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Between 2010 and 2014, Gérard Hirigoyen and Thierry Poulain-Rehm analysed the quality of governance across 434 listed companies using the Anglo-Saxon, continental European and Asian systems. Hirigoyen and Poulain-Rehm’s findings, published in 2017 in the paper Approche comparative des modèles de gouvernance, asserted that governance effectiveness varies far more by institutional context than by formal structure alone.
The research shows that while Anglo-Saxon firms tend to score higher on measurable governance standards, no single model can be deemed universally superior and each approach has potential flaws.
The authors reported that there was evidence to suggest many boards across the world are converging towards a common set of governance standards, but that there remain distinct approaches, shaped by legal, cultural and ownership realities.
It is for boards to decide on the approach that works best for them and the companies that they lead. This article explores how the different frameworks work in practice and the lessons you can learn to help your board tailor a governance framework that provides the foundation for success.
- No governance model is universally superior. Hirigoyen and Poulain-Rehm’s evidence shows performance depends more on institutional context.
- Anglo-Saxon firms score higher on formal governance quality, especially in shareholder rights, board independence and audit controls.
- European and Asian models trade formal control for relational stability, which can support long-term resilience but often weakens transparency.
- Ownership structure matters more than geography. Widely held firms consistently show stronger governance than family or state-controlled companies.
- Governance codes may look similar, but real practices tend to be shaped by national systems.
The three dominant governance models compared
| Dimension | Anglo-Saxon model | Continental European model | Asian model |
|---|---|---|---|
| Ownership structure | Dispersed shareholding | Concentrated, often family or bank-led | Cross-shareholdings, state or group influence |
| Primary control mechanism | Market discipline and investor pressure, including takeover threats and activist campaigns | Exercised less through markets and more through stable relationships between key stakeholders | Insider control within corporate groups |
| Board structure | Smaller, more independent boards; clear separation between executive and non-executive roles | Dual boards or stakeholder representation are common. Supervisory and management boards separating oversight from execution. | Larger boards, fewer independent directors and an emphasis on internal promotion |
| Shareholder protection | Strong legal protection for minorities | Moderate protection, emphasis on stability | Historically weaker protection for minorities |
| Transparency and audit | High disclosure standards, strong audit culture, with oversight by audit, remuneration and nomination committees | Improving but uneven across countries. Less transparency than the Anglo-Saxon model in relation to executive pay, for example. | Traditionally lower, but reforms under way, including stewardship codes and corporate governance codes aimed at strengthening board independence and shareholder rights |
| Strategic horizon | Short- to medium-term performance focus | Long-term relational and social balance | Long-term stability and continuity |
| Potential weaknesses | Pressure for short-term performance can weaken long-term investment and stakeholder trust if not carefully managed. | The risk of entrenched control, where dominant shareholders can prioritise private benefits over minority interests. | Companies own each other in complex layers, allowing dominant shareholders to take unfair advantages while smaller investors lose out due to a lack of strong oversight. |
Comparative approaches to governance models in practice
Governance quality across regions
Across governance systems, the most visible differences emerge in these key areas:
- Board effectiveness
- Audit strength
- Transparency
Studies show that:
- Companies operating in Anglo-Saxon systems consistently achieve higher scores in these areas, usually driven by stronger disclosure rules, more independent boards and well-established audit committees.
- European continental firms tend to occupy a middle ground. Their boards are often highly experienced but less independent, with governance shaped by long-standing relationships between owners, banks and management. This supports stability but can dilute the board’s ability to challenge executives decisively.
- Asian firms, particularly those embedded in corporate groups or influenced by the state, typically show the widest gap in governance quality. Larger boards, weaker audit independence and limited transparency have historically reduced their effectiveness, although recent reforms are beginning to narrow this divide.
Shareholder rights and engagement
The treatment of shareholders highlights one of the clearest contrasts between governance models.
- In Anglo-Saxon systems, there is strong legal protection for minority shareholders. The relationship with the board is two-way, with an emphasis on open shareholder engagement from the company and investor activism and proxy voting informing board behaviour.
- In continental European systems, ownership is often concentrated, which changes the balance of power. While this can support long-term strategic alignment, it also raises the risk that controlling shareholders extract private benefits at the expense of minorities. Formal rights may exist, but their practical enforcement varies widely across countries.
- Asian governance structures face the greatest tension in this area. Cross-shareholdings and insider networks frequently weaken minority protection, making engagement more symbolic than influential.
Executive pay and incentives
Across all models, executive remuneration remains the weakest link in governance.
- Anglo-Saxon firms tend to perform better due to disclosure requirements and shareholder votes on pay. But the link between incentives and sustainable value creation is unclear, especially where companies favour short-term metrics to inform rewards.
- European and Asian firms face deeper challenges. In many cases, executive pay is shaped more by internal norms and power dynamics than by objective performance criteria.
