Varieties of Capitalism, Corporate Governance and Employees

Varieties of Capitalism, Corporate Governance and Employees

Varieties of Capitalism, Corporate Governance and Employees

Edited by Shelley Marshall, Richard Mitchell and Ian Ramsay

MELBOURNE UNIVERSITY PRESS

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187 Grattan Street, Carlton, Victoria 3053, Australia

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Text © Shelley Marshall, Richard Mitchell and Ian Ramsay, 2008

Copyright of chapters remains with the individual authors

Design and typography © Melbourne University Publishing Ltd 2008

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National Library of Australia Cataloguing-in-Publication entry

Varieties of capitalism, corporate governance and employees / edited by Shelley

Marshall, Richard Mitchell and Ian Ramsay.

www.mup.unimelb.edu.au

Carlton, Vic.: Melbourne University Publishing, 2008.

9780522855487 (pbk.)

9780522855494 (pdf)

Includes index.

Bibliography.

Corporate governance—Australia.

Industrial management—Employee participation—Australia.

Corporations—Investor relations—Australia

Industrial relations—Australia.

Capitalism.

Corporate governance.

Industrial relations.

Marshall, Shelley.

Mitchell, Richard.

Ramsay, Ian.

330.122

Contents

Preface

Contributors

1Varieties of Capitalism, Corporate Governance and Employment Systems in Australia

Shelley Marshall, Richard Mitchell and Ian Ramsay

Part I Theoretical Approaches

2Varieties of Capitalism, Corporate Governance and Employment Relations Under Globalisation

Nick Wailes, Jim Kitay and Russell D. Lansbury

3Partnership, Bargaining and Production in ‘Liberal Market’ and ‘Co-ordinated Market’ Economies

Richard Gough and Max Ogden

4Legal Origin, Legal Families and the Regulation of Labour in Australia

Meredith Jones and Richard Mitchell

5What is Labour Law Doing About ‘Partnership at Work’? British and Australian Developments Compared

Richard Mitchell and Anthony O’Donnell

Part II Empirical Studies

6The Market for Corporate Control at Tooth and Co. 133

Mark Westcott

7Corporate Governance, Shareholder Primacy and the Interests of Employees: Evidence From a Survey of Australian Directors

Meredith Jones, Shelley Marshall, Richard Mitchell and Ian Ramsay

8What Do Company Directors Think About Partnerships Between Companies and Their Employees?

Meredith Jones and Shelley Marshall

Part III Corporate Social Responsibility and Regulatory Approaches

9Does Socially Responsible Investment Influence Employment Relations?

John Lewer, John Burgess and Peter Waring

10 Do Australian Institutional Investors Aim to Influence the Human Resource Practices of Investee Companies?

Kirsten Anderson, Shelley Marshall and Ian Ramsay

11 The Role of ‘Light Touch’ Labour Regulation in Advancing Employee Participation in Corporate Governance: The Case of ‘Partners at Work’

John Howe

Index

Preface

The papers published in this volume were delivered at a workshop held in the Law School at the University of Melbourne on 7 and 8 December 2006, under the title ‘Corporate Governance and the Management of Labour: Australian Perspectives’. The workshop formed part of a larger Australian Research Council – funded project titled ‘Partnerships at Work: The Interaction Between Employment Systems, Corporate Governance and Ownership Systems’. That five-year project commenced in 2003, and the workshop was designed to provide a vehicle for discussion of some of the research results arising from the project. The workshop also provided us with the opportunity to involve a number of other scholars whom we knew to be undertaking research projects which were engaged with similar questions and issues to our project generally.

Apart from our various colleagues who have contributed papers to this volume, several others made presentations at the workshop, acted as chairs or commentators in the sessions, or otherwise assisted with the organisation of the proceedings. We wish to thank, in respect of all of these activities, Sean Cooney, Colin Fenwick, Anthony Forsyth, Peter Gahan, Leon Gettler, Jarrod Lenne, Charlotte Morgans, Jill Murray, Christine Parker and Geof Stapledon. We also thank Ingrid Landau, and Dr. Tess Reyes, RMIT Vietnam, for their assistance in the later stages of the book’s preparation.

