A Constitution for Privatized Eastern Enterprise

Felix Fitzroy and Zoltan J. Acs, ()

CRIEFF Discussion Papers from Centre for Research into Industry, Enterprise, Finance and the Firm

Abstract: Western advisors of Eastern reform favour outside, stock-market ownership and control of large privatized enterprise. However, Japanese firms and their Western transplants are dominated by employee stakeholders as implicit residual owners. Their success, and political contraints, suggest a majority equity stake for (often-entrenched) Eastern empoloyees, closely linked to bank creditors with majority board membership and remaining equity. Residual-claimant status removes the incentive for redistributive wage claims (that have decimated East German employment) and maximises motivation for cooperative effort, supported by relational banking for efficient intervention, investment, control and restructuring in case of default.

Keywords: Privatization; Corporate Governance; Japanese firm; State-owned Enterprise; Eastern Europe (search for similar items in EconPapers)
JEL-codes: D23 G3 P5 (search for similar items in EconPapers)
Date: 1993-10

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