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How common are takeovers of large national companies? Two views from Europe.

Takeovers are not unusual in corporate America; in the UK too, mergers and takeovers commonly occur in a culture that allows and encourages the free movement of capital. This model of corporate governance is known as 'shareholder capitalism'.

But in continental Europe, the culture is different: in countries like France and Germany, there is a tradition of a social market, where companies often operate within a 'dual board' structure. This system of corporate governance involves shareholders and workers electing members of a supervisory board. This model can be referred to as 'stakeholder capitalism'.

The continental approach is exemplified by the case of Volkswagen.

Barriers to takeover at Volkswagen

There have been attempts in the past to take over this well-known German manufacturer. However, these have been thwarted by what is known as 'VW-Gesetz' (VW-Law), which has protected the firm from being swallowed up by predator companies.

Old style VW Beetle. © iStock.com

Under VW-Gesetz, the firm's regional public authorities are represented on the company's board. This and other parts of the system act to put off potential foreign investors. The European commission has criticised the system for the way it restricts, in an indirect way, the free movement of capital in the Single Market of the European Union.

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