The papers published here bring together a diverse set of perspectives around the broad theme indicated by the title. The content is multi-disciplinary insofar as it draws from a number of academic fields including management, industrial relations, law and institutional economics. The work also draws upon a range of research methodologies including case studies and survey work, as well as reviews of theoretical works and secondary literature generally. Taken as a whole, we believe the volume makes an important contribution to the international debate on varieties of capitalism and national styles of regulation from an Australian perspective.

Shelley Marshall

Richard Mitchell

Ian Ramsay

February 2008

Contributors

Kirsten Anderson completed degrees in Arts and Law, and a Masters degree in Public and International Law, at the University of Melbourne. She then worked as a research fellow in the Law School at the same institution. She is currently head of Research and Communications at The Children’s Legal Centre, an organisation based at the University of Essex, where she undertakes socio-legal research on children’s rights and child law and policy. She has published in the areas of corporate governance and workplace relations, international law, human rights law and children’s rights.

John Burgess is professor and director of the Graduate School of Business, University of Newcastle. He has a PhD in Economics from the University of Newcastle. His research interests are in labour market policy, contingent work, gender and work, and workplace change.

Richard Gough is a lecturer in the School of Management at Victoria University. Prior to becoming an academic, he worked as a policy analyst in the Commonwealth public service in the areas of industrial relations and work environment issues. His recent publications include Employment Relations in the Asia-Pacific Region: Reflections and New Directions (2007) and Employee Relations Management: Australia in a Global Context (2006), both jointly edited with Julian Teicher and Peter Holland.

John Howe is a senior lecturer in the Law School at the University of Melbourne, and is a member of both the Centre for Employment and Labour Relations Law and the Centre for Corporate Law and Securities Regulation at the Law School. He obtained his PhD in law from the University of Melbourne in 2000. His research interests are in regulatory theory, labour law and corporate accountability. Prior to commencing an academic career, John worked in private legal practice, and also as a researcher for public policy and advocacy organisations in the United States. He is the secretary of the Australian Labour Law Association, and editor of the Reports section of the Australian Journal of Labour Law.

Meredith Jones was employed as a research fellow on the Corporate Governance and Workplace Partnerships Project at the University of Melbourne from 2003 to 2007. She is a graduate in Arts and Law from Monash University and has completed postgraduate studies in research methods at Swinburne University. She also completed an LLM by coursework at Monash in 2002. She has worked as a researcher in a variety of organisations within the not-for-profit sector, and in the trade union movement researching industry regulation and employment trends. She is now research and policy officer for the Royal Institute of Architects, Australia.

Jim Kitay was associate professor and chair of the Work and Organisational Studies group at the University of Sydney, where he now holds an honorary appointment. His research interests focus on employment relations and changes at work in service industries, primarily management consulting and retail banking. He is a joint coordinator of a nine-country comparative study of employment relations in the automobile and retail banking industries.

Russell Lansbury is professor of Work and Organisational Studies and Associate Dean (Research) in the Faculty of Economics and Business at the University of Sydney. He holds degrees in Psychology and Political Science from the University of Melbourne and a PhD from the London School of Economics, where he undertook research on British Airways. He is the president-elect of the International Industrial Relations Association.

John Lewer is a lecturer in Industrial Relations and Human Resource Management in the Faculty of Business and Law at the University of Newcastle. His PhD thesis examined workplace performance during the closure of BHP’s Newcastle steelworks. Among other areas, he is interested in organisational change and skill formation. He is coauthor of the widely used textbook Understanding Australian Industrial Relations, now in its seventh edition. Before joining the university, John was a teacher and industrial relations practitioner.

