The Ri se of Sharehol der Capi tal i sm

i n Conti nental Europe?

The Commodi fi cat ion of Corporat e Cont rol and t he Transformat i on of
European Corporat e Governance

Bastiaan van A peldoorn

M ax Planck Institute for the Study of Societies
Paulstrasse 3
50676 Cologne, Germany

Paper Prepared f or the XV I I I Worl d Congress of the

I nternati onal Pol i ti cal Sci ence A ssoci ati on,
Qubec Ci ty, 1-5 A ugust, 2000
(Panel SS 22, Compari ng Corporate Behaviour i n Conti nental Systems )

I ntroducti on
In February of this year, telecommunications giant M annesmann became the first German company to
fall victim to a hostile take-over as the management of British Vodafone A irtouch succeeded in
persuading the majority of M annesmanns shareholders a large part of them being US and A merican
funds - to exchange their shares for those of an enlarged Vodafone in the largest ($125 billion) hostile
bid ever. In trying to fend off the bid, M annesmanns CEO Klaus Esser did not invoke the argument of
saving jobs or preserving the Rhineland model even if German trade union leaders and politicians,
1
including Chancellor Schrder, did do so but instead time and again stressed that M annesmann
shareholders acting in their interest alone w ould be the arbiter of this battle for control. A lready
before the take-over battle, Esser, in a clear act to please shareholders and the global capital markets,
had announced that he w ould split up the company, selling the old industrial parts in order to
concentrate on telecommunications as its core business. Other German conglomerates are
restructuring in similar w ays, w ith their managers increasingly adopting the discourse of shareholder
2
value. In France, the debate on le gouvernement denterprise probably started already a few years
3
earlier, w ith captains of industry and banking calling to (partially) adopt A nglo-Saxon practices . In
Italy the successful hostile take-over by Olivetti of its much bigger rival Telecom Italia show ed that the
stability of the traditional relationships betw een banks, industry and their ow ners w ithin the
4
corporate netw orks of Italian capitalism may no longer be guaranteed.
The debate on w hat has come to be called corporate governance, w hich used to be a mainly US,
and later, British, debate on how shareholders could regain control over mangers allegedly
squandering their money, has thus also become a continental European debate. This raises the
question w hether w e w itness a transformation of established European corporate governance
practices, that is, those practices that define the pow er relations w ithin the company (betw een ow ners,
managers, creditors, w orkers, etc.) and the w ay, and to w hich purpose, it is run. There is no single
regime of corporate governance w ithin Western Europe. Indeed, being shaped in part by national
law s, regulations and traditions, w e may identify different national varieties of corporate governance
systems as a critical constituting element of w hat in recent political economy literature has been
discussed as national varieties of capitalism (see, e.g., A lbert 1993; Crouch and Streeck 1997; H all and
Soskice forthcoming, Rhodes and Van A peldoorn 1997; 1998, Soskice 1999). N otw ithstanding this
national variety, w e may, using ideal-types, in fact usefully distinguish betw een tw o competing
regimes of corporate governance (Rhodes and Van A peldoorn 1998;A lbert 1993; De Jong 1996; Jackson
1998).
On the one hand there is the shareholder model of the A tlantic (A nglo-Saxon) capitalist
economies that is premised on the sovereignty of shareholders, exercising their pow er through the
stock exchange, constituting a market for corporate control (allow ing for hostile take-overs, etc.). The
ow ners here are outsiders having an arms-length, market-based relationship to the firms and its
management. The interests of the latter are clearly aligned w ith those of the share ow ners, w hereas
employees have no role in corporate decision-making. In this model, ow nership constantly changes as
a firms numerous ow ners buy and sell their shares on the market. A s a result, the corporate strategy
of the firm is becomes more oriented tow ards the maximisation of w hat is now called shareholder
1

A s reported inter alia in the Financial Times of 20/ 21 N ovember 1999 ( German chancellor w eighs into battle over
M annsmann ).
2
The shareholder value concept has started to become hotly debated w ithin German corporate and financial circles from the
late 1990s onw ards, see, e.g., Shareholder Value ist in Deutschland noch in der Startphase , Frankfurter Allgemeine Zeitung,
26 A ugust 1997, and, Die A ktie is das Produkt, und der A ktionar der Kunde, Frankfurter Allgemeine Zeitung, 27 M arch 1997.
3
See, e.g, Claire Blandin, Le debat sur le pouvoir dans lenterprise partage le monde patronal. Jean Peyrelevade: le modele
anglo-saxon est irresistible , Pierre Drouin, La revanche des actionnaires. Un ouvrage sur le gouvernement des
enterprises , Le M onde, 29 A pril 1995,
4
See Paul Betts, Olivettis earthquake shakes Italian capitalism , Financial Times, 22 February 1999, and Paul Betts and James
Blitz, Italys capitalist renaissance? , Financial Times, 23 February 1999.

value, w hich in turn is argued to imply an orientation tow ards short-term financial gain (see, e.g.,
A lbert 1993 and De Jong 1996). On the other hand, there is the stakeholder model prevalent in most
continental European capitalist economies (and in particular w ithin the so called Rhineland
countries), as w ell as in Japan, in w hich the firm and its management are more embedded in a network
of interests, including those of banks and employees (Rhodes and Van A peldoorn 1998: 408). Especially
banks often play a direct role in corporate governance as finance in these corporate governance
regimes is more bank-based than equity-based. Capital markets are relatively underdeveloped and
ow nership more concentrated than in the A nglo-Saxon countries. Ow ners, w hether banks, industrial
corporations or families, are insiders to the firm and maintain stable, long-term relationships w ith its
management. Workers, moreover, often have a formal role in corporate decision-making through
w orks councils and representation on company supervisory boards (again, particularly in Germany
and other Rhineland countries). This stable community of interests (albeit still an asymmetrical one)
is argued to lead to a more long-term orientation in w hich stable grow th is prioritised over short-term
profit-maximisation. Whether or not the financial markets are rightly accused of short-termism, it is
clear that these models represent different pow er configurations betw een the different groups w ithin
the firm, or more w idely, betw een different social groups or classes (and segments of classes) w ithin
society at large.
A bstracting from otherw ise significant national diversity w e may thus w ithin Western Europe
distinguish a common continental European model in opposition to the model prevalent w ithin the UK.
Do the events reported above, then, indicate a shift aw ay from this old model and tow ards a new
shareholder capitalism in continental Europe, and w ould this imply a convergence on the A nglo-Saxon
model? A nd, if so, w hat w ould be the causes and the consequences of such a historic transformation
of continental European capitalism? These questions of course tie into the ongoing debate on
globalisation and w hether or not it challenges the existing national capitalist diversity and forces
advanced capitalist countries again on a path of convergence (see, e.g., Berger and Dore 1996).
This paper, presenting some preliminary results of an ongoing research project, w ill address
these questions finding preliminary answ ers - through an analysis of the changing structures of
ownership and control of Europes 100 largest non-financial companies. On the one hand, one w ould
expect a considerable diversity in ow nership and control pattern w ithin Western Europe given the
divergence in established corporate governance regimes discussed above. On the other hand, the
ongoing process of European integration makes that the member-states of the EU (as w ell as, to a
degree, associated countries such as Sw itzerland) increasingly form a single unit, an integrated
transnational economic space w ith an emerging common supranational regulatory framew ork. It is
thus that in this context the question of convergence or continued divergence gains particular
relevance.
Who ow ns and w ho controls Europes largest corporations many of w hich are transnationals
that are the principal actors w ithin a globalising w orld economy - is a crucial constitutive element of
Europes capitalist system(s). Who controls the modern large corporation in Western Europe: the
shareholders, i.e., its ow ners; or, rather, the often non-ow ning management? A nd, critical in a
European context, to the extent that the ow ners are in control, w ho are those ow ners, w hat are their
interests, and how are their social relations to the firm and its management and w orkers structured?
5
Structures of ow nership and control are key to the constitution of corporate governance practices.
Rules of corporate governance structure the interrelationships betw een different groups (e.g.,
shareholders and managers) w ithin the firm, specifying their rights and obligations, but is the
structure of ow nership and control that defines the identities and interests of the major actors in the
first place, and on its turn is likely to shape the corporate governance regime. Indeed, in this paper I
interpret changes in corporate governance practices in terms of a shifting balance of pow er betw een
different groups of capitalists engaged in a struggle over corporate ow nership and control. A lthough
many recognise the centrality of ow nership and control structures to corporate governance practices,
5

Indeed, the debate on corporate governance if often framed in terms of a debate on ow nership and control.

and more generally to different forms of capitalism, little recent empirical research exists on these
structures, in particular w ith regard to Europe.
By analysing the changing ow nership and control structures of Europes large-scale industrial
capital this paper w ill argue that in (continental) Europe w e are indeed w itnessing the rise of a new
shareholder capitalism that is changing traditional practices of corporate governance and can be
expected to accelerate the erosion of Europes post-w ar models of nationally embedded capitalisms.
H ow ever, I w ill also argue that w ithin continental Europe this shareholder capitalism w ill be in some
significant respects of a different kind than that prevalent in the US and in the UK as some of the old
features of European corporate governance systems such as the existence of so called large
blockholders (holding a controlling percentage of the companys shares) - w ill be preserved, even if
their meaning changes inasmuch as they are inserted into a new context. This new context is one in
w hich corporate control is increasingly mediated by the (stock) market, that is, firms are increasingly
subject to the discipline of the stock markets. A s a preliminary conclusion I submit that w e w itness a
process of partial convergence in w hich across Europe corporate control is increasingly exercised
through the stock market and thus, I argue, subject to a financial (rather than an industrial)
perspective.
The remainder of this paper is organised as follow s. The first section discusses the debate on
ow nership and control from both a historical and theoretical perspective. I w ill argue that in order to
better understand w hat is at stake in the current transformation of European ow nership and control
structures w e have to make a distinction betw een corporate control based on the traditional
mechanism of voting pow er exercised at the meeting of shareholders, and control based on market
pow er. This allow s us to distinguish betw een different types of capitalist ow ners and ultimately to
devise a typology of different forms of capitalism from the vantage point of different patters of
ow nership and control. The second section presents an analysis of the current ow nership and control
structures of Europes 100 largest corporations. The analysis show s that w ithin continental Europe
concentration of ow nership is still high, and takes the form of large blockholders (w hether the state,
other corporations or families) exercising a large degree of control over corporations. The third section
then addresses the question of w hether a new shareholder capitalism is indeed in the making in
continental Europe, and w hether w e thus w itness a shift aw ay from the old continental stakeholder
model. A gain, from a perspective focusing on changes in ow nership and control I w ill argue that w e
w itness the relative decline of traditional ow ners and the rise of a new class of ow ners that is explicitly
oriented tow ards maximising shareholder value. What this boils dow n to is a marketisation of
corporate control as firms themselves become commodities bought and sold on the market. A lthough
large blockow ners w ill remain a feature of European corporate governance, they too are under
increasing pressure from the grow ing capital markets. The final section w ill draw some conclusions
from the analysis and outline an agenda for further research. H ere I w ill argue in particular that the
partial convergence that w e can observe is related strongly to globalisation, a process that is crucially
aided, how ever, by the changing role of the state.

