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Can the EU solve the stakeholder capitalism equation and offer a solution for its sustainable corporate governance model?

14 January, 2022
London United Kingdom
CFA Institute report highlights how stakeholder capitalism as applied in Germany offers learnings for the EU’s Capital Markets Union project

With the evolution of the concept of ‘corporate governance’ impacting global businesses since the 1970s, many regions globally are now at an inflection point, where the idea of blending the long-standing governance model of shareholder primacy with concepts borrowed from stakeholder governance is becoming more acceptable. In the EU, in particular, there is hope that this model can underpin the development of its capital markets union. 

CFA Institute, the global association of investment management professionals, in cooperation with CFA Society Germany, has published a detailed report entitled Stakeholder Capitalism in Action. This work throws a spotlight on the German model of corporate governance, which enshrines employee co-determination in law, and provides for the establishment of Works Councils, which play an important mediating role between employers and employees within individual companies.

In particular, the report presents a collection of case studies in which interviewees were asked to explain how co-determination operates in practice within their companies and to describe the influence that this form of stakeholder representation exerts within the company decision-making process.

Josina Kamerling, Head of Regulatory Outreach, EMEA commented:

 “We undertook this research in cooperation with CFA Society Germany as we note a particular shift in the global narrative around governance. The EU’s Capital Markets Union project is ultimately aiming to reconcile shareholder capitalism and stakeholder capitalism, but there are still several questions around exactly how this might work in practice. Germany has one of the more advanced applications of stakeholder capitalism and gaining an in-depth understanding of how their corporates function could perhaps influence the debate in the EU as the Union is looking to further the integration of its capital markets. We hope that this report and the case studies within it offer food for thought for policymakers and regulators for the next phase of evolution of corporate governance.”

 Susan Spinner, CFA, CEO of CFA Society Germany commented:

 “In Germany, Works Councils play an important interfacing and mediation role at both the individual employee and at the company level. The Councils aim to improve conflict resolution and align the long-term interest of all parties around company resilience. This model has enjoyed broad acceptance domestically and is considered by many to have been a supporting factor in Germany’s robust economy. The question is whether this stakeholder model could be considered a corporate governance option, which if exported, would provide results that are similarly successful in other countries. This is an interesting time to be engaging in this debate on the best model of good governance, particularly as the EU grapples with multi-lateral regulatory challenges.”

 A webinar discussing this report’s broad implications will be hosted by CFA Society UK on 19 January 2022, with the speakers including author of the report, Martina Bahl, CFA, Managing Director at Bahl Consulting, Susan Spinner, CFA, CEO of CFA Society Germany, Edward Smith, CFA, Co-Chief Investment Officer of Rathbones, and Oliver Gottlieb, CFA, Global Equity Analyst at GIB Asset Management.

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About CFA Institute

CFA Institute is the global association of investment professionals that sets the standard for professional excellence and credentials. The organization is a champion of ethical behavior in investment markets and a respected source of knowledge in the global financial community. Our aim is to create an environment where investors’ interests come first, markets function at their best, and economies grow. There are more than 175,000 CFA® charterholders worldwide in more than 160 markets. CFA Institute has nine offices worldwide and there are 160 local societies.

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