Shelley Marshall was senior research fellow with the Corporate Governance and Workplace Partnerships Project at the Law School, the University of Melbourne, from 2003 to 2007. She is now a lecturer in the Department of Business Law and Taxation at Monash University. A graduate in Arts and Law, and in Development Studies from the University of Melbourne and the London School of Economics and Political Science respectively, prior to commencing an academic career she worked in private legal practice. Her major research interests are industrial democracy and corporate governance, and theories of development and labour law.

Richard Mitchell is a professor in the Department of Business Law and Taxation, and the Department of Management, at Monash University. He is also a member of the Work and Employment Rights Research Centre at the same institution. His current research focuses on labour market regulation, and varying styles of regulation in different types of economies.

Anthony O’Donnell is a lecturer in the School of Law at La Trobe University. He has previously held positions at the Centre for Employment and Labour Relations Law and the Centre for Public Policy at the University of Melbourne. He has researched and published in the areas of welfare policy, labour market regulation, corporate governance, immigration law and policy, and legal education.

Max Ogden was originally a maintenance fitter. He was a shop steward in the Amalgamated Metal Workers Union before becoming an official in the same organisation for around seventeen years at the state and national levels. Max was an ACTU Industrial Officer for twelve years. Although currently retired, he continues to be involved with various research and training projects in Australia, New Zealand and other countries, including acting as director of the Foundation for Sustainable Economic Development in the Department of Management at the University of Melbourne.

Ian Ramsay is the Harold Ford Professor of Commercial Law in the Faculty of Law at the University of Melbourne where he is director of the Centre for Corporate Law and Securities Regulation. He has practised law with firms in New York and Sydney. He is a member of the Takeovers Panel, the Companies Auditors and Liquidators Disciplinary Board, the Law Committee of the Australian Institute of Company Directors, the Corporations Law Committee of the Law Council of Australia, and the Audit Quality Review Board. Former positions he has held include Dean, Faculty of Law, University of Melbourne, head of the federal government inquiry on auditor independence and member of the International Federation of Accountants taskforce on rebuilding confidence in financial reporting. He has published extensively on corporate law and corporate governance issues.

Nick Wailes is a senior lecturer in Work and Organisational Studies at the University of Sydney. He teaches and researches in a number of areas, including comparative employment relations, international corporate governance and strategic management. He is currently involved in co-ordinating a seven-country study of the impact of globalisation on employment relations in the auto-assembly and retail banking industries.

Peter Waring is a postdoctoral research fellow in the Business School at the University of Newcastle. Prior to being awarded this fellowship, Peter was a lecturer in Management at the Newcastle Business School, teaching in the fields of human resource management, industrial relations, organisational behaviour and negotiation and advocacy. His current research interests include investigating relationships between socially responsible investment and human resource management within public corporations.

Mark Westcott is a lecturer in the Faculty of Economics and Business at the University of Sydney. His research interests include governance of trade unions as well as markets, corporate governance and labour management strategies.

1

Varieties of Capitalism, Corporate Governance and Employment Systems in Australia

Shelley Marshall, Richard Mitchell and Ian Ramsay*

It is often speculated, both in the popular media and in academic literature, that recent changes to Australian industrial relations and corporate governance practices are bringing Australia more into line with the operation and practice of labour and capital markets in the United States and other similarly organised economies. It is assumed that this has flow-on effects for the culture of Australian workplaces and the lifestyles of workers. In particular, it is often said that reforms to labour law are making workplaces more like the United States where employees can be fired at the will of employers (and likewise employees can leave when they wish). It is also argued that the pressure to deliver returns to shareholders is creating a corporate environment, which, like the United States and the United Kingdom, is more shareholder-oriented. Some scholars have focused on the negative consequences of this emphasis on producing shareholder value, which they believe draws investment away from the long-term interests of other stakeholders. It is believed that this focus on shareholder value is creating a workplace culture that is inimical to power-sharing and co-operation between employers and employees; that it produces insecurity for workers and a lack of commitment by employers to training and other investments in human capital. Others, conversely, credit this shift with making Australian businesses more competitive and innovative.