Ow nershi p and Control i n M odern Capi tal i sm:

Property and Power
Private property, defined and protected by property rights (and thus by the state) is central to any
capitalist system. Private property does not only entail a claim over an object, but at the same time
through that, also constitutes a claim vis--vis other persons inasmuch as they are excluded from the
beneficial use of that object of property in the same w ay as the holder of that particular property
right. In fact, in capitalism, w here the most dominant form of property takes the form of capital, or the
means of production, property relations are the most fundamental set of social relations, a set of social
3

relations in w hich the relations betw een persons or groups of persons are expressed in relations
6
betw een objects, or betw een claims on objects. Private property is thus connected to pow er, as w ell as
7
to class.
A lthough uncontroversial in the 19th century this thesis has been challenged throughout a large
th
part of the 20 century. This challenge has been made on the basis of a thesis first advanced in the
M odern Corporation and Private Property, a classic study w ritten in the US of the Great Depression by
Berle and M eans (1991 [1932]). Their argument w as that w ith the rise of the modern corporation, or
joint-stock company, ow nership has been separated from control due as the former had come into the
hands of countless small shareholders unable to overcome their collective action problems, and thus
unable to exercise any influence over the affairs of the firm of w hich they w ere the nominal ow ners.
Control thus ended up in the ends of management. It has to emphasised that Berle and M eans
identified this at the time as a far from completed process. Indeed, in their sample of the 200 largest
US companies they do identify many cases of so called minority control w hereby a single ow ner holds
such a large block of shares that (s)he can dominate decision-making at the A nnual General M eeting
(A GM ) of shareholders inasmuch as the ow nership of the remaining shares is so w idespread that the
(s)he cannot be outvoted. But w ithin the US, the dispersion and fragmentation of ow nership w as to
steadily continue in the follow ing decades, up to the point w here in those countries in hardly large
corporation did any person or institution hold more than 10 or even five per cent of the shares (Scott
1997). This trend, then, has been interpreted to lead to a separation of pow er from the property to
w hich it used to be attached.
The classical functions of the capitalist, that of investing money in the production process and
managing that production process (or labour process) in order to accumulate more money, w ere thus
argued to have become divided betw een a passive mass of shareholders and a new class of
professional managers w hose rise had been bound up w ith that of the modern corporation. Freed
from the constraints of ow nership, managers w ere free to pursue strategies other than that of profitmaximisation, serving either their ow n material interests or a more public interest in w hich the
corporation w as seen less as the instrument of the ow ners (for the extraction of private gains) and
more as a social institution serving the w ider interests of the community. This managerial
revolution (Burnham 1975 [1941]) has been interpreted by later theorists of industrial society (in
contradistinction to capitalist society) to lead to the decomposition of the capitalist class as class
domination itself w ould have ceased to exist w ith the separation of ow nership and control (see, e.g.,
Dahrendorf 1959, and Bell 1965, and 1973). M anagerialism has in fact for a long time been the
dominant theory w ithin economic sociology and business history, assumed to be the universal model
th
of 20 century capitalism (see in particular the w orks of Chandler, e.g., Chandler 1977).
The managerialist thesis has been subject to a number of challenging critiques by mostly M arxist
w riters , particularly in the form of the alternative theory of finance capital (follow ing earlier theories
by Lenin and H ilferding). This theory stated that concomitant to the rise the large industrial
corporation w e have w itnessed the rise of large (monopoly) banks financing the expansion of those
industrial corporations and playing an important role in the control over those corporations in their
role as creditors, sometimes also as stable shareholders. N ext to the financial and ow nership ties, big
banks and industrial corporations w ere also show n to be linked through personal ties of interlocking
directorships (Zeitlin 1974; Fennema 1981), the occupants of w hich w ere seen as to form a new class of
finance capitalists, of w hich the core w as draw n from the major w ealthy families, i.e., the propertyow ning capitalist class (Zeitlin 1974 and Soref and Zeitlin 1987: 60; see also Scott 1997). A lthough
maybe rightly pointing out that the new intimate links betw een large corporations and big banks, both
controlled by the same capitalist elite , I w ill argue below that M arixst and other critiques of
managerialism often missed a more fundamental point, and that is, that even in the absence of the
ow nership of a large block of shares of a single firm, capitalist ow ners may, under certain institutional
6
7

This is w hat M arx referred to as the fetishism of the commodities (M arx, Capital Vol. 1) .
Indeed, class can be usefully seen as a historically constructed relationship to the means of production (Roy 1997).

conditions, still exercise control through the market mechanism that the stock exchange at w hich the
firms shares are traded, provides to them.

From M anagerial Capitalism to Shareholder Capitalism

Even if the reports on the death of the capitalist class pronounced by managerialists w ere certainly
exaggerated as a clearly capitalist elite could still be identified as controlling US big business, a large
degree of separation of ow nership and control did indeed take place in the evolution of US capitalism
from the 1920s to the 1970s (Scott 1997). The control exercised by the property-ow ning A merican
capitalist elite w as only w eakly and often indirectly tied to ow nership interests in A mericas big
corporations and more based on organisational devices such as interlocking directorships. M oreover,
their control w as indeed substantially limited by the pow er exercised by an increasingly autonomous
managerial class. In the w ake of Polanyis Great Transformation (Polanyi 1957) the post-w ar period
became the era of w hat Kees van der Pijl (1998) has identified as corporate liberalism, or a capitalism in
w hich not only financial capital had been bound to the interests of Fordist industrial capital, but in
w hich also industrial capital had become embedded in a framew ork of public and semi-public
regulation and planning, tasks that w ere carried out by a (state or private) managerial class separate
8
from the property-ow ning bourgeoisie.
This organised and managed capitalism also came to characterise the development of WestEuropean capitalism (see, e.g., Schonfield 1965), such that according to some contemporary w riters the
1960s, w hen the Golden A ge reached its highpoint, also came to be the heyday of managerial
capitalism (Dore, Lazonick and OSullivan 1999: 109). A s w e shall argue more explicitly in the next
section, the managerial capitalism if indeed it w ould be the right term of Western (continental)
Europe w as of a different kind than that of the US as in fact in no European country except the UK
could w e observe the same dispersion of share ow nership as across the A tlantic and large firms
continued to be controlled by large blockholders ow ning a controlling minority (or often even a
majority) of the shares (in addition continental Europe counted, and still, counts many large firms that
are not even publicly listed at all but completely privately ow ned). This made for a different
constellation of interests and for a different set of social relations betw een ow ners, managers and
w orkers w ithin European capital. These differences are often insufficiently appreciated as many have
simply assumed that the separation of ow nership and control identified by Berle and M eans w ould be
universal. In Europe, how ever, w e did observe other institutional developments that did not so much
erode the pow er of ow ners, but rather gave both mangers and employees a stake in the control of the
corporations, w ith each of the three groups often being bound together in a stable set of
institutionalised social relations. This, then, is the netw ork-model (Rhodes and Van A peldoorn 1998)
identified in the introduction, w hich developed in post-w ar Europe, albeit it w ith significant national
variations (see for a general overview , Rhodes and Van A peldoorn 1998).
The development of post-w ar German capitalism is probably the proto-typical example of w hat
has also been called managed capitalism (Ltz 2000; see also Streeck 1997). In the ream of corporate
finance, this has been the most developed case of bank capitalism, w ith the banks as Hausbanken not
only providing loan capital to firms but also taking large equity stakes and seats on their supervisory
boards, thus tying themselves firmly to the long-term interests of the firm. A part from banks, families
also continued to play a role in this particular system of finance capitalism (Deeg 1999). Capital markets
remained very underdeveloped and there w as no market for corporate control. This allow ed not only
for a stable relationship betw een ow ners and management but also for the post-w ar institutionalised
class compromise betw een capital and labour to take shape w ithin the German corporate governance

In this context, Van der Pijl speaks of a cadre class (1998: chapter 5).

regime. Thus, co-determination became a key feature of the German system, and a generally a stable
coalition betw een w orkers and management could be observed.
Developments in other major European countries w ere similar in some respects, and different in
others. The statist mode of the development of French capitalism also meant that the state and its
managers had a much larger role to play in not only governing the economy, but also governing
individual enterprises, including a large role in corporate finance (Zysman 1983). A t the same time,
due to ideological fragmentation, French trade unions w ere institutionally much w eaker than their
German counterparts, and the evolving French corporate governance regime did not see the
emergence of anything like German co-determination. Thus, instead of a capital-labour coalition that
characterised the German system, the French system w as one of a coalition of state and big business
and the amalgamation of the political and economic elites (Schmidt 1996). In Italy, labour w as equally
w eak, but Italy also lacked the statism of French capitalism. In Italy, the typical pattern of ow nership
and control w as that of family controlled corporations, w ith families holding minority stakes through
holding or pyramid structures. Italian capitalism Other continental European countries show again
other variations. Still a common pattern may also be distinguished.
In all continental European countries, stock markets remained underdeveloped as large firms
w ere either w holly or partially in the secure hands of families, banks or other corporations.
Corporations, their minority or majority ow ners, their managers, and their w orkers thus w ere
shielded from the potential pressures of the capital market. In Germany and other corporatist
countries, this insulation from the capital market provided an environment in w hich an
institutionalised class compromise could emerge providing labour w ith a real measure of control.
These coalitions betw een management and w orkforce (and ow ners) could not be observed to the same
extent in Latin countries. But still , here too the stability of ow nership structures - w ith capital being
bound to a particular firm - and of management, did provide for a different set of social relations
betw een capital and labour than one that w ould obtain under the conditions of a shareholder
capitalism. The continental European variety of (semi-)managerial capitalism w as thus part and parcel
of w hat Colin Crouch (1999) has called the mid-century social compromise that underpinned postw ar European capitalism. The underdeveloped of capital markets contrasted to the US w here the
corporate revolution had taken place to such an extent that after the w ar almost all large firms w ere
publicly listed and traded. But at least until the 1980s this trading did not really threaten managerial
autonomy as there w as not an active market for corporate control. Developments w ere similar in the
UK. H ence, to sum up, in spite of important differences betw een the A nglo-Saxon and the continental
European countries, and in spite of important differences betw een the latter, the post-w ar era w as
indeed one in w hich capital w as bound, bound to nationally embedded and regulated production
(even if societies w ere still clearly capitalist).
A ll this may now be in the process of unravelling. What has been identified by some as an
ow ners revolt (Van der Pijl 1998) and could indeed be interpreted as almost an anti-managerial
revolution, started in the US in the 1980s, w ith Thatcherite Britain follow ing in it footsteps, and may
now be eroding Europes established regimes of corporate governance as w ell. In US, and to a lesser
extent in the UK, the 1980s became the era in w hich the dormant market for corporate control w as reactivated w ith a flurry of take-over activity and so called leveraged buy-outs that made many
managers of underperforming (according to the stock market that is) firms nervous (Jensen 1997). This
period also saw the phenomenon of so called shareholder activism, w ith unhappy shareholders
clamouring for their rights (basically their right to a good financial return) vis--vis management.
This role w as later partly picked up by very large investors, w hether rich individuals, or, increasingly,
so called institutional investors, that is, mutual and pension funds, investment and insurance
companies. In fact, the rise of these institutional investors became a distinct feature of the emerging
A nglo-Saxon model, in the UK even more so than in the US, and has also led to the partial reconcentration of ow nership. Funds, w hich basically manage assets for other people, now sometimes
hold such large equity stakes in individual firms that they are increasingly also capable of exercising
6

voice, even if that voice is still based on market-pow er, and thus the threat of exit. With the reactivating of US and UK capital markets, as reflected in the stock-market boom of the 1980s, and the
concomitant rise of shareholder pow er (Useem 1993), w e have also w itnessed the rise of the so called
shareholder value concept as w hat is supposed to be the guiding principle for corporate governance
and corporate strategy.
The concept of shareholder value defines the interests of shareholders not committed to any
specific (industrial) enterprise. The value of shareholder value has been defined as financial value,...
and more specifically cash (Black et al 1998: 8). A more technical definition of shareholder value is
that of future cash flow s discounted by the w eighted average cost of capital (ibid.: 48). Crucial to the
calculation of the cost of capital are the so called opportunity costs. This means concretely that an
investment in a firm has to yield at the least the same returns as that capital investment could yield
elsew here plus any risk premiums that may exist for such investment. Investors may for instance also
invest their money in bonds, that is in fixed-interest rate bearing securities. The latter is generally
considered a much saver investment than buying stocks, hence for the latter a higher rate of return is
demanded (w hich reflects the higher risk, and therefore the higher cost, of that investment).
A s indicated, there are signs that such a shareholder capitalism is also on the rise in continental
Europe, although w e still have to determine to w hich extent and in w hich form, w hich I w ill attempt
to do in the final section of this paper. The question for now is a theoretical one and related to the
follow ing paradox. A lthough shareholder ow nership is becoming more w idespread, and more and
more (for instance formerly state-ow ned) companies are becoming publicly traded, a re-uniting of
ow nership and control seems to be taking place as shareholders reclaim the pow ers attached to their
property rights, or, at least, as firms increasingly gear their corporate governance practices tow ards
the interest of (outside) shareholders. A new shareholder capitalism thus appears to go hand in hand
w ith the very phenomenon that Berle and M eans identified as the cause of the separation of
ow nership and control, the dispersal of share ow nership. This puzzle can be solved if w e keep in
mind the principle that even if ow ners hold too small stakes in individual firms to exercise any
significant direct control over that firm, they may still collectively exercise indirect control through the
(stock) market, that is through their pow er to sell their shares.

