Persuasion and Resistance: The Use of Psychology by Anglo-American Corporate Governance Advocates in France

Abstract

In the paper, I argue that in the 1990's Anglo-American corporate governance became the dominant model for large, public firms in the international business world. Corporate governance professionals relentlessly promoted and exported Anglo-American corporate governance throughout the developed and developing world. I contend that it is an appropriate time to examine critically the advocacy of Anglo-American corporate governance. An important part of the critical assessment is to explain the momentum of the dominant model: to understand why Anglo-American corporate governance appeared so persuasive and inevitable, and why other models were less compelling and pushed to the margins of the debate. I argue that corporate governance advocates used psychological factors both to create this momentum, and thus the one-sidedness of corporate governance debates, in many countries and to persuade policy-makers abroad to use Anglo-American corporate governance as a model to transform their governance systems.

I base my argument upon a study of French corporate governance, which I selected because I had previously written about this governance system and had myself participated in governance advocacy in France in the 1990's. After briefly presenting the orientation of behavioral law and economics that inspired the study and the major psychological factors identified by psychological research I next present the study. In it, I examine public texts, French and non-French, influential in recent French corporate governance debates and either representative of or strongly influenced by Anglo-American corporate governance advocacy, to see how corporate governance advocates used psychological factors in them to make a psychologically persuasive case for the Anglo-American model.

I then present the results of the study. I highlight, by both a table and a general description, the major differences between the French and non-French texts in the use of the psychological factors, and examine examples of the factors in each of the texts. I draw several conclusions from the study. The study implies that psychologically powerful advocacy altered the French governance debates by pushing finance and governance alternatives into the background and did not necessarily promote a corporate finance and governance solution that would be both acceptable in and appropriate for France. The study also suggests that there is a need for policy-makers to develop a more rational way of debating about corporate finance and governance, in light of this pervasive use of the psychological factors by governance advocates. After offering a few general guidelines on how to achieve this goal, I argue that, because its development will take time, culture and politics give policy-makers a mental framework that blunts the immediate effects of the psychological factors and that guarantees for them and others a space for debate on governance changes. I then briefly examine a recent French law dealing with corporate governance and contend that it shows both the success of Anglo-American corporate governance advocates (based on their use of the psychological factors) and the cultural and political resistance to them by French policy-makers.

Keywords: French corporate goverance, psychology

JEL Classification: K2