Can it be said that Australia’s industrial relations and corporate governance systems—two institutions which influence the variety of capitalism of a national economy—now belong more clearly in a group with the United States and the United Kingdom rather than with other OECD countries such as Germany, Sweden or Japan? While this is often assumed to be the case, very little work has been conducted which systematically investigates the Australian evidence.

This book, combining the contributions of leading Australian scholars from several disciplines, provides an examination of the Australian evidence from a range of perspectives. It draws together the work of corporate law and labour law scholars, comparative employment relations and human resource management academics and political economists among others. Some of the chapters are concerned with changes to corporate ownership or financing; and tracking any associated shifts in corporate priorities. The contributions of Meredith Jones, Shelley Marshall, Richard Mitchell and Ian Ramsay (Chapter 7) as well as that of Mark Westcott (Chapter 6) consider the impact of corporate ownership and corporate governance on workplace practices and attitudes. Two contributions—those of John Lewer, John Burgess and Peter Waring (Chapter 9) as well as Kirsten Anderson, Shelley Marshall and Ian Ramsay (Chapter 10)—examine the implications for employment practices of the increasing prominence of institutional investors, such as mutual funds and superannuation funds, as owners of Australian companies.

Other contributions examine the issue of where Australia fits on the international spectrum of varieties of capitalism from an employment relations perspective. Labour law scholars Richard Mitchell and Anthony O’Donnell (Chapter 5) map the effects which the Australian government’s labour law changes over the last decade have brought about concerning partnership relations between employers and employees, and compare these labour law changes with recent pro-partnership reforms in the United Kingdom. Meredith Jones and Richard Mitchell (Chapter 4) consider the extent to which Australia’s common law legal traditions are deterministic of the regulation of labour in Australia. John Howe, another labour law scholar, considers the impact of the Victorian government’s Partners at Work program on the style of labour relations in Victorian workplaces (Chapter 11). Meredith Jones and Shelley Marshall (Chapter 8) examine the attitudes of company directors towards partnerships between the company and its employees in order to ascertain whether the attitudes of corporate strategists are consistent with and guided by those who determine labour policy. Industrial relations specialists, Richard Gough and Max Ogden (Chapter 3), examine whether the Australian variety of capitalism acts as an impediment to the co-operative implementation of innovative work systems in Australian workplaces. Comparative employment relations scholars Nick Wailes, Jim Kitay and Russell Lansbury (Chapter 2) are concerned to discover what factors, other than labour law changes, are driving employment changes, and whether these changes are resulting in a convergence with the United States and the United Kingdom, or creating new, idiosyncratic employment systems in Australia.

As well as bringing together scholars from different disciplines, the contributions employ different methodological approaches. The book is structured around these different approaches. Part I sets out various theoretical perspectives, including those of Varieties of Capitalism and Legal Origins. (These approaches are expanded upon later in this introductory chapter.) Part II contains contributions that are primarily empirical in nature, including case study and survey material. Part III includes contributions which investigate the power of countervailing corporate social responsibility forces.

Although the authors approach the question of whether Australia is converging with the United States, the United Kingdom and other liberal market economies from different perspectives, they all, in some way, consider the intersection or impact of corporate governance on employment systems. This is one of the strengths of the analyses presented in this book. While, generally speaking, the fields of corporate law and corporate governance have developed and exist in isolation from the fields of labour law and comparative employment relations, the contributions to this collection consider the interaction of these influences.