M odes of Corporate Control: Large Blockowners versus the M arket

In fact, I argue, one can identify tw o basic modes through w hich property, in the sense of capital
ow nership, is linked to pow er, in the sense of control over the use of that capital. The first refers to
voting power as exercised individually by ow ners of large blocks of shares at the A nnual General
M eeting (A GM ). This first mechanism is in fact the only one identified in the analysis of Berle and
M eans and later managerialists, as w ell as in the critiques of most their opponents. If w e restrict our
analysis to this mechanism, it w ill mean that given a sufficient dispersion of the share ow nership of a
particular firm, i.e. the absence of any large blockholders, a large degree of separation of ow nership
and control is indeed likely to occur. Largely ignored has been a second basic mode of corporate
control, that w hich is constituted by the market power exercised collectively by the numerous (share)
ow ners through their buying and selling on the stock market. A s is clear from the argument, this
pow er can be exercised in the absence of any substantial concentration of ow nership w ith respect to
individual corporations. H ere the stock market functions as a market for corporate control , w ith the stock
or share price as the regulating mechanism.
A market for corporate control exists w hen property rights in the form of shares can be traded to
such an extent that outsiders can gain control of other firms. This then contrasts w ith a situation in
w hich the ow nership of a corporation is firmly in the hands of insiders in the form of stable large
blockholders. In the latter case management has in fact little incentive to care about the share price,
w hereas in a w ell-developed market for corporate control management is forced to pay close attention
to the share price as an undervalued stock could mean that that firm falls victim to a hostile take-over
7

(w ith the management being replaced). A s emphasised in much of the business oriented corporate
governance literature, the share price may thus function as a disciplining device vis--vis w hat
otherw ise w ould be a too autonomous management. To be sure, the tw o modes of corporate control
are very different in kind.
On the one hand, individual small (w ith respect to the individual firm) shareholders cannot
exercise direct individual control. On the other hand, they posses a liquidity and therefore a freedom
that the large shareholders do not posses because their fate is tied up to that individual firm from
w hich they cannot easily exit. In this respect, a useful distinction has been made betw een committed
capital and liquid capital (Jackson 1998). In contrast to the latter, the former is bound to a particular
firm and a particular set of institutionalised social relations that make up that firm. This in turn gives
managers, and, under certain conditions, w orkers, some pow er vis--vis these ow ners. From the
perspective of w orkers, having stable large blockow ners that are insiders to the firm means that one
has ow ners w ith w hom can talk, negotiate, etc.. H ere, the social relations betw een capital and labour
are still personal w hereas in the case of a pure shareholder capitalism they are completely marketmediated, and the ow ners of capital have become invisible behind the anonymous face of the market.
Committed capital, then, is part of a social institution the firm and thus bound up in set of
structures in w hich market relations are supplemented by, and indeed partly embedded in, nonmarket social relations.
A s indicated, it is the second basic mode of control that of control exercised through the market
- that has been ignored in the historical debates on ow nership and control. Only few w riters have
acknow ledged that w ith the so called corporate revolution the firm itself has become a good that can be
traded in the market (the phrase publicly traded already indicates this). The modern corporation is
not only a producer of commodities, it is itself a commodity (Fitch 1971: 166), and the stock exchange is
the place w here this commodity is traded. M uch more than a place w here capital for new investment
is raised, the stock exchange is a market for the circulation of property rights. It is true that the
modern corporation has in a w ay socialised capital (Roy 1997 - as also M arx pointed out, Capital Vol.
3, Ch. 27) but it has socialised it mainly w ithin one class that w ith this organisational innovation
gained a lot more liquidity. Rather than ow ning w hole firms or large parts of them, the rich in the US
and in the UK have increasingly come to hold large diversified portfolios instead, free to add pieces
of firms of their choosing to their possessions.9
We may now also represent the tw o mechanisms in a 2x2 matrix combining different degrees of
concentration of ow nership w ith different degrees to w hich a market for corporate control has
developed through the stock exchange. We are thus obtaining different ideal-types of forms of
capitalism from a perspective that emphasises the centrality of ow nership and control structures
(property and pow er) to any capitalist system:

Contrary to the managerialist myth now once more at the heart of the popular discourse of shareholder capitalism that
w ith the dispersion of share ow nership, capitalist ow nership is itself spread to such an extent that it leads to the dissolution
of the capitalist class (as it is no longer restricted to any particular class), share ow nership is in fact very unequally
distributed in society (H enw ood 1999).

Degree of concentration of ownership

M arket for corporate
Weak
control

Low

H igh

Classical M anagerial Capitalism

Post-war European Capitalism

(Berle and M eans)

Weak ow ners Strong managers
(high degree of separation between
ownership and control )

Strong large blockholders

& strong managers (plus often w orkers)
in stable consensus oriented coalitions
(ownership and control linked through
(minority) ownership)

Anglo-Saxon Shareholder
Capitalism
Strong outside ow ners vulnerable
manages

???

(ownership and control linked through the

market )

Strong

In the upper-left quadrant, combining a low degree of ow nership concentration w ith a weak market for
corporate control, w e w ould find the classical managerial capitalism of Berle and M eans. Of course,
this matrix ignores other possibilities of control such as that by banks or finance capital (w hich has
been, as w e saw , the focus of some M arxist critiques of managerialism). N evertheless, I w ould suggest
that it is indeed correct to view US capitalism of the Golden A ge as indeed representing a limited
managerial capitalism. In the upper-right quadrant, combining a high degree of ow nership
concentration w ith a weak market for corporate control, w e w ould find the post-w ar continental
European capitalism, that, w ith its different varieties, has been described above. We may argue that
this also represents again at least a limited form of managerial capitalism but of a different kind than
that of the A nglo-Saxon countries because of the continuing dominance of large blockholders. In the
low er-left quadrant, combining a low degree of concentration of ow nership w ith a strong market for
corporate control, w e w ould, I argue, find the present shareholder capitalism of the US and the UK.
A lthough in recent decades a limited re-concentration of ow nership in the form of large holdings by
institutional investors has taken place in these countries, ow nership of individual firms is still very
dispersed and control is exercised collectively through the market. The low er-right quadrant,
combining a high degree of concentration of ow nership w ith a strong market for corporate control is
still left open. On the face of it, this quadrant seems to represent an impossibility. Certainly,
concentration of ow nership and the development of a market for corporate control correlate
negatively as the former prevents the liquidity that the latter needs. But, I w ould argue if the
concentration of ow nership is limited to minority control, the majority of the shares might still be
subject to the treat of an outsider taking control. M oreover, there are also, as w e shall see, other
reasons w hy a publicly listed firm, even if it has stable dominant shareholders, may increasingly be
subject to capital market pressures, i.e. to control exercised through the (stock) market. It is this
possibility that w e w ill examine w hen analysing the current transformation of European corporate
governance.

M oney versus Productive Capital

The above typology of capitalism by ow nership and control structures, may also be related to different
fractions of capital , and different, and potentially rival, fractions of the capitalist class. We have already
made the distinction betw een committed capital and liquid capital, and thus betw een different groups
of capitalist ow ners, w ith different interests and identities. M ore abstractly, follow ing M arx
distinction betw een productive capital and money capital, or industrial versus financial capital in their
concrete manifestations w ithin capitalist class formation (Capital, Vol. 2, see also Van der Pijl 1998),
w e may argue that committed capital represents productive capital inasmuch as it is bound up w ith
and implicated in the production process itself, a process it can therefore also exercise direct control
over (by controlling the management), but from w hich it at the same time is not free to extract itself.
Ow ners have of liquid capital on the contrary, have diversified their holdings and do have this
freedom. They w ill thus seek to maximise the returns of those holdings inter alia by selling and buying
their property titles on the stock market, thus freely moving their investments from one firm to
another (moreover they are also free to turn their stock in to other kinds of investments, such as bonds
and other purely financial instruments w hatever makes more money). In the latter case, then,
ow nership has come to stand completely outside the production process and assumes the form of
money capital. A s M arx already w rote, w ith the rise of the join-stock company, the ow ner of industrial
capital, now a shareholder, comes to act as a pure money capitalist (Capital Vol. 3, Ch. 27). The
shareholder value ideology of maximising returns (i.e. financial gain) as discussed above, indeed
reveals a pure financial or money capital perspective. I w ould thus argue that w hat can be seen as the
essence of shareholder capitalism, namely the commodification of capitalist ow nership through the
stock market and the market for corporate control (i.e., the phenomenon w hereby firms have
themselves become commodities), and thus the marketisation of the social relations betw een ow ners on
the one hand and managers and w orkers on the other, w ill be bound up w ith the dominance of the
money capital perspective, and of the financial as opposed to the industrial fraction of the capitalist
class. What this may imply is a potential disembedding of industrial capital (w hich is by definition
much more embedded than purely financial capital) as the money capital perspective comes to prevail
w ithin industry, and therefore w ithin production, itself.
The question that now remains to be dealt w ith is w hether such a rise of money capital vis--vis
productive capital can also be observed in continental Europe, w here traditionally stock markets have
been underdeveloped and capital firmly bound to at least to an extent nationally embedded
production. For this w e w ill start by mapping and analysing current ow nership and control structures
among Europes largest firms, and examine to w hich extent changes here reveal indeed a shift
tow ards a new shareholder capitalism.

Ow nershi p and Control

Bl ock hol ders

i n Contemporary Europe: The Predomi nance of

Large

Who ow ns and controls the largest corporations in Western Europe? The answ er in part depends
w hether one only looks at the voting mode of control or also takes into account w hat I have identified
as a second basic mode of corporate, that of market control. In this section w e w ill first look at the first
mode only, thus examining Europes ow nership and control structures from the perspective of the
classical debate that started w ith Berle and M eans. Later on I w ill argue that the picture significantly
changes if one incorporates the market mode of control into the analysis as w ell.
Table 1 presents a list of Europes 100 largest (by revenue, and based upon Fortunes Global 500)
non-financial companies and their largest and second largest so called ultimate ow ners at the end of
1998. Based on primary data (mainly from company sources such as annual reports and company
w ebsites) I have identified the largest shareholders (in the case of publicly listed companies) of each of
10

the 100 companies in my sample. This gives us a first cut on corporate control but is not sufficient to
determine the actual identity of a firms dominant ow ners. This is so because the largest shareholders
have themselves often dominant ow ners, w ho, in their turn, also have big controlling shareholders,
sometimes in a long chain (a so called pyramid) that ends w ith a single person w ho w e w ould then
identify as the ultimate ow ner. It is thus I have for each large shareholder uncovered their ow nership
structure, and to the extent that one could find dominant ow ners at that second layer, identified their
dominant ow ners, etc.. The ultimate ow ner is thus the person or entity w ho is ultimately in control.
Control here, focusing on voting pow er, is defined as having a certain percentage of the total
voting rights of a corporation such that the ow ner of that large block of shares cannot be outvoted and
has the pow er to appoint and control management at the A GM . Often such a large blockholder w ould
also be represented on the board of directors (or supervisory board in the Germanic system). In order
to determine control, then, in this w ay w e need to define a cut-off point, that is a certain percentage at
w hich w e say that there is control by a dominant ow ner. A ny such a cut-off point is ultimately
arbitrary and does not take into account a number of other relevant factors, such as in particular the
degree of dispersion of the remaining shareholdings. It can therefore only be an approximation. Berle
and M eans had set it at 20 per cent but since share ow nership has become more dispersed since their
time, most present w riters on the subject have accepted 10 per cent as a reasonable threshold for
control (Scott 1997, La Porta et al 1998) and this practice has been follow ed here. So, if a person or
entity has 10 per cent or more of the voting rights of a corporation he or she is said to have (minority)
10
control of that corporation. Let us now , then, examine the ow nership and control structures of
Europes 100 largest companies from this vantage point.

