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  • Quiet Politics and Business Power: Corporate Control in Europe and Japan by Pepper D. Culpepper
  • Marie Söderberg (bio)
Quiet Politics and Business Power: Corporate Control in Europe and Japan. By Pepper D. Culpepper. Cambridge University Press, Cambridge, 2011. xviii, 221 pages. $95.00, cloth; $30.99, paper; $25.00, E-book.

This book touches on a subject that has attracted considerable attention during recent years, namely, corporate control in democratic countries. Since the worldwide economic downturn in 2008 and the collapse of some major companies, voices have been raised in favor of stronger corporate control. But what happens when people are not watching? The general public seems to care about some issues while others receive very little attention, often because they are complex and difficult to grasp.

When corporate issues are debated in the media, politicians know that people are watching and they have a strong incentive to respond to public opinion. Elections can be won or lost over high-salience issues, but are those issues the most important ones or are we missing a number of issues that will have a much larger effect on our daily life?

Pepper Culpepper argues that the political dynamics of low-salience issues differs from that of high-salience ones. In so-called “quiet politics,” highly organized interest groups can dominate the policy process, shielded from public view. One such issue area is hostile takeovers. These might have great political and economic consequences, but the rules governing them seldom command public attention. Deregulation of capital markets has [End Page 492] challenged institutional arrangements that formerly impeded hostile takeovers in Europe and Japan. The author researches hostile takeover processes in France, Germany, the Netherlands, and Japan and finds that the observed outcomes do not depend on government partisanship or on different interest group coalitions but rather on political preferences of managerial organizations. In all countries, the rules favored by the managers of large companies are the ones that prevail, although their preferences differ depending on the strength of labor organizations in their firms.

In previous work, there are basically two broad theoretical approaches used to explain corporate control. The first one, partisan theory, emphasizes variations in the partisanship (parties and elections) of governments. The second, coalitional theory, focuses on interest groups and the coalitions between interest groups that are built to support preferred corporate governance. Both of these assume that politics matters because it produces policy that leads to certain corporate governance outcomes. Culpepper points out that many institutional rules are informal and thus cannot be dealt with by legislation. It is in this field that he seeks to make a theoretical contribution by comparative qualitative research on hostile takeover processes in four different countries.

Germany stands out as the one with the most patient capital, having concentrated ownership, stable ownership groups, and limited hostile takeover activity. Since 1995 Germany has been stable compared to the Netherlands, and in particular compared to France and Japan, which have seen considerable changes over time. The Netherlands lacked the concentrated ownership that characterized France and Germany but has enjoyed legal protection against hostile takeovers. This shows that national institutional context matters. In France, the state was the dominant owner of many of the large companies until 1986 when the right took power and initiated a privatization process. At first, a network of stable ownership was created through cross-shareholding but this system collapsed in 1998 and the French companies were replaced by foreign institutional investors, which opened up opportunities for a number of hostile takeovers.

The conventional view of the postwar Japanese economy has emphasized cross-shareholding and informal links (both horizontal and vertical) between firms in so-called keiretsu, networks organized around trading houses or large banks. Since 1996 and the downturn in the Japanese economy, however, stable shareholding has deteriorated. As the prices of shares collapsed, banks had to sell to meet their capital requirements. Because of the weakness of labor representatives at the company level, managers were able to carry out aggressive restructuring, the mighty industrial organization Keidanren pushed for the reform of corporate law to facilitate this process, and substantial legal changes were made. In line with this, hostile takeovers...

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