From harmonisation to regulatory competition

The political debate over the governance of the company and its proper role in society currently revolves around two broad alternatives. The shareholder concept of the firm prioritises the role of shareholders in corporate governance and sees increasing shareholder wealth as the primary function of the company. Advocates of the shareholder model generally argue that competition between different systems of company law should be encouraged in order to maximize business choice. The stakeholder approach in contrast takes a pluralistic view of the groups (‘stakeholders’) that the company is responsible for and which should have a voice in corporate governance. In his contribution (Chapter 4) AIAS-researcher Jan Cremers provides a historical account of the European-level approach to company law and its effect on national systems. Originally, the European Commission pursued a project of company law harmonisation on the basis of high standards which were designed to discourage competition between national regimes. However, in the past two decades there has been a clear shift away from harmonisation and towards promoting regulatory competition. This has helped erode standards in national systems of company law.