10

N ot alw ays does the percentage of voting rights equal the percentage of shares held. This w ould be the normal practice in
the US and the UK, but in continental European countries there are deviations to this. For instance, in France more long-term
shareholders are often rew arded for their patience by gaining double voting rights after a certain period (usually tw o or
three years). M ore often discrepancies betw een voting rights and actual ow nership (so called cash flow rights) arise because
of the existence of tw o or more classes of shares, w ith differential voting rights attached to the different types of shares (some
carrying no voting rights at all). The most extreme case here is Sw eden. For instance, Investor, w hich is controlled by the
Wallenberg family foundations, holds 21.0 % of the voting rights in Sw edish company Electrolux but only 3.6 of its capital.
A s Berle and M eans (1991: 71) have argued, such a divergence betw een voting rights and actual economic interest does
represent a kind of separation of ow nership and control (by legal device they called it), how ever the voting rights are still
vested in ow nership and normally the discrepancies are not as large as in this extreme case.

11

Tabl e 1: Ow nershi p A nd Control I n Europes 100 Largest N on-Fi nanci al Compani es, A round End
1998: D omi nant Ow ners By V oti ng Ri ghts
Company N ame

A BB
A hol d
A k zo N obel
A l catel
A l stom
A rbed
A SD A
A uchan
BA SF
Bayer
Bertel smann
BM W
Bouygues
BP Amoco
Br. Aerospace
Br. A i rw ays
Br. Am. Tobacco
Br. Post Of f i ce
BT
Cabl e & Wi reless
Carref our
Casi no
Centri ca
D aiml erChrysl er
D anone
D el hai ze
D eutsche Bahn
D eutsche Post
D eut. Telek om
D i ageo
El ectri ci t de Fra.
El ectrol ux
El f A cqui tai ne
EN EL
EN I
Eri csson
Fi at
France Tel ecom
Franz Haniel
GEC

C
o
u
n
t
r
y

L
i
s
t
e
d

Sw / S
N eth.
N eth.
Fra.
Fra.
Lux.
UK
Fra.
Ger.
Ger.
Ger.
Ger.
Fra.
UK
UK
UK
UK
UK
UK
UK
Fra.
Fra.
UK
Ger.
Fra.
Bel.
Ger.
Ger.
Ger.
UK
Fra.
Sw .
Fra.
Italy
Italy
Sw .
It.
Fra.
Ger.
UK

Y
Y
Y
Y
Y
Y
Y
N
Y
Y
N
Y
Y
Y
Y
Y
Y
N
Y
Y
Y
Y
Y
Y
Y
Y
N
N
Y
Y
N
Y
Y
N
Y
Y
Y
Y
N
Y

Type of
control l i ng
ow ner

Largest
ul ti mate ow ner
by voting ri ghts

Board
Repr.

Second l argest
ul ti mate ow ner

M artin Ebner (P)

A M EV/ VSB 1990
(none above 10%)
Socit Gnrale
A lcatel (J)
Luxembourg state
Schroders IM
M ullliez family
A llianz
A llianz
Reinhard Mohn
Quandt family
M . & O. Bouygues (J)
State of Kuwait
(none above 5%)
Franklin Resources
(none above 3%)
Br. Government
(none above 3%)
Prudential Corp.
Defforey family (J)
Jean-Charles Naouri (P)
Prudential Corporation
Deutsche Bank
M . David Weil (P)
Delhaize family
German federal state
German federal state
German federal state
Bernard A rnault
French state
Wallenberg family (P)
(none above 1.25%)
Italian state
Italian state
Wallenberg family (P)
A gnelli family (P)
French state
H aniel family
Prudential Corporation

9.5
8.0
5.5
24.0
29.7
13.8
85.0
10.4
5.0.
90.0
45.6
18.3
3.8
6.3.
100.0
3.4
14.3
59.4
3.7
12.0
8.6
38.0
100.0
100.0
73.0
10.9
100.0
21.0
100.0
36.3
38.8
30.1
63.6
99.0
3.7

BD
No
BD
BD
BD
No
CSB
SB
No
H CSB
SB
CEO
No
No
No
No
BD
SB
No
CSB
BD
No
SB
SB
SB
BD
BD
BD
BD
BD
VC
HC
BD
CSB
No

Wallenberg family (P)

IN G Group
Employees Trust
GEC (J)
Suez Lyonnaise des E.
M ercury A M
Zeit Foundation
A utomobilw erte
Franois Pinault (J)
Fidelity
Schroder IM
N at. City N ominees
J. and C. March (P) (J)
Guichard family
State of Kuwait
A gnelli family
France Telecom
4th Nat. Pension ...
A B Industrivrden
M ediobanca
Deutsche Telekom
-

6.7
7.4
3.2.
24.0
9.4
8.9
10.0
10.0
13.8
3.7.
5.3
3.2
6.2
CSB
7.4
6.4
2.0
5.8
26.4
3.0
2.0
-

Board
Repr.

(10% cut-of f )
Fami l y
State
Corporate
(B, I , C)
Other
M i xed

N one
N one
N one
(N one)
Corporate (C)
State
Corporate (I )
Fami l y
Corporate (B)
N one
Fami l y
Fami l y
Fami l y
N one
N one
N one
N one
State
N one
N one
Fami l y
Fami l y
N one
Corporate (B)
N one
Fami l y
State
State
State
Fami l y
State
Fami l y
N one
State
State
Fami l y
Fami l y
State
Fami l y
N one

12

C
No
No
BD
No
No
No
No

BD
No

No
BD

No
BD

BD
BD
No
BD
-

Gl axo Wel l come

H enk el
H oechst
I CI
I RI
I vensys
J Sai nsbury
K i ngf i sher
K vaerner
La Poste
Lagardre
LOral
Luf thansa
M an
M annesmann
M arks & Spencer
M etal l gesel l sch.
M etro
M i chel i n
M i gros
M ontedi son
N estl
N ok i a
N orsk H ydro
N ovarti s
Otto V ersand
Pechi ney
Petrof i na
Peugeot
Pi naul t-P.-R.
Phi l i ps Electron.
Preussag

UK
Ger.
Ger.
UK
It.
UK
UK
UK
N or.
Fra.
Fra.
Fra.
Ger.
Ger.
Ger.
UK
Ger.
Ger.
Fra.
Sw i.
Italy
Sw i.
Fin.
N or.
Sw i.
Ger.
Fra.
Bel.
Fra.
Fra.
N eth.
Ger

Y
Y
Y
Y
N
Y
Y
Y
Y
N
Y
Y
Y
Y
Y
Y
Y
Y
Y
N
Y
Y
Y
Y
Y
N
Y
Y
Y
Y
Y
Y

N one
Fami l y
Corporate (C) 1
N one
State
N one
Fami l y
N one
Corporate (I )
State
Fami l y
M i xed (F/C)
Corporate (B)
Corporate (B.)
N one
N one
Corporate (B)
Fami l y
Fami l y
N one
Corporate (B)
N one
N one
State
N one
Fami l y
Corporate (I )
Fami l y
Fami l y
Fami l y
N one
State

Wellcome Trust
H enkel family
State of Kuwait
Capital Group
Italian state
Franklin Resources Inc.
Sainsbury family
Prudential Corporation
Chase M anhattan2
French state
J. Lagardre & son
L. Bettencourt & fam. (J)
2 German banks (J)5
A llianz (& partners) (J)
(none above 5%)
Prudential Corporation
Dresdner Bank
M etro Holding(J)6
F. & E. M ichelin & fam.

Promods
Fra.
RA G
Ger.
Renaul t
Fra.
Repsol
Spain
Rhone-Poulenc
Fra.
Robert Bosch
Ger.
Roche H ol di ng
Sw i.
Royal D utch/
N eth.
Shel l
/ UK
RWE
Ger.
Safeway
UK
Sai nt-Gobai n
Fra.
Si emens
Ger.
Smi thK l i ne
UK
Beecham
SN CF
Fra.
Statoi l
N or.
Stora Enso
Fin.
Suez Lyonnai se des Fra.
Eaux
Telecom I tal i a
Italy
Telef oni ca
Sp.
Tesco
UK
Thyssen K rupp
Ger.

Y
N
Y
Y
Y
N
Y
Y

Fami l y
Corporate (C)
State
N one
N one
Other
Fami l y
N one

Bloc Italian banks (J) (P)

Pohjola Insurance Co.
N orw egian state
Sandoz family
Otto family
Franklin Resources Inc.
A . Frre (& P. Desmarais)
Peugeot family
Franois Pinault
(none above 10%)
N orth Rhine-Westphalia
(WestLB)
H alley family
VEBA (J)
French state
Banco Bilbao Vizcaya
Socit Gnrale
Bosch Foundation8
Founding families
Prudential Corporation

SB

Prudential Corporation
Jahr family
Chemiew erte
Prudential Corporation
Capital Group
Begesen d.y. A SA
(supporting block)
N estl (J) 4
Deutsche Bank
M erill Lynch A sset M/
UPM -Kymmene Corp.
Brost & Funke family
Capital Group Cos.
M ichelin
Guillbert family
-

3.1.
5.0
10.2
3.3.
5.0
19.6
34.5
11.3
2.3
3.6
25.0
12.0
5.3
2.9
-

BD
BD
CSB
No
BD
No
No
No
No
-

53.9
37.1
44.2
9.5
2.8
93.0
50.0
1.4

CEO
CSB
BD
VC
BD
Yes
BD
No

Banco Bilbao Vizcaya

VEW (J)
Corporate bloc
La Caixa
BN P
Bosch family
M artin Ebner (P)
-

5.2
30.2
7.2
7.6
2.5
7.0
16.5
-

SB
BD
BD
BD
No
No
-

Y
Y
Y
Y
Y

M i xed (C/S)
N one
N one
N one
N one

A llianz
Franklin Resources
Vivendi
Siemens family
M ercury A sset M ngmnt

13.3
9.4
9.3
6.9
3.8

CSB
No
BD
SB
No

Group of municipalities
Capital Group
BN P
Prudential Portfolio

12.1
4.3
5.7
3.0

SB
No
BD
No

N
N
Y
Y

State
State
M i xed (S/F)
Fami l y

French state
N orw egian state
Finnish state
A . Frre & P. Desmarais

100.0
100.0
21.6
12.6

BD
No
No
SB

Wallenberg family
Credit A gricole

10.9
10.5

C/ BD
SB

Y
Y
Y
Y

N one
N one
N one
Other

Italian state
Banca A rgentaria
(none above 3%)
Krupp Foundation

4.0
5.0
16.8

BD
BD
H CSB

Bank of Italy
La Caixa
Republic of Iran

2.3
5.0
7.7

No
BD
SB

Co-operative

13

5.5.
85.0
24.5
6.9
100.0
6.0
39.0
4.0
19.8
100.0
5.83
35.9
10.1
36.0
5.9
11.8
60.0
35.07
37.4
4.7
51.0
4.2
50.0
14.5
39.9
38.1
58.5
33.0

No
H CSB
SB
No
BD
No
Yes
No
No
BD
MP
BD
SB
VCSB
SB
SB
MP
CM
BD
No
BD
CEO
No
CB
CSB
CEO
-

No
No
No
No
No

Total
Uni l ever
V EBA
VIAG
V i vendi
V ol k swagen
V ol vo

Fra.
N eth.
/ UK
Ger.
Ger.
Fra.
Ger.
Sw .