Board independence and power balance
The contrast between outsider and insider governance systems is most visible in board composition and authority.
This table shows how these models work.
| Model | Typical regions | Board structure and independence | Strengths | Risks and trade-offs |
|---|---|---|---|---|
| Outsider | Anglo-Saxon markets | Majority independent non-executives, strong committees, chair’s authority balanced by robust NED oversight, often chair and CEO separated | Clear monitoring, investor alignment, sharper challenge, cleaner disclosure | Pressure for short-term results, more adversarial tone, risk of information gaps between board and management |
| Hybrid | Continental Europe | Mix of independents with influence from controlling shareholders, banks or employee representatives; often two-tier structures; power more dispersed | Broader stakeholder input, consensus building, stability across cycles | Slower decisions, diluted accountability, potential for compromises that blunt execution |
| Insider | Many Asian markets | Boards dominated by senior executives and long-standing insiders; weaker independence; committees less central | Cohesion, continuity, faster decision-making, strong executive alignment | Limited challenge and accountability, higher related-party risk, reform pressure to add independent oversight. |
Do governance models converge or remain distinct?
In a world that is more connected than ever, will these models converge towards a single, dominant model or will they maintain differences? There are contrasting theories about the future of governance:
- Convergence thesis: As markets, codes and rules spread across borders, boards start to look alike. Global investors expect familiar concepts, such as independent directors, audit committees and strong disclosure, so companies adopt them to meet listing and capital demands.
- Persistence thesis: Real practice still reflects local DNA. Law, ownership, labour relations and politics lock systems into distinct paths to help companies manage these challenges. Bank–family–employee ties in Europe and insider or state influence in parts of Asia shape how boards actually behave. One size is not only unlikely, but it may be unwise, as it does not serve all boards equally well.
What the evidence shows
Hirigoyen and Poulain-Rehm found that:
- We see formal convergence in the form of similar structures on paper and resulting in higher scores for Anglo-Saxon model firms on governance checklists.
- But there is practical divergence. Independence means less in insider systems, shareholder rights vary in enforceability and transparency varies across different companies.
- Effectiveness depends on context, such as ownership concentration, legal protection and wider institutions, not on copying a single template.
Boards around the world increasingly speak the same governance language, but they still run very different conversations. Good governance is not about mimicking a model; it is about how the company thrives in its unique circumstances.
Lessons for boards and executives
Choosing a governance model that fits your environment
The most effective governance systems fit the company’s institutional reality. Boards should start by assessing four fundamentals:
- Ownership structure
- Regulatory context
- Access to capital markets
- Stakeholder expectations.
A widely held, internationally exposed company will benefit from strong market-based mechanisms such as shareholder engagement. A family-controlled or state-influenced organisation, by contrast, needs governance that balances stability with safeguards against concentration of power.
When hybrid governance works best
Hybrid governance becomes valuable when organisations operate between systems. This is common for companies expanding internationally or shifting from founder-led to professionally managed structures.
In these cases, combining elements of different models can deliver better outcomes. For example, maintaining relational stability while introducing independent directors and formal audit oversight can strengthen accountability without destabilising control.
Warning signs your current model is failing
Governance systems erode through small but telling signals, rather than collapsing without warning. You should take action when you see:
- Concentration of decision-making in too few hands, especially where ownership and management overlap
- Symbolic independence, where directors meet formal criteria but rarely challenge executives
- Weak oversight of executive pay, with limited transparency or poor alignment to long-term performance
- Low shareholder or stakeholder trust, reflected in disengagement, activism or reputational risk
- Compliance without impact, where governance looks strong on paper but fails in crises.
Comparative evidence shows that many governance failures stem not from the wrong model, but from models that no longer fit the reality of your company’s situation.
How to strengthen governance without full structural change
Improving governance does not always require radical reform. In many organisations, targeted adjustments can be impactful. Here are some examples:
- Enhancing audit and risk oversight, especially where insider control is strong
- Introducing clearer performance-linked remuneration frameworks
- Improving transparency and disclosure, even where regulation is less demanding
- Formalising shareholder and stakeholder dialogue to keep all parties aligned and informed.
These measures respect your institutional context while addressing the core drivers of governance quality identified in comparative research. They are accountability, balance of power and credible oversight.
Frequently Asked Questions
They examine how different national systems shape board power, accountability and performance outcomes.
Yes, through selective hybridisation that strengthens oversight without abandoning institutional traditions.
Highly concentrated ownership often weakens minority protection and reduces board independence.
Rules converge, but real practices remain shaped by national institutions, meaning that governance systems will always diverge in some manner.
Research shows that governance excellence is not about choosing the right model, but about building the right fit. Anglo-Saxon, European and Asian systems each reflect distinct institutional realities, and while formal standards increasingly converge, real governance practices remain shaped by ownership structures, legal frameworks and cultural norms.
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