Analytical Approach: Varieties of Capitalism and Legal Origins

Most chapters in this book draw on the Varieties of Capitalism (VoC) approach to frame their analyses. The general literature comparing types or ‘varieties’ of capitalist economies has much to say about corporate governance and employment systems.¹ While the VoC debate generally ranges across a broad spectrum of different questions and topics, the issues of corporate governance and labour management, and the relationship between them, appear crucial, if not decisive, in how different systems are characterised and typified.² And while the VoC literature generates investigation into the corporate governance and labour management systems of particular national economic ‘styles’, these inquiries in turn generate investigation of the behaviour of particular economic agents, for example business enterprises, and their managements. Across this broad general area, a wealth of information is being generated internationally on, among other things, national style in corporate governance, whether, and if so how, labour management systems are affected by, or interrelated with, corporate governance style, and whether these characteristics are discernible, and consistent, both at national levels and at enterprise levels within national systems.

Australian scholars are now directing their attention to these matters across a broad range of disciplines, and with an eye to how Australia might be characterised as a national system. However, as Wailes, Kitay and Lansbury point out in their opening contribution to this collection it is necessary for several reasons to be cautious in adopting the VoC characterisations of national systems for analytical purposes. The VoC literature, for example, relies upon a grouping of national capitalist systems into two: the liberal market model and the co-ordinated market model. While both these models present effective and efficient systems for economic production and distribution they do so in different ways. The co-ordinated model tends to feature more co-operation between the parties to production (capital, labour and management). Capital is more long-term in orientation, and labour tends to be more protected. On the other hand, the liberal market model is characterised by greater competition. Capital is more favoured, and the interests of labour tend to be sacrificed in support of shareholders’ interests. This is, as Wailes, Kitay and Lansbury note, an over-simplified, and possibly misleading, set of characterisations, obscuring important complexities both internationally and within country systems. It is mooted, for example, that perhaps there are other broad varieties of capitalist economies, such as an Asian model.³ The authors very usefully set out here some details of a current research project through which they are attempting to overcome some of the weaknesses indicated in the VoC project.

However, if one accepts the general VoC division of capitalist systems into these two broad camps, it does provide the opportunity for interesting analyses drawn from national data. For example, the VoC typology would rank Australia among the liberal market economies alongside the United States, the United Kingdom, Ireland and New Zealand, and accordingly we would expect to find that Australian institutions of corporate governance and labour management would display characteristics which are largely consistent with this ranking. But does the evidence support this contention? The contribution by Jones and Mitchell addresses this question in part by examining the regulation of labour in Australia. The chapter uses the ‘legal origins’ theory, which suggests that the division of economic systems into different types is largely predicted according to its regulatory background. Those countries with common law backgrounds map fairly neatly onto the liberal market–type economy, while those in the civil law tradition correspond with the co-ordinated market type.⁴ According to this framework, the regulation of labour in Australia should appear more like the highly contractualised systems of the United Kingdom and the United States than the more worker-supportive systems of many European countries. While the evidence shows a demonstrable shift in Australian labour market regulation in recent decades towards a more contractualised liberal market model,⁵ as Jones and Mitchell point out it is less easy to characterise the Australian system historically as having conformed with that type. In fact, prima facie there are reasons for supposing that the Australian labour law tradition, with its centralised wage-setting mechanism, was more in keeping in certain respects with the co-ordinated model than the liberal market model. In the final analysis, however, the authors conclude that in essential respects the Australian system of labour regulation has tended to correspond, even historically, more with the liberal market model than otherwise.

While it may be possible to broadly characterise Australia as a liberal market economy, there may nevertheless be high levels of diversity within the liberal market model, variety within national systems, variety between industries, and most likely very often variety within business corporations between sites and operations⁶ and so on. While Australia might be grouped together with the United States and the United Kingdom, it does not mean that its business systems mirror those in other liberal market economies. The studies in this book show that Australia has retained idiosyncratic features. The close studies of business practices in this collection are able to demonstrate rather more clearly than the quantitative data used to support the legal origins/liberal market connection⁷ the great complexity which exists. These studies support the proposition that there is ‘within system’ heterogeneity. And, as Mark Westcott’s detailed industry study demonstrates clearly, the variations in how management co-ordinates its relations with its shareholders and employees, and the potential conflicts of interests between them, are not merely determined by the legal grounding of corporate governance and labour management, but by much else besides, including, importantly, the regulation and state of the product market in which the particular enterprise operates.⁸