Y
Y

Other
N one

COGEM A 9
Leverhulme Trust

10.3
2.7

BD
BD

Paribas
-

2.5
-

BD
-

Y
Y
Y
Y
Y

Corporate (B)
State
Corporate (C)
State
Corporate (I )

A llianz
State of Bavaria
Saint-Gobain
State of Low er Saxony
ForeningsSparbanken

11.5
32.6
11.5
20.0
11.2

SB
No
VC
SB
No

Bayerische H ypo. Bank

A lcatel
4th Nat. Pension Fund

-20.6
7.7
5.0

BD
BD
BD

Sources: Ow n research (company reports, internet, and miscellaneous). A more detailed table, including the control chains
that lead from the ultimate ow ner to the controlled firm (that is, if the largest shareholder is not itself w idely held), w ill be
made available in a later table.
Not es: Type of controlling ow ner: this categorises the largest ultimate ow ner w ith more than 10% of the voting rights. In
case control may be deemed to be exercised jointly by tw o or more shareholders, and if these shareholders fall into different
categories, the firm is classified as mixed. Ow nership by foreign states (w hich is the case mainly in few German companies)
is here classified as corporate ow nership. B= Banks and insurance companies; I= Investment companies incl. quoted
holding companies, pension funds, mutual funds and other funds; C= Other companies, mainly industrial firms.
Largest/ second largest ultimate ow ner: In identifying the ultimate ow ner I follow La Porta et al (1998; see also Berle and
M eans 1991) in adding the direct and indirect voting rights controlled by a shareholder. Direct holding are shares registered
in the shareholders name. Indirect holding are shares held by companies that that shareholder ultimately controls. A lthough
a a 10% cut-off criterion has been used to identify the ultimate ow ner w ith respect to the first layer of ow nership (direct
holding), a 20% cut-off has been applied to identify any ultimate ow ners at higher ow nership tiers. A ccording to this
definition the ultimate control exists if there is continuous chain of holdings (of voting rights) of at least 20%, or 10% at the
end of the chain, w ith at each time no rival shareholders w ith large stakes. Thus if person A holds a personal (direct) stake of
5% in a company X, but also ow ns >20% of the voting rights in entity C, w hich in turn controls >20% in entity B, w hich in
turn has >10% of the voting rights in company X (a pyramid, see below ) than person A is said to control (directly and
indirectly) 15% of the voting rights.
- = not applicable (no first or second largest ow ner w ith a significant holding). (P)= in case the (second) largest ow ner stands
on the top of a pyramid structure, defined as a structure in w hich at least one quoted company stands in betw een the ow ner
and the company (s)he ultimately controls. (J)= Joint control, w hich is defined as control exercised by tw o or more dominant
shareholders w ho are independent but have agreed to co-ordinate and partially pool their interests by w ay of a shareholder
agreement. In the case of joint control, the tw o or more partners do not have to be of equal w eight, i.e., one of them may very
w ell be regarded as the dominant ow ner (e.g., Bouygues w hich is minority ow ned and managed by the tw o Bouygues
brothers). Board representation: BD= M ember of the Board of Directors; C= Chairman of the Board of Directors; VC= ViceChairman of the Board of Directors; H C= H onorary Chairman of the Board.; CEO= Chief Executive Officer; SB= Supervisory
Board member; CSB= Chairman of the Supervisory Board; VCSB= Vice-Chairman of the Supervisory Board; HCSB:
H onorary Chairman of the Supervisory Board; M P= M anaging Partner. In case in italics, the board member is not the
ultimate ow ner him or herself but someone w ho is an inside director (or chairman of the supervisory board) of an
intermediate company.

The Kuw aiti state ow ns this stake via the Kuw ait Petroleum Corporation.
A s a custodian for a number of different shareholders.
3
Lagardere, like M ichelin, is a limited partnership w ith shares (SCA ), w hich means that it consists of general partners w ith
unlimited liability and the right to appoint the management, on the one hand, and of limited partners, or ordinary
shareholders on the other (the latter elect the supervisory board). In a limited partnership w ith shares, the managing partners
may be deemed to be in full control of the company even if their shareholding is below the 10% level.
4
N estl and Lililiane Bettencourt jointly exercise control over 70.4 % of the voting rights through the holding company
Gesparal.
5
Dresdner Bank and Bayerische Landesbank together in a holding called M unchener Gesellschaft fur Luftfahrtw erte.
6
M etro H olding is jointly ow ned and controlled by Otto Beisheim, the Schmidt-Ruthenbeck family and the H aniel family. Of
these, M etro founder Beisheim maybe regarded the dominant shareholder.
7
Estimate. See further note 3.
8
Voting rights for the Bosch foundation are in fact exercised by a trust (Treuhand) controlled by Bosch management.
9
COGEM A is ow ned by CEA , (French atomic energy commission), w hich is a French government agency, but w ith full
financial and management autonomy. Total also holds a stake in COGEM A . It is here classified as other.
______________________________________________________________________________________________________________
2

Of the 100 companies, 84 are publicly listed corporations, w hereas 16 are fully ow ned either privately
or by the state. The great majority of Europes big companies therefore now have their capital (shares)
traded on the stock exchange. Of these, how ever, a substantial majority (48) do still have substantial
14

ow ners holding blocks of 10 per cent or more. Indeed, using the 10 per cent cut-off in total 64, or
almost tw o thirds, of Europes 100 largest companies are controlled by a dominant ow ner. In 9 other
cases the largest shareholder controls less than 10 per cent but through board representation can still
be said to exercise a predominant influence (sometimes even outright control) so that in only 27 cases
could w e find no dominant (ow nership) interest at all (w ith the largest shareholders holding no more
than a few per cent, w hich is still significant in money terms but not w ith regard to voting pow er). Of
these 27 w idely-held corporations representing the classical case of the managerialist theory 19
can be found in the UK (incl. tw o A nglo-Dutch companies), out of a total of 22 British companies.
Restricting our analysis, then, to continental Europe w e find that 61 out of the total of 78, or
almost 80 per cent, of continental European companies are subject to direct ow ner control (w ith a
further 10 per cent subject to predominant influence). H ence examining ow nership and control
structures from the vantage point of concentration of voting pow er, it appears that w e can indeed
distinguish betw een an A nglo-Saxon and a continental European model, w ith the latter continuing to
be dominated by large blockholders. The first important conclusion, then, that w e can draw is that the
process identified by Berle and M eans 70 years ago, and often assumed to have been universal, has
11
apparently never fully taken place w ithin continental Europe. The dispersal of share ow nership has
been limited, and there are still large blockholders in almost all continental European countries,
ow ners w ho can (partially) control management through their voting pow er and are indeed as such in
almost all cases (56 out of 64) represented on the board. Even if , as w e argued above, some kind of
managerial capitalism did arise in Europe, it w as not of the kind in w hich ow ners lost all control
(w hich probably w ould not be the right w ay of understanding the A merican managerial capitalism
of the Golden A ge either, but across the A tlantic w e have w itnessed a much w ider dispersal of
ow nership). On the concentration of ow nership dimension, then, continental European capitalism
w ould still be on the right-hand side of our earlier 2x2 matrix.

11

This conclusion is in line w ith some of the other (very limited) recent research on ow nership and control structures, in
particular that of La Porta et al 1998. Contrasting the UK as a representative of the A nglo-Saxon model w ith the rest of
Europe here representing a continental model of course glosses over important differences betw een the different
continental European countries. A lthough certainly important, it falls outside the scope of this paper to engage in such a
comparison. H ere w e are mainly interested in the changes pertaining to w hat the continental European systems have in
common, namely underdeveloped capital markets (markets for corporate control) and relatively high concentration of
ow nership.

15

Table 2: Control of European N on-Financial Top 100 by Type of Controller and M ode of Control (End
of 1998)
Type of Control l er

Family/
Personal
M ode of Control

Corporate
Banks &
Insuranc
e Cos.

Funds

Other
Corporations

State

Other

N one

Totals

Full ow nership

12

M ajority control
(>50%)
Joint majority control

13

M inority control
20 < 50%
Joint minority control
20 < 50%
M inority control
10 < 20%
Relative minority control

13

Predominant influence

N o dominant interest

27

27

30

11

21

27

100

Total s

Source: Ow n research, see Table 1.

Not es: Cases w here the ultimate ow ners are of the mixed category (see Table 1) e.g., cases w here control is exercised jointly
by a family and a corporation have here been allocated to the category of the dominant partner. Other includes ow nership
by foundations that are no longer controlled by their founding families.
Relative majority control is intended to describe those cases w here a minority controller is subject to a significant
countervailing influence of one ore more other shareholders. This is here operationalised as follow s. If there are tw o
independent and unassociated (through an agreement) shareholders w ith each 10% or more of the votes, and w ith the
difference betw een the largest and the second largest shareholder being no more than 10%, or 15% in case the second largest
shareholder is represented on the board w hereas the largest is not, w e see that minority control is relative. Cases of relative
minority control are allocated by largest shareholder (by voting rights), even if in some cases control may be distributed
about equally betw een the different dominant ow ners (how ever, if w e w ould split companies on this basis, the distribution
w ould be practically the same). Predominant influence refers to a situation w here the largest shareholder holds betw een 3 and
10% of the voting rights and is represented on the board.

__________________________________________________________________________________________
Examining the distribution of different types of ultimate ow ners w e see in Table 2 that family or
personal ow nership still dominates w ith 30 out of 73 firms in w hich there is either ow ner control or
predominant ow ner influence (or 30 per cent of the total), w ith 23 of these being controlled by stakes
of 20 per cent or more. This is follow ed by state ow nership (21) and ow nership by banks and
insurance companies (11). With almost one third of Europes largest companies being (partially)
controlled by families or individuals, the rise of the modern corporation has in continental Europe
clearly not led to the full demise of family capitalism that has often been associated w ith it. A lthough I
w ill later argue, that family ow nership is nevertheless in relative decline, and moreover that its nature
is being transformed for now it is important to note that in this respect continental European
capitalism is still different from the shareholder capitalism said to prevail in the US and the UK (as
w ell as from classical managerial capitalism!). Ow nership and control in continental Europe continues
16

to be characterised by a relatively high degree of concentration of ow nership (thus w ithin one of the
tw o right-hand quadrants of our 2x2 matrix).
What then about the alleged rise of shareholder capitalism in continental Europe? This is w here
w e have to extend our analysis to include the second basic mode of corporate control, that of control
through the (stock) market. Below , I w ill argue that taking this into account w e can, on the basis of the
evidence available, in fact observe the emerge of a new shareholder capitalism in continental Europe,
but still of a different kind than that prevalent in the A nglo-Saxon countries.

A European Sharehol der Capi tal i sm i n the M ak i ng?

On the basis of evidence gathered for this research, and on w hat has been found by others, it is
possible to observe to observe a number of trends in the ow nership and control of Europes large
companies that together indicate a relative decline of the traditional large blockholders and a rise of
new class of investors, w ho are outside shareholders operating in globalising capital markets and
12
thus oriented exclusively to maximising their financial return, operating as pure money capitalists.
The decline of traditional blockholders takes tw o forms. First, although ow nership concentration
is still high in continental Europe (compared to the US and the UK) it has been decreasing and
probably w ill continue to do so in the foreseeable future, even if only to a certain point. But, this
decline primarily concerns traditional blockholders that formed the core of the ow nership structure of
managed capitalism, such as banks, founding families of old companies, and the state. For the
foreseeable future, large blockholders w ill continue to dominate the European corporate landscape. In
fact as important as their quantitative is the transformation of the role they play in corporate governance.
I w ill argue that large blockow ners w ill increasingly become themselves subject to the pressures and
the temptations of the capital market.

The Decline of Traditional Owners

The most dramatic, and most consequential, decline of traditional ow nership concerns that of the
state. The state has in fact in most cases not been a blockholder in the usual sense as it often ow ned a
100 per cent of a firms capital. Even if the state is still the second largest type of controller, state
ow nership among European big capital has declined spectacularly over the past 10 to 20 years. A s w e
can see in table 3, of Europes 100 largest corporations 30 have once been in full state ow nership and
three in majority state ow nership. Of these 33, 15 have now been completely privatised (w ith the state
holding no shares at all), w hereas in a further nine cases the state has sold off a substantial part of its
holding. A s is w ell know n, the privatisation w ave in Western Europe started in the UK in the early to
mid-1908s under Thatcher, then expanded to France in the second half of the 1980s under the new
centre-right government (to an extent involving companies that had only been nationalised a few
years before), as w ell as to Germany (w here state ow nership had alw ays been limited) and to Italy
(w here state ow nership has been extensive) again a bit later. This process is set to continue. Indeed,
apart from the UK, the privatisation process has not been completed in most European countries, and
several large companies are expected to have their first Initial Public Offering (IPO) very soon or in
fact have already gone to the market just recently. In other companies w here the state still holds a
large stake, further sell-offs are expected (see Table).
12

I put the term investor here betw een quotations marks as it could be argued that shareholders in fact do no so much
invest in the sense of providing new capital to firms as just make money by trading existing shares. A s H enw ood (1999)
points out only in the case of formerly private firms going public (or state-ow ned firms being privatised) or in the rarer
cases that firms issue new share capital, does the stock exchange in fact perform the kind of investment function it claims to
perform. In the majority of cases all that happens is that property titles pertaining to existing capital change hands (at a
handsome profit).

