Bank power in West Germany revised

Corporate governance in Germany

“…Immediately after World War II, the Allies sought to break up the concentration of economic power in German industry and banking and to replace it with market control, but the prime aspects of managerial control, namely, intercompany shareholding networks and close bank-industry relations, remained and played an important role in insulating enterprises from market control. Another important source of insulation from market control was enterprises' access to internally generated funds, which rendered most of them relatively independent of external sources of finance (Esser 1990).…”

Corporate Governance in Germany: Productive and Financial Challenges

“…But the onset of the Cold War and the perception of the West Germ a n economy as a bulwark against the Soviets led to a decline in commitment to this path. Many of the industrial enterprises on which the postwar German economy relied were the enterprises that had been dominant before the war, and prime aspects of prewar managerial c o n t ro l -n a m e l y, intercompany shareholding networks and close b a n k -i n d u s t ry relations (as practiced via ownership of company share s by banks, banks' involvement in the superv i s o ry boards of companies, and the banks' role as the trustees for their depositors' share s ) -remained strong in the postwar decades (Esser 1990;Edwards and Fischer 1994;d'Alessio and Oberbeck 1997;O'Sullivan 1998c;Lazonick and O'Sullivan 1997b).…”

Ideas, Networks, and Policy Streams: Privatization in Britain and Germany

“…The other key component of the German policy network, the financial system, has been dominated for years by a small number of huge universal banks (Deutsche, Dresdner, and Commerz are the largest)-called universal because they perform all financial functions-that have exercised wide latitude, as the Federal Republic of Germany needed to rebuild rapidly after World War II.Io However, despite some evolution during the 1980s that diffused the earlier "one firm-one bank" (i.e., "house bank") relationship common during the 1950s and 1960s, German industry evolved toward a looser system of "organized finance capitalism" (Oberbeck and Baethge, 1989;Esser, 1989). Despite the evolution from house banks to banking networks, there remains a German preference for long-term investment, the presence of the banks on company boards, and the interaction of industry and finance leaders."…”