Aspects of this heterogeneity are explored also in the contribution by Gough and Ogden. The division of capitalist economies into two fundamental types, one of which appears outwardly more conflictual and less co-operative than the other, does not, as the authors illustrate, imply that there is no scope for collaborative relations between capital and labour in one system and no scope for conflict in the second. Indeed liberal market economies are sometimes characterised by forms of co-operative relations between management and labour (described as ‘partnerships’ in the United Kingdom and ‘mutual gains’ in the United States) and in co-ordinated economies co-operation does not completely eliminate conflict. Rather, in the authors’ view the ‘stereotypes’ created in the VoC debate in fact are populated by a range of partnership styles which run across both the liberal market and co-ordinated market categories. Thus, the nature of partnership relations is in a continuous state of flux, switching between greater and less conflict, and more or less co-operation, over time, under the influence of particular country, industry, regulatory and labour market contexts.

Another important set of questions occurs in relation to the prospect of change in particular types of economic organisation and regulation. Do the varieties of capitalism remain the same, or do they change over time,⁹ and if the second possibility remains open, is there a chance that the different types might converge into one? A third possibility is that there will be ‘within system’ convergence. This is, clearly, a complex issue. It is also a much-debated one.¹⁰ The mixture of ideas associated with the concepts of ‘legal origin’, ‘institutional complementarity’ and ‘path dependency’ in national systems tends to produce an argument that the broad ‘types’ of capitalism are relatively impervious to fundamental change in character.¹¹

Contributions in this collection join with this debate from different perspectives. Some authors have suggested that economic globalisation is (possibly) producing a convergence in capitalist style away from the co-ordinated model towards the US and UK liberal market style, raising questions about the continued relevance of individual national systems of business regulation.¹² One obvious consequence of such convergence is the shift to a more ‘shareholder sovereignty’- or ‘shareholder primacy’-oriented system and a corresponding decline in the position of employees through greater marketisation. This argument suggests that global competition is putting pressure on the key co-operative institutions of co-ordinated market economies such as ‘works councils’.

Contrary to the proposition that there is an overall international convergence in systems, Wailes et al. suggest that it may be the case that the competitive pressures imposed by a more integrated global market are now resulting in a convergence of features within systems. They base this argument on Hall and Soskice’s prediction that a ‘dual convergence’ ought to occur as a response to heightened competitive pressures. This is an affect of institutional complementarities. Institutions are said to be complementary to the extent that the existence of one enhances the effectiveness of the other. As a consequence, Hall and Soskice argue, ‘nations with a particular type of co-ordination in one sphere of the economy should tend to develop complementary practices in other spheres as well’.¹³ Thus, in the coordinated market economy system, for instance, the operation of a strong cohesive industry association may enhance the economic efficiency of industry-wide collective bargaining. In contrast, well-developed capital markets and outsider forms of corporate governance complement more marketised, shorter term industrial relations practices in liberal market economies. Thus, as pressure is placed on national institutions due to more heightened global competition, we would expect to see change occur within national systems along these lines.

If either of these arguments is plausible, as Australia’s capital markets have developed as a response to globalisation, we would expect to see a trend towards employment relations with features such as shorter tenure for employees, less investment in company-specific training and a higher incidence of contingency-based pay systems. This, it might be anticipated, would be associated with more restrictive practices imposed on unions and greater adversarialism in management/union relations. Two chapters provide some empirical information on the Australian case. As noted, the contribution by Jones and Mitchell, surveying Australian labour market regulation and labour management practices over much of the previous century, suggests a considerable shift in national institutions over the past decade or so consistent with this prediction. It also provides support for an argument that Australian labour market institutions are converging upon the more marketised and more partially regulated models of US and UK capitalist style. Earlier research, though again by no means decisive, would suggest a similar argument could be made out in the case of Australian national ‘style’ in its institutions of corporate governance.¹⁴ On the other hand, however, evidence adduced by Jones, Marshall, Mitchell and Ramsay from a national survey of company directors would seem to indicate that the importance of ‘shareholder primacy’ is, if anything, declining among Australian business leaders rather than converging upon the US outlook. While this evidence is indicative at best, far from supporting a convergence of national styles, it may instead support Wailes et al.’s suggestion that globalisation will produce ‘differential outcomes across varieties of capitalism’.