17

Tabl e 3: D ecl i ni ng State Ow nershi p amongst Europes 100 Largest Compani es (End of 1998)
Company N ame

A l catel
A rbed
BP Amoco
Br. Aerospace
Br. A i rw ays
Br. Post Of f i ce
Bri ti sh Telecom
Cabl e & Wi reless
Centri ca (f rmr.
Bri ti sh Gas)
D eutsche Bahn
D eutsche Post
D eut. Telek om
El ectri ci t de Fra.
El f A cqui tai ne
EN EL
EN I
France Tel ecom
I RI
La Poste
Luf thansa
N orsk H ydro
Pechi ney
Preussag
Renaul t
Repsol
Rhone-Poulenc
RWE
Sai nt-Gobai n
SN CF
Statoi l
Telef oni ca
Total
V EBA
VIAG
V ol k swagen

C
o
u
n
t
r
y

Year of
f oundati on

Year(s) of
pri vi ti sati on

(nati onal i sati on)

H i ghest
%
of state
ow nershi p

Remai ni ng Board
state
Repr.
sharehol di ng

Changes si nce end 98/

pl anned f uture
pri vati sati on?

Fra.
Lux.
UK
UK
UK
UK
UK
UK

1898 (1982)
1882
1909
1977
1939
n.a.
n.a.
1860s (1947)

1987
1987
1981
1987
1984-93
1981

100.0
n.a.
68.0
100.0
100.0
100.0
100.0
100.0

0.0
29.7
0.0
0.0
0.0
100.0
0.0
0.0

BD
No
-

no plans know n
no plans/ deregulatory pressure EU
-

UK

n.a.

1986

100.0

0.0

Ger.
Ger.
Ger.
Fra.
Fra.
Italy
Italy
Fra.
It.
Fra.
Ger.
N or.
Fra.
Ger
Fra.
Spain
Fra.
Ger.
Fra.
Fra.
N or.
Sp.
Fra.
Ger.
Ger.
Ger.

n.a.
n.a.
n.a.
1946
1941
1962
1953
n.a.
1933
n.a.
1926
n.a. (1945)
19th cent. (1982)
1923
1898 (1945)
18th cent. (1985)
1860s (1982)
1898
1665 (1982)
n.a.
1972
n.a.
1924
1929
1923
1938

2000
1995/ 6-1994
1999199519972000
1965-97
1995-98
1959?
19941989-97
-1993
19861987-97
1965-87
1986-1988
1960

100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
51.0
100.0
100.0
100.0
100.0
100.0
c. 60.0
100.0
100.0
100.0
100.0
c. 40.0
100.0
100.0
100.0

100.0
100.0
73.0
100.0
GS
100.0
36.3
63.6
100.0
100.0
0.0
51.0
0.0
(33.0) 13
44.2
0.0
0.0
c. 30.014
0.0

SB
SB
SB
BD
BD
BD
BD
BD
BD
No
(SB)
BD
GS
CSB
BD
No
No
SB

partial privatisation planned

IPO of 35% planned for A utumn 00
further public offering planned
no plans know n
IPO in Nov. 99 (34.5% sold)
no plans know n

100.0
GS
0.0
0.0
32.6
20.0

to be dissolved in June 00
no plans/ deregulatory pressure EU
no plans know n
no plans know n
merger w ith VEW
no plans know n
(merger w ith VIA G)
(merger w ith VEBA )
no plans know n

Sources: Ow n research (information gather company Internet sources and other sources), see also Table 1.
Not es: The years of privatisation give if know n - respectively the year in w hich the privatisation process started and the
year in w hich it w as completed (before and after the hyphen).

Family ow nership, by w hich I mean the ow nership of (often founding) families passing on their firm
from one generation to the next less so personal ow nership in general - is also in a relative, longterm decline, even if it is still a major feature of continental ow nership and control structures. M any of
the companies in my sample or their predecessors have a history going back a century or more,
that is to the era of competitive family capitalism. In fact, the overw helming majority of the 100
13
14

Stake held by Westdeutsche Landesbank, w hich is controlled by the State of N orth Rhine-Westphalia.
This is not a single holding but the holdings of different municipalities and other local authorities added together.

18

companies (the most important exceptions being those that w ere state-ow ned from the start, mainly
national PTTs and other monopolies) w ere at one time family firms, founded by a particular ow nerentrepreneur. N ow there are 21 companies left in w hich the founder or his (never her) descendent(s)
still hold five per cent or more of the shares, 19 of w hich hold a controlling stake of more than 10 per
cent. There is one UK company among these, all other 18 are from various continental countries. These
are partly indeed old companies, such as Fiat (founded in 1899) and Franz H aniel (founded in 1756!),
spanning several generations of family ow nership as w ell as younger companies in w hich the founder
is still in control (such as Pinault-Printemps Redoute of Frances richest man, Franois Pinault). In
addition there are four cases of continental companies that w ere not founded by the presently
controlling families but of w hich the ow nership has already passed through more than one generation
and still amounts to more than 10 per cent.
The total of 22 cases out of 78 continental European companies in w hich their has been
controlling family (or personal) ow nership since foundation or at least across more than one
generation, is still very high in comparison to w hat w e find in the UK or in US, but low compared to
w hat w e w ould have found a century or also several decades ago. M oreover, family ow nership is still
in the process of further dilution, mainly because of the continuing merger and acquisition w ave.
Family (controlled) firms too have to grow in order to compete in an increasingly global product
market and this almost in all sectors necessitates merging or a large take-over (or indeed, being
15
taken-over).
Ow nership by other corporations, w hether of a cross-shareholding kind or not, has been a feature
of the traditional ow nership and control patterns in in particular France and Germany, w ith the latter
show ing a large degree of ow nership by banks (basically the big three: Deutsche, Dresdner, and
Commerzbank, as w ell as the insurance company A llianz), and the former show ing more complex
netw orks of cross-holdings involving both industrial companies and financial institutions. H ow ever,
these corporate blockholders are also in decline. In France, the 1990s have seen a spectacular
unw inding of its complex system of cross-shareholdings, w ith inter-corporate ow nership declining
from 59 per cent to less than 20 per cent of total market capitalisation from 1993 to 1997 (N estor and
Thompson 1999: 11). In Germany, financial institutions have so far been prevented from selling off (or
reducing) the stakes they hold in many of the countrys largest industrial corporations (see Table 1)
because of the punitive tax imposed upon such sales. A t the end of 1999, how ever, the new German
Finance M inister, Eichel, unexpectedly announced the complete abolition by January 2002 - of this
particular capital gains tax, a new s to w hich the global financial community has reacted w ith delight
as it is expected to lead to large sales of these stakes of formerly committed capital, thus boosting the
stock market by providing it w ith new liquidity and promoting the development of an equity culture
16
in Germany . Indeed, it has been argued that this could possibly spell the end of w hat has been
called Deutschland AG (H pner 1999), and pow erhouses of that Germany Inc. such as Deutsche Bank
17
and A llianz have already announced that they intend to at least significantly reduce their holdings.
In sum, traditional ow ners, w hether the state, families, corporations or other insiders that
provided committed capital bound in a set of stable and long-term relationships to the firm, its
management and its w orkers, have been, and continue to be in decline. Below I w ill argue, that at the
same time, how ever, a new type of blockow ners is emerging.
15

Thus, for instance, the Wallenbergs have seen their controlling stakes diluted w hen their companies A stra and Stora
merged w ith respectively British and Finish competitors (Zeneca and Enso). Other family ow ned firms are under pressure to
merge (rumours of w hich regularly appear in the financial press) and some controlling families may even consider to just sell
their stake to a competitor (liquidifying their assets).
16
Charles Pretzlik, Germany companies ready for w holesale restructuring , Financial Times, 14 July 2000.
17
Thus, Deutsche Bank (w hich is for instance the largest shareholder of DaimlerChrysler) has stated - after the tax reform
plan had been adopted by parliament on July 14 - that We are pleased w ith the tax reform. It doesnt mean that w e w ill sell
everything immediately but it means a w idening of the room for manoeuvre (Pretzlik, see note above). A llianz had already
earlier declared that it no longer regarded many of its holdings as strategic and thus, if the tax w ould be abolished, as up for
sale (see Ute H arnischfeger, A lllianz aims to continue overseas grow th , Financial Times, 21 M ay 1999.

19

The Transformation of Large Blockholders into Money Capitalists

There is evidence that remaining large blockholders are increasingly adopting a financial rather than a
strategic perspective, i.e. they come to demand shareholder value as w ell.18 This applies to all main
ow ner categories, the state, corporations, and not in the last place, families and individuals. In the case
of the state and of some corporate ow ners, particularly banks and insurance companies in the
Germanic systems, this is in fact more of a transitional phenomenon, in anticipation of the (further)
sale of the equity holdings of these ow ners. In many cases w here the state has only partially privatised
companies, that is, has kept a controlling majority or minority of the shares, it has become a passive
shareholder, not taking any active role vis--vis management. A lthough not maybe adopting an
explicit financial perspective, it does so by default inasmuch as it allow s the other shareholders
operating through the market to exercise their control through the market (sometimes supplemented
by voice mechanisms) w ithout making use of its voting pow er as a counterw eight. Thus for instance,
Deutsche Telekom, of w hich the German state still holds 73 per cent, belongs to one of the more
capital-market and shareholder value oriented corporations of Germany (H pner 2000)
The in the German case largely prospective decline in inter-corporate ow nership noted above
is another indication that ow nership stakes formerly regarded as strategic, and again in the German
case certainly providing committed capital, are now longer regarded as such. Thus, the CEO of A llianz
has indicated that the equity stakes his company w hich is in many w ays the spider in the German
corporate w eb holds, and indeed, the w hole post-w ar German system of banks and insurance
companies holding large blocks in German corporations, served a useful purpose in the past
providing the system w ith a stability that it needed in the era of post-w ar reconstruction but that it
19
has now outlived its usefulness and that they might thus be up for sale. In the meantime, as long as
they are not sold, A llianz w ill look much more critically at the financial performance of these assets
and is likely to expect higher returns than in the past. Indicating a similar change in strategy, Deutsche
and Dresdner Bank have put their equity holdings into separate companies that are supposed to
manage these holdings independently (N estor and Thompson 1999: 12).
A nother important transformation of blockholders concerns that of families and individuals.
H ere, w e may again deal in part here w ith a transitional phenomenon as families maybe become more
focused on financial performance as a prelude to the selling of their business. But w e also observe the
rise of a new type of personal ow ners w ho are in it for the long-run, i.e. do not hold equity stakes in
order to sell them again at a higher price, but do tend to have a more pure financial perspective. The
case of the Wallenberg family may be an illustration of both developments.
The Wallenbergs have dominated Sw edish industry for a large part of this century and still
20
control about 40 per cent of the market capitalisation of the Sw edish stock market. Within my
sample, the Wallenbergs are (indirectly) the largest (and controlling) shareholder of Electrolux and
Ericsson, and the second largest of StoraEnso and A BB. They are represented on the board of all four
companies and are thus in this sense clearly insiders. Their main vehicle for control is the publicly
quoted industrial holding company Investor, of w hich the Wallenberg family foundations control 41
per cent of the votes (and 19 per cent of the capital). Investor describes its task as to create value for
21
its shareholders through long-term active ow nership and active investment operations
18

The distinction betw een financial and strategic is one that is commonly made by financial analysts and partly overlaps
w ith our earlier distinction betw een committed and productive capital. If a stake is seen as strategic than it represents an
interest beyond that of pure financial return, i.e. because it implies the control of a company that otherw ise might be a
competitor.
19
Ute H arnischfeger, A lllianz aims to continue overseas grow th , Financial Times, 21 M ay 1999.
20
Busting Up Sw eden Inc. , Business Week (intl edition), February 22, 1999.
21
http:/ / w w w .investorab.com/ lang3/ m1-2/ m1-2.asp.

