Title: Top Executives, Turnover, and Firm Performance in Germany
Abstract:This article examines executive turnover-for both management and supervisory boards-and its relation to firm performance in the largest companies in Germany in the 1980s. Turnover of the management bo...This article examines executive turnover-for both management and supervisory boards-and its relation to firm performance in the largest companies in Germany in the 1980s. Turnover of the management board increases significantly with poor stock performance and particularly poor (i.e., negative) earnings, but is unrelated to sales growth and earnings growth. These turnoverperformance relations do not vary with measures of stock ownership and bank voting power. Supervisory board appointments and turnover also increase with poor stock performance, but are unrelated to other measures of performance. Corporate governance systems have received an increasing amount of attention from academics, the government, and the popular press. Most of this attention has focused on differences between the U.S. system and those of its strongest industrial competitors-Germany and Japan. The U.S. corporate govvernance system is generally characterized as market oriented or short-term shareholder oriented. Managers are monitored by an external market for corporate control and by boards of directors usually dominated by outsiders. The German and Japanese systems, in contrast, are characterized as relationshiporiented systems. Managers there are supposedly monitored by a combination of banks, large corporate shareholders, and other intercorporate relationships. These relationships are maintained for long periods of time. The external market for corporate control is small, if not absent, in those two countries. These differences in governance systems, in turn, are usually associated with differences in managerial behavior and firm objectives. One view, perhaps the majority view, argues that the close financial ties and relationships in Germany and Japan reduce agency costs and allow investors to monitorRead More