Shareholders’ Interests and Partnerships with Workers

The argument that there is either a global convergence in systems, or ‘within systems convergence’ appears to be based on the assumption that shareholders’ interests (in high yielding shares) are inevitably pursued at the expense of employees’ interests (resulting in poorer work conditions and less security). This tendency is generally known as ‘shareholder primacy’. In dealing with the issues of corporate governance and labour management, the VoC literature creates the idea of a competition for priority between shareholders and employees which must be mediated or reconciled by managers. Several of the contributors in this volume are concerned with how managers and other corporate leaders perceive this conflict, and what institutional, market or social influences induce particular outcomes arising from the ‘co-ordination problem’ of mediating these competing interests.¹⁵

While a number of the contributions in this collection point to the retreat among Australian institutions from worker protection,¹⁶ data drawn from the Jones, Marshall, Mitchell and Ramsay contribution reporting on a survey of company directors (Chapter 7) raise serious doubts about the status of shareholder primacy as a dominating tendency among Australian businesses. While their data do demonstrate a general tendency to prioritise the interests of shareholders over other stakeholders, the degree of shareholder prioritisation in Australian businesses appears overstated on this evidence. Compared with their US counterparts, for example, Australian directors do not rank shareholders’ interests much higher than the interests of the company generally or the interests of employees in particular. Only 44 per cent of Australian directors recorded in the survey data ranked shareholders as their number one priority, as compared with close to 75 per cent of directors in a similar US survey. Using a slightly more nuanced ‘salience’ scale in the Australian survey, the authors arrived at a similar result: shareholders were still ranked only marginally higher than employees in terms of directors’ priorities. This evidence seems to support the contention that while Australia may be said loosely to belong to the liberal market type of capitalist economies, there are nevertheless significant differences between the countries of that type expressed in terms of the values that drive businesses.

It may also be incorrect to assume that all shareholders have an interest in the production of shareholder value at the expense of other stakeholders. While the VoC literature has tended to associate liberal market economies with more dispersed shareholdings¹⁷ the question arises whether the recent re-concentration of ownership through institutional investment funds (for example, superannuation and pension funds) is responsible for a restrengthened focus on shareholder value in those economies, and a growing focus on shareholder value in the co-ordinated market economies, or whether contradictory tendencies may result. One argument presented in relation to this set of issues is that institutional investment will tend, if anything, to detract from the kind of shareholder primacy which results in pressure on companies to produce short-term gain for shareholders at the expense of other stakeholders’ interests.¹⁸ The reason for this is that because such shareholders often are invested both broadly across the sharemarket and at the same time deeply invested in particular companies insofar as they hold a significant proportion of shares in those companies, an exit strategy (by selling) is often difficult and undesirable. Consequently institutional investors may be more locked into their investments for the longer term than other types of investors. Thus in this type of concentrated shareholder pattern, so the argument proceeds, the pressure on companies to produce results in the short term is reduced, and the incentives for investors to encourage companies to adopt strategies to produce sustained, long-term benefits are increased. These strategies will, in all likelihood, include investment in worker training, employee consultation, and long-term employment security, practices traditionally associated with insider-relational labour management.

The contribution made by Anderson, Marshall and Ramsay provides some supporting evidence for this argument. The authors’ study of thirteen institutional investor groups indicates that some are beginning to make investment selections based on some human resource and labour standards indicators, and that they are