20

Traditionally, the family considered this long-term ow nership to imply the provision of committed and
thus stability to Sw edish productive capital. Financial press reports indicate that Investor is
increasingly under pressure from other shareholders (that those 58 per cent not controlled by the
family) to improve its financial performance and to this aim accelerate the restructuring including
22
foreign relocation of their operations - of the industrial companies it controls. A ccording to one fund
manager, if the Wallenbergs do not deliver on improving shareholder value, they w ill have
23
shareholders chasing them and it w ont be very pleasant . One of these new outside shareholders is
the US mutual fund Franklin M utual A dvisors w hich has become the second largest shareholder of
24
Investor by taking up a stake of 8.5 per cent. The pressures exercised by the capital market on
Investor seem to pay of as tw o observers from the OECD w rite that [t]he Sw edish Wallenberg family
is restructuring its w hole portfolio [..] w ith the aim of becoming an arms length investor w ith a
purely financial perspective in Sw eden and more active in international portfolio diversification
(N estor and Thompson 1999: 11).
One of main problems for the Wallenberg family, then, and this is a critical point, is that even if
they control over 40 per cent of the voting rights, w hich is more than sufficient to exercise control at
the A GM , it does not ow n a majority of the companys capital, and is therefore subject to the influence
of other shareholders w ho are exercising their control through the market as w ell as through voice on
the basis of their market pow er. H ere w e thus see a clear example of a growing discrepancy between
voting control and market control and w hy w e have to take into account both in order to determine by
w hom and how a firm is subject to ow ner control. Large blockow ners thus become themselves subject
to the market-based pow er of other, smaller, shareholders and they may either resists their pressures
or succumb to them by embracing the shareholder value ideology themselves. Let us finally look at
some examples of first-generation ow ners w ho seem to have taken this perspective already at a much
earlier point, billionaire financiers w ho are taking up increasingly central positions in the ow nership
and control netw orks of parts of European big capital.
A clear example is that of M artin Ebner, one of Sw itzerlands richest men w ho is now (indirectly)
the largest shareholder of Sw iss-Sw edish engineering giant A BB, and also holds 16.5 per cent of Sw iss
global drug company Roche (see Table 1, he also has large stakes in A lgroup and Credit Suisse). Ebner
gained notoriety in the 1990s as one of continental Europes still rare shareholder activists and as a USstyle corporate raider. H e has now transformed himself more into an insider by becoming a board
member of most of the companies in w hich he has invested, but his perspective is still an explicitly
financial one, and he has certainly not lost any of his reputation as a campaigner for shareholder value
25
and a foe of entrenched management. A dopting a strategy that w e have hitherto know n only from
US funds, Ebners 75 per cent ow ned BZ Group (bank plus associated holding companies) aims to
acquire if possible controlling stakes of equity in companies it deems to underperform financially
and then, through active ow nership, i.e. putting management under pressure, seeks to push up that
companys profits and share price.
A nother financier playing a significant role in restructuring part of European industry, is
Belgiums richest man, A lbert Frre, considered to be one of Europes more important behind-the26
scenes dealmakers. Within my European Top 100, Frre, together w ith his Canadian partner Paul
Desmarais, is through a complex pyramid structure - the ultimate controlling ow ner of French
22

See, e.g., Busting Up Sw eden Inc. , Business Week (intl edition), February 22, 1999, and Barbarians at the Wallenbergs
Gate, . , Business Week (intl edition), M ay 3, 1999.
23
Busting Up Sw eden Inc. , Business Week (intl edition), February 22, 1999.
24
Ibid.
25
William H all, Ebner turns to gatekeeper: Sw iss fund manager to become an insider , Financial Times,14 February, 1999;
William H all, Ebner raises Sw iss stake , Financial Times, 12 N ovember 1999; A ndreas N lting, Schrecken der Company ,
M anagermagazin, December 1999.
26
See David Ow en and N eil Buckley, Profile A lbert Frre: The reclusive capitalist , Financial Times, 12 July 1999; See N eil
Buckley, Belgium agog as Baron Frre pulls the strings: recent moves by one of Europes most pow erful tycoons have set
markets buzzing , Financial Times, 8 M ay 1998.

21

utilities giant Suez as w ell as of Belgiums Petrofina, w hich has now merged into TotalFina Elf, of
w hich Frre is still the largest shareholder (his big portfolio also includes half of CTL-UFA , the panEuropean commercial TV company). The publicly listed holding company at the top of the Frre
27
pyramid, CN P, states as its long-term objective [..] to maximize shareholders' value , and even if
Frre does not share Ebners reputation for shareholder activism, the Belgian financier must surely be
seen as a different kind of ow ner than the traditional family entrepreneur. Indeed, he is much more of
a finance capitalist accumulating his w ealth through a diversified set of holdings.
It is important to note that in all three cases above, the respective individuals and families control
their firms through a (very long in the case of Frre) pyramid or chain of control in w hich one or more
intermediate companies are publicly quoted companies of w hich part of the share capital is ow ned by
a dispersed group of outsiders trading their stock on the market. These personal blockow ners thus
make use of the market, and are in their control strategy either constrained or enabled by that market
and its disciplinary mechanisms. Thus, in the case of the Wallenberg family and their holding Investor
w e have seen how the grow ing outside (and foreign) ow nership of a large part of that companys
capital has put it under increased pressure to raise financial returns, a market pressure that has
w eakened the familys traditionally iron grip through the voting mode of control on a large part of
Sw edish industry. These market pressures w ill of course increase to the degree that capital markets
are further developing in volume and liquidity, and this is precisely w hat is happening at the moment
in Europe. A part from indigenous shareholder activists such as Ebner w ho rather than being
constrained by the market makes use of it w ithin his shareholder value-oriented strategy this
marketisation of European corporate control is driven to a large degree by the massive entrance of so
called institutional investors from outside continental Europe, mainly the UK and the US, into
continental capital markets, thus further contributing to the reshaping of Europes corporate
governance landscape.

The Rise of Anglo-Saxon Finance or Foreign Institutional Ownership

A s noted before, institutional investors have already for a longer time been a key feature of the
ow nership and control structures of the US and especially the UK, but the grow th in institutional
ow nership is also a global phenomenon that can be observed across the w hole OECD. Thus the assets
managed by institutional investors insurance companies, mutual and pension funds, and other
investment companies rose from a total of $ 3.2 trillion in 1981 to 24.3 trillion in 1995 (OECD 1997:
16). Particularly in the 1990s annual grow th of institutional holdings has been spectacular. Within
continental Europe part of this grow th is indigenous, but, except in some countries like The
N etherlands and Sw eden, the development of domestic A nglo-Saxon style funds is still in its infancy.
M ore of this explosive grow th in institutional ow nership then is of foreign and particularly A ngloSaxon origin. It are these A nglo-Saxon institutions that are often among the first to buy up European
equity that is brought into the market through privatisation, the public listing of formerly private
family firms, and the dissolution of inter-corporate shareholdings. Thus w ith reference to the expected
break-up of Germany Incorporated noted above (due to the abolition of capital gains tax), it are
A nglo-Saxon investors in particular w ho, according to the Financial Times, are licking their lips as
w hat is in prospect , says a US banker: M ost of us have spent vast sums expanding our expertise in
28
Germany. We see enormous opportunities for us . There is a clear trend among especially US mutual
and pension funds w hich used to be more domestically focused - to diversify internationally (OECD
29
1997: 18). The European market here is an attractive target as because of the traditional stakeholder
27

http:/ / w w w .cnp.be/ apres.htm

Charles Pretzlik, Germany companies ready for w holesale restructuring , Financial Times, 14 July 2000.
29
See also, e.g., J. A uthers, US institutions strengthen hold abroad , Financial Times, M ay 6 1999.
28

22

model European companies are regarded as undervalued, that is, they have not maximised their share
price, or shareholder return (German companies in particular are often considered a bargain).
There is thus a clear trend of rising foreign especially A nglo-Saxon ow nership - of major
European corporations, and this a trend that can be expected to continue. Thus, w ithin my sample,
those (listed) companies for w hich data have been found, foreign ow nership (excluding stable
blockholders) ranges betw een 14.0 per cent in the case of M A N to 62.0 per cent in the case of
M annesmann (before the take-over). Particularly in France and Germany (w here w e also have the
most data) foreign ow nership is very substantial, often around a third or more. Of these foreign
holdings, a significant part (ranging from one to more than tw o thirds) is typically held by
30
institutional investors from the UK and the US. The current levels of foreign ow nership are
historically high, but it is in particular the latter that represents a new phenomenon. Within the
companies in w hich they collectively hold a large part of the capital, foreign funds do not only
exercise a degree of control over the management, they are in some cases also in the position to decide
the companys fate w hen it is subject to an attempted hostile take-over (OECD 1997: 45). A gain the
example of M annesmann w ith w hich I started this paper is a case in point. Even if M annesmann has
been an exceptional case as not only tw o thirds of its capital w as foreign ow ned, but 40 per cent of that
w as ow ned by US and UK institutions, w e may expect to see more instances of this in the future
In some cases, A merican and British funds have come to hold very large stakes in individual
firms. French aluminium company Pechiney, w hich has tw o US funds as its tw o largest shareholders,
each holding more than 10 per cent, is a case in point. H olding such large blocks does not turn these
funds into stable shareholders, into the kind of insiders that traditional blockow ners w ere. Indeed,
they w ould have no interest in becoming tied dow n like that. Foreign institutional holdings tend to
show a great degree of fluctuation, stakes are bought and sold again w hen the price is right. Thus, the
fourth largest shareholder of another French company Bouygues in 1998 w as the asset management
arm of UK investment bank Schroders. In 1999, Schroders had disappeared again from Bouygues
shareholder roster. Indeed, these A nglo-Saxon institutional investors are classic shareholder value
ow ners, or pure money capitalists, standing outside the actual production process that ultimately
underpins the value creation. A lthough their interests differ w ith for instance insurance companies
being more dependent on a stead flow of dividends, w hereas other are primarily focused on the share
price, all of them are arms-length outside ow ners that operate through the market. Even if
institutional investors, especially those w ho hold relatively large stakes, tend to increasingly make use
of the voice mechanism as w ell, their voice is still based on their market pow er, or on the threat of
exit that they can make as holders of diversified portfolios operating in liquid markets. Even though
holding very large blocks (as is sometimes the case) may limit their exit option somew hat, this w ill not
turn them into committed capital, show ing loyalty to the firm in w hich they have invested.31

The New Continental European Capitalism: Between Convergence and Hybridisation

A ll of the trends analysed above indicate an increased marketisation of corporate control in
continental Europe, or a relative shift from the traditional voting mode of control to the market mode.
A fter having had very w eakly developed capital markets up until very recently, European capital
markets partly fuelled by the international expansion of A nglo-Saxon funds are now taking off as
w ell. Even, if the market capitalisation as a percentage of GDP is still very low in most continental
European countries compared to the US and the UK (w here it is w ell over a 100, as compared to only
38 and 28 in respectively France and Germany in 1996, OECD 1998: 18), stock market grow th is
30

This is based on about a quarter of my sample, not all companies provide these data.
H olding very large stakes for instance % of a single company w hich occurs even if rarely limits exit because selling
such a large block of shares w ould have the price of the stock drop to such an exit as making that very costly for the seller.
Still, making the exit more gradually can still be done and is also done a lot in practice.

