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CGR : Coordinated Governance Regime

Coordinated regimes are characterised by a relatively high level of social consensus, which limits the role of markets to some extent, but which also prevents elite groups such as wealthy families from capturing state resources.

Definition

Equity markets

Varying levels of market cap to GDP and proportions of free float. Historically, most companies operating within CGRs have tended to obtain the bulk of their external financing from banks rather than equity markets. Shareholdings may be concentrated or diffuse, but effective control is usually exercised by block holders or networks and not delegated to managers (though in some cases this has been changing). A higher priority to the interests of all stakeholders alongside those of shareholders, who are generally favoured under LGR- type regimes. The most obvious example of a CGR is the two-board co-determination system in Germany which gives labour a big influence via the unions.

CGRs are consensus based and high trust societies with strong and effective institutions. The states generally operate as social democracies whereby distributional concerns run alongside more commercial priorities. CGRs tend to have heavily regulated labour markets, which favour insiders at the expense of those without jobs, especially the young. The state will often impose restrictions on the extent to which companies can restructure their operations.

Broader economy

Challenges
and potential change factors

Increasing proportion of foreign based, often US, shareholders over past twenty years. Emphasis on consensus and ‘long-termism’ can often delay response to market signals. Most CGR countries are in continental Europe and companies based in Euro member states outside Germany constantly need to move up the value chain to compete effectively. Shareholders can lose out at times of economic stress as government/society seeks to redistribute away from capital to labour.

Markets