself (Fort, et al, 2003).  Through adversity, the American system gained additional clout.  Beyond this consideration, however, there is a far further reaching reason for the popularity of the American system- the evolution of the modern corporate model, control, and the need for corporations to be able to grow without hindrances of a cumbersome governmental model, combined with the need for serious reforms in other parts of the world as well. The evolution of the modern corporate model indeed is one of the pivotal motivating factors for other nations to become interested in the “American way”.

  In earlier generations, most companies were owned, and operated by the same individual or individuals.  As such, the tendency was for only a few of these companies to grow beyond a nominal level because of the limitations of the knowledge and resources of the private owner.  With the passage of time and the maturity of the global economy, however, there emerged a business model that featured investors and management separate from actual ownership of a firm, and with it, a need for rules and structure to make this possible.  In the earlier, primitive models of leadership and oversight, this was all but impossible (Davis, et al, 1994).  Without the adaptation of corporate governance that is similar to the American system, the effect would be akin to trying to walk with shoes that are not the right size, with companies literally stumbling over themselves as they try to move forward.  As with anything else, there was a clear need for effective methods of advancement, growth, and control.

  Also, there remains the issue of the needs for reforms in other parts of the world. Europe, for example, often contradicts itself in terms of corporate governance styles; sources show that nations such as the United Kingdom  routinely contain companies that are widely held by others outside of the leadership, much like the U.S, while nations such as Italy rarely do so (Enriques & Volpin, 2006).  While nations like France and Germany fall somewhere in between, the uneven nature of corporate governance in Europe is quite clear, as is the trend of convergence toward the American model and the need for this trend to continue.

 Convergence toward the American system of corporate governance has likewise been driven by some unfavorable experiences that European nations experienced when they tried to reform corporate governance through the use of one of their own reformation models.  More specifically, within the European model as opposed to the American model, the lack of strong provisions for disclosure of corporate information, as well as the difficulty of enforcement of European regulations, fueled the popularity of the American, as opposed to European model (Enriques & Volpin, 2006).  All of this in mind, the question of exactly how far other countries are going to embrace the American system needs to be analyzed. How Far Other Countries are Going to Change  to American Corporate GovernanceThe research thus far has shown the trend toward the adaptation of the American corporate governance model on the part of other countries; this being understood, one should also understand just how far these countries are willing to go in order to change to the American model. Taking a cue from Sarbanes-Oxley, the European Union has in the past several years begun to fully understand the value of not only enacting, but enforcing regulations like the Americans have done recently; as a result, European corporate governance has undergone substantial regulatory changes, the likes of which had not been seen before.

  Action against those that would violate the standards of corporate governance have also taken place in the modern Europe; for example, workers, management and trade unions in Germany have found themselves of late clashing on labor issues, with the leadership of these various groups being held accountable in terms of proper conduct in the best interest of their constituents, and within the guidelines of proper corporate governance (Williamson, 2006).  In taking a closer look at the developments in Germany, something becomes abundantly clear- the focus is moving beyond serving the interests strictly of the ownership or top leadership of organizations, and a more balanced system of managing and providing for everyone involved in the organization emerges, just as it does in the American system.  In sometimes subtle, other times dramatic ways, American corporate governance is emerging elsewhere in the world. SummaryThis paper has shown, for better or worse, the convergence of other nations toward the American system of corporate governance; perhaps more remarkable, however, this migration illustrates some additional key developments in the global economy.

  With the focus being shifted to the increase of shareholder/stakeholder value, the possibility exists for the economy of every nation on earth to realize tremendous gains and the nations will consequently enjoy an upsurge in quality of life and prosperity.  It must be emphasized, however, that these gains must be done within the scope of proper, legal conduct, lest the entire process suffer.  In closing, therefore, let it be understood that the American system is spreading, but must always do so in the realm of ethics and integrity if the world is to benefit in any lasting way.References Davis, G. F., & Thompson, T. A.

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Fort, T. L., & Schipani, C. A. (2003). Adapting Corporate Governance for Sustainable Peace. Vanderbilt Journal of Transnational Law, 36(2), 377+.

(Holmstrom B Kaplan S 2003 State of US Corporate Governance: What’s Right and What’s Wrong)Holmstrom, B., & Kaplan, S. (2003). The State of US Corporate Governance: What’s Right and What’s Wrong.

National Bureau of Economic Research.It Ended Well, but All Is Not. (2002, June 17). Sunday Business (London, England), p.

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com/time/2002/enronWilliamson, H. (2006). Germany’s Worker Directors Need to Justify Their Jobs. The Financial Times Limited.;;