31

23

accelerating rapidly in Europe and w e may expect these percentages to rise rather dramatically
(OECD 2000). A long w ith this development of increasingly globalised European markets, w e also see
the gradual development of a European market for corporate control . Indeed, the development of
stronger markets for corporate control w ithin the w hole OECD area is now increasingly recognised
(OECD 1998). The take-over of M annesmann by its British competitor w ould have been unthinkable
32
just a few years ago. A lthough it is too early to predict how many more cases like M annessmann, or
Olivetti and Telecom Italia, w e are going to see (and different firms are still protected against hostile
take-over to different degrees), crucial is that this w hat used to be a typical A nglo-Saxon phenomenon
now has become thinkable in w hat used to be the most netw ork-oriented and therefore most closed
corporate governance regimes in continental Europe. Culturally speaking, the thinkability of it might
in itself be seen as an important breakthrough for shareholder capitalism in Europe.
It is thus that many large corporations that used to be shielded from the discipline of the capital
markets are now increasingly subject to its grow ing pressures. Companies are clearly feeling these
pressures. A s the head of the so called investor relations department of a large Germany company
explains: [t]he capital market today plays a completely different role. The German system used to be
a bank-based system () Today () the banks have taken up the role of an intermediary betw een
investors and the corporation. We used to be more dependent on the banks and now w e are rather
more dependent on the capital market (Zugehr 2000). Pow er is shifting from traditional
blockholders and other stakeholders to outside shareholders operating on a money capital logic, and
this restructuring of capital and of the capitalist class is also reflected in the re-orientation of corporate
governance practices of a majority of European corporations. Thus, almost all publicly listed
corporations have now set up investor relations departments in order to be able to better
communicate w ith the increasing numbers of domestic and foreign institutional shareholders. When a
corporation issues new equity, considers a merger or a take-over, it also tends to go on investor road
show s in order to convince the financial community of the shareholder value logic of their plans.
A nother sign that European companies are becoming more open tow ards A nglo-Saxon investors is
that they increasingly seek a listing at the N ew York Stock Exchange (N YSE), w hich also requires
these companies to meet a number of stringent disclosure requirement (enhancing the kind of
transparency that investors w ant). The most important development, how ever, is probably the
w idespread introduction of so called stock option programmes for senior management. If in the era of
managerial capitalism there had been a tendency of the managerial class to develop an autonomy
from the rest of the capitalist class, indeed to turn into a cadre class (Van der Pijl 1998) separate from
the property-ow ning bourgeoisie and w ith an identity and a set of interests opposed to it, stock option
programmes are surely a sign of a re-integration of this class segment into the core of the capitalist
class. They play a useful role in w hat could be seen as anti-managerial revolution by re-aligning the
material interest of management w ith that of outside shareholders.
A ll of these developments point to a rather strong convergence on the A nglo-Saxon model.
H ow ever, there is also another side to the story, and this is the continued existence of large
blockholders w ithin the ow nership and control structures of continental European capital. In this
respect, then, w e do not so much w itness a full convergence but rather a hybridisation inasmuch as
some of the old features of European corporate governance systems are still being preserved, even if
their meaning changes as they are inserted into a new context. A lthough share ow nership in Europe is
becoming more dispersed and w e have seen a relative deconcentration of ow nership, the degree of
concentration is still much higher than in the US or in the UK (to the extent that a re-concentration in
these countries due to the rise of institutional ow nership w ill continue, how ever, w e might even see a
stronger convergence in the future) We may thus conclude that continental Europe is moving into the
32

In this respect, it is instructive to compare M annesmanns case w ith that of an earlier attempted hostile take-over in
Germany of a few years ago, that of Thyssen by fellow German competitor, Krupp. Then, the w hole of Germany Inc. w as
up in arms about this unprecedented attack on the Rhineland model and Krupp had to w ithdraw its bid. Vodafones
attempt, did cause some political stir but only temporary and the German business elite refrained from denouncing it.

24

(so far empty) low er-right quadrant of the earlier 2x2 matrix, that is tow ards a type of capitalism that
combines a still relatively high degree of concentration of corporate ow nership w ith an increasing
importance of the stock market, and thus of market-mediated corporate control.
But this hybrid model w ould still be a shareholder capitalism. Even if the large blockow ners are
still there, their control through voting pow er has w eakened vis--vis the market-based control
exercised by an increasing number of outside shareholders. M inority control, that is control through a
substantial minority of voting rights, is now longer so secure as it used to be in the face of increasing
market pressures (as w as for instance illustrated by the case of the Wallenberg empire). The share
price, and thus the market mechanism of corporate control, is becoming increasingly central to
corporate strategy, and thus w eakens the control exercised by traditional blockholders through the
traditional mechanism of voting pow er. That is to say, even if they remain committed insiders and
vote accordingly at the A GM in close alliance w ith the management, the management, nor the
blockholders, can any longer afford to ignore the share price and the demands of other shareholders.
But, equally important, rather than sticking to their role as committed capital, the marketisation of
corporate control, is, as w e have seen, also transforming the position and outlook of many remaining
blockowners, they too are increasingly under pressure, or maybe, the temptation, to adopt a purely
financial perspective as w ell. In this respect, then the kind of hybridisation going on is maybe best
exemplified by the observed rise a new type of blockow ners, that of the shareholder value oriented
financiers. In conclusion, then, w e can see that the money capital perspective is increasingly coming to
prevail w ithin and over production itself.

Concl usi ons and an A genda f or Further Research

The old post-w ar European model of committed and bound capital, allow ing for limited managerial
autonomy, as w ell as, particularly in some countries, a limited control exercised by employees, is thus
in the process of a fundamental restructuring. A lthough this is prima facie evidence in favour of the
thesis that globalisation is leading to at least a partial convergence of corporate governance regimes,
w e should still point out the mechanisms through w hich these convergent pressures then take effect.
It falls outside the scope of this paper to fully explore the causes of the rise of a new shareholder
capitalism in continental Europe. This w ould ultimately require a much more historical analysis,
tracing the transformation process over a longer period of time. Below , I w ill, how ever argue as a w ay
of a conclusion, as w ell as to point to the necessity of further research, that there are at least strong
arguments for believing that globalisation is in many w ays the driving force (even if that still leaves
globalisation itself unexplained). In fact, I w ill now briefly outline three main factors behind the
observed partial convergence, tw o of w hich directly concern the ongoing economic globalisation
process, and the third concerning the changing role of the state as an actor both responding to and
enabling (accelerating) globalisation. With regard to globalisation I w ill distinguish betw een the
globalisation of capital markets and that of product markets.

Globalisation of Capital and Product M arkets

The fact that in Europe w e do indeed w itness a rise of the market mode of corporate control the
emergence of a European market for corporate control; is to a large extent related to the global and
European integration of formerly national capital markets from the 1970s onw ards (and accelerating
in the 1990s). Transnationally mobile shareholders operating in globalising capital markets can put
pressures on firms by making use of both exit and voice (loyalty is alw ays absent). In both cases the
market mechanism is central as the share price is the main instrument. Companies w ith too low a
share price may face the threat of a hostile take-over. A part from the globalisation of equity markets,
25

as evidenced by the rising foreign presence on European capital markets, w hich gives investors more
liquidity and mobility, the globalisation process also changes the role of so called financial
intermediaries such as banks w ho, as w e have seen in the case of Germany, are giving up their more
traditional roles and move into investment banking, consultancy, etc.. These latter business areas are
far more profitable in part also because corporations themselves in the w ake of financial
deregulation have increasingly shifted from bank-based to direct market finance. Global finance
thus becomes a w hole new grow th sector in itself w ith the actors participating in the so called
financial community investors, investment bankers, consultants, analysts, etc.. all pushing the
shareholder value concept.
The globalisation of production and the concomitant rise of global competition in product
markets also contributes to the re-orientation of corporations to global capital markets. In particular,
firms need to grow externally in order to remain globally competitive and this can only be done
through mergers & acquisitions. H ence the present M & A w ave. The latter not only dilutes holdings of
traditional blockholders but also makes the share price increasingly important from a management
perspective. M & A s increasingly take place through share sw aps and the price of a corporations stock
thus translates into money for acquisitions. Thus, even corporations w hich are w ell-protected for
instance because a majority of their shares is in the hands of insiders - against hostile take-overs are as active participants in the market for corporate control still under pressure of capital markets. It is
in this sense then that corporations now increasingly have to compete for transnationally mobile
capital.

The Changing Role of the State

The role of the state, and of national and international policies, is ultimately a central part of the story.
Both as a response to the above changes and as a constituent element of those changes. That is to say,
the state, and changing state policies have played a crucial role in facilitating and accelerating the
above developments. This concerns in the first place the w hole w ave of international and European
financial deregulation and general market liberalisation. The European integration dimension here
can be seen as one reinforcing and amplifying the globalisation process as Europe has moved to a
single market and a single currency and thus an integrated financial area in w hich capital can move
freely (and w ith much low er transaction costs). Particularly the Euro is expected to further boost the
development (and transnationalisation) of European capital markets as it w ill facilitate the
diversification of portfolios across European borders (Lannoo 1999: 282).
A part from financial deregulation and integration, the earlier noted trend privatisation policies of
Western European states can also be seen as one of the driving forces of shareholder capitalism
inasmuch as it helps to fuel European equity markets (N estor and Thompson 1999: 15), creating new
liquidity and also enabling foreign (A nglo-Saxon) investors to come in and by up w hat w as once
33
public property of a different kind. The state also further promotes stock market grow th by w elfare
state cutbacks and privatisation of pensions etc... (traditional w elfare state functions are increasingly
taken over by private insurance through the stock market).
Finally, the state also enables convergence through regulatory change in the area of corporate
governance. A gain, the EU increasingly plays its ow n role here too as it is attempting to harmonise
corporate governance practices, or at least to provide a more common framew ork through the
introduction of European company law (Rhodes and van A peldoorn 1998; Lannoo 1999).
th
H armonisation proposals have been made regarding the legal structure of corporations (5 company
law directive), cross-border mergers and rules on take-overs and the setting-up of a European
company statute. A ll of these proposals have yet to be adopted, and progress in this area of creating
33

Thus the stock market capitalisation of countries like Italy, Spain, and Portugal have quadrupled as a result of the recent
privatisation w ave (N estor and Thompson 1999: 15).

26

the single market has this been stalled for years. N evertheless, efforts continue, and as European
transnational corporations are also increasingly calling for progress in this area, things might yet start
to speed up. Recently, the Commission has made a proposal to harmonise accounting standards on
the basis of the investor-friendly regulations draw n up by the International A ccounting Standards
34
(IA S) Committee. These proposals from the Commission are in part the outcome of a w ider global
transnational debate on corporate governance, and an attempt on the part of international policymakers as w ell as representatives of the global capitalist elite in the form of CEOs of TN Cs and
financial institutions from both sides of the A tlantic, to reach a consensus on the harmonisation of
corporate governance practices. In this context, the OECD has also recently issued a set of guidelines
and principles (OECD 1999) w hich has been interpreted by some as primarily designed to protect the
rights of shareholders and favouring the A nglo-Saxon shareholder approach (Financial Times, 10/ 11
A pril, 1999). Indeed, the OECD report is very specific and explicit on the rights of shareholders and
very vague and brief on the role of stakeholders .
This outline of the main causes of a shift tow ards a new shareholder capitalism still leaves us w ith a
rather large agenda for further research. In the first place, globalisation cannot be understood in
deterministic terms but has to be explained as the outcome of the interplay of structure and agency.
We have already stressed the agency of the state in this respect, but the role of the state cannot be
understood in abstraction from the underlying configuration of social forces, that is the agency of
social groups and classes that also shapes the content of state policies and institutions. Indeed, w e
might for instance w ant to examine the role played by transnational capitalist elites in promoting the
kind of regulatory convergence noted above, and in shaping the transnational discourses in w hich
those international policy-making processes take place (Van A peldoorn 2000). M ore generally, w e
have argued that corporate governance is a reflection of the balance of pow er betw een different
groups w ithin the firm, including different types of capitalist ow ners, or different fractions of the
capitalist class. Changes in corporate governance regimes, then, may also be understood as the
outcome of the pow er struggle betw een these rival fractions, and in particular those of financial and
industrial capital. In a larger research project than has informed this paper one could undertake to
examine this pow er struggle by situating it in the historical context of the capitalist restructuring that
has been going on since the crisis of w hat w e earlier identified as corporate liberalism and the rise of
the neoliberal project. The latter then w ould also point us to the more explicit ideological dimensions
of the transformation process. From again a somew hat different angle, one could also examine how
w hat has been termed an equity culture is actually propagated throughout the media, education and
other institutions w ithin civil society. Indeed, a better understanding of the socio-cultural dimension
of shareholder capitalism in my view w ould be essential to any critical analysis.
Finally, much more detailed research should be done w ith regard to the consequences of the rise of
a new shareholder capitalism in w hat used to be the managed and regulated capitalism of continental
Europe. Is, as money capital increasingly comes to reign over productive capital, European industry
fully being disembedded from its post-w ar national moorings? Will the alleged short-term perspective
of the financial markets lead to a w orse socio-economic performance, in particular w ith regard to
employment (as A lbert and others have implied). A nd, w hat w ill it mean for class relations, in
particular the relation betw een capital and labour? I have already suggested that shareholder
capitalism rather than leading to the dissolution of the capitalist class involves its restructuring in
terms of a shifting balance of pow er betw een financial and industrial capital. This is in fact only
making capitalism more capitalistic as it involves a reclaiming of the pow er of private property and a
deepening of commodification. But w hat does this imply for w orkers and the coalitions that they thus
far maintained w ith capital in some continental European countries? H ow are they going to deal w ith
w hat is going to be an increasingly invisible capitalist class?

34

See Frits Bolkenstein, One currency, one accounting standard , Financial Times, 14 June, 2000.

27

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