The aftermath of the 2008 global financial crisis provoked a salvo of criticism to the finance industry for its unethical behaviour and the toxic effects of financialization on the real economy. Commentators and scholars questioned the prudence of corporate governance models and criticised the greed and short-termism of financiers and capital markets. This book by Inge Lippert, Tony Huzzard, Ulrich Jürgens and William Lazonick belongs to an emerging literature that considers the impact of financialization—broadly defined—on the world of work. Faithful to earlier institutionalist approaches (e.g., Gospel & Pendleton, Reference Gospel and Pendleton2005) it attempts to unravel the thread that ties together models of corporate governance, financial markets, institutions of employee voice and systems of work. It does so by looking into a key economic sector, the automotive supply industry, and offers a refreshing perspective on the evolving work systems across different national contexts.
The introduction is very well organised, it elaborates on the rationale behind such an endeavour, states the main aim of the book, previews the key argument, and provides a roadmap for the rest of the book. The second chapter presents the conceptual framework of the empirical research project. It offers a critical survey of the comparative business and capitalist systems literatures, and joins the group of scholars who criticised earlier theories for lack of dynamism and inability to account for change. Thus, it reviews more recent theories of institutional change (20-23) and synthesises insights from the financialization literature (24-26). Finally, it clearly articulates the research questions and research design of the study, while the authors give further details on data collection and methods of analysis in the Appendix.
The third chapter is indispensable. It places the study of the book in a wider context; it considers the systemic characteristics of the automotive supply industry and charts their interplay with, and deviations from, national models of capitalism. This is a very important addition that should be part of any book engaging in an industry-wide study. It helps the reader to see the bigger picture of how large-scale processes towards restructuring, globalization and financialization play out at the macro- and meso- levels of analysis (40-47). It thereby helps to delineate global or cross-national trends from the specific circumstances of particular nations and sectors.
The fourth chapter elaborates on the key conceptual contribution of this book. The authors propose a new analytical category of “governance regimes” (76) and use this as a “heuristic device” to categorize firms according to their exposure to capital markets: sheltered, unsheltered and private equity financed. The regimes take the shape of Weberian ideal-types and the authors sketch their general characteristics and the associated firms’ expected behaviour in terms of corporate governance, employee voice and work organization. One of the novelties here is that it sheds light on firms acquired by private equity funds through leveraged buyouts (LBO), which is generally an under-researched category of firms in this literature.
The following three chapters delve into the empirical cases that exemplify the different types of firms. The case selection is varied along two axes: according to firms’ exposure to capital markets (sheltered, non-sheltered, private equity financed), but also across three national institutional contexts (Germany, Sweden and the United States). Thus, the empirical part of the book follows a “three by three” research design, with a total of nine case studies. This breadth allows the authors to confidently gauge the plausibility and generality of their arguments. The narrative is historically informed, contextualised, and enriched with insights from the interviews with key actors.
The empirical material provides us with several original findings, which challenge conventional wisdom on the topic. For instance, even in egalitarian institutional contexts, such as Sweden, the private equity financed firms are forced to abandon the quests for quality of work by adopting lean work organization principles so as to cope with heightened international competition (196-98). The authors question the sustainability of these models and shift attention to the business models that are followed by sheltered firms. These may blossom even in liberal market contexts, such as the United States, where firms pursue new models of industrial democracy based on “shared capitalism” (Kruse et al., Reference Kruse, Freeman and Blasi2010), illustrated, for instance, in Employee Share Ownership Programmes (131-33).
The eighth chapter summarises the findings of the case studies along the three themes. The authors argue that the pace of convergence is variable, and different governance regimes have prompted different paths of change (214-230). Sheltered firms have made path-dependent adjustments in corporate governance with some adoption of performance based reward strategies; but there is still a balance of power between employees, managers and owners, and these firms tend to follow “high-road” work strategies. Unsheltered firms have broken from their earlier paths and made transitions to new models of corporate governance. Here, powerful corporate managers tend to pursue an agenda of shareholder value, which subordinates employee voice to profit maximisation, and leads to “low-road” work strategies (i.e. based on low-pay and low-skill jobs). Finally, in private equity financed firms, investors are the powerful actors and employee voice is subordinated to investors’ goals. In this case, as with unsheltered firms, there is a clear reorientation of work systems that deemphasize the interests of employees.
The final chapter wraps up the key arguments and considers the future prospects for the industry. One of the main arguments is that the corporate governance changes provoked by isomorphic pressures from financialization and globalization undermine the prospects of job quