Letting Companies Choose between Board Models: An Empirical Analysis of Country Variations

Abstract

This paper has a dual aim: it aims to contribute to the substance of comparative corporate law and it aims to advance the methodology of comparative legal research. In substantive terms, the paper addresses the key question about the design of a suitable board structure. It notes that today many countries not only allow modifications of the default structure, but provide two separate legal templates by giving firms a choice between a one-tier and a two-tier board model. Yet, information on the actual choices made by companies is rare. This paper aims to fill this gap. It presents original data about the choice of board models from 14 European jurisdictions, analyzing variations of popularity of these models at the country level. For this purpose, the paper applies the techniques of “correspondence analysis” and “qualitative comparative analysis”, which have been developed by other academic disciplines but have so far been rarely employed in comparative legal scholarship. One of the main advantages of these techniques is that they do not depend on a large number of observations as is the case for econometric methods. They are also intuitive to use for legal scholars as they are not simply based on particular numerical scores (such as significant levels) but ask researchers to use their qualitative skills and knowledge in research design and evaluation. In conclusion, the new data and analyses show that there are profound country differences in the preferred choice for one of the board models and that both path dependence and
legal differences can help to explain those variations.

Keywords: comparative corporate law, empirical comparative law, correspondence analysis, qualitative comparative analysis, path dependence

JEL Classification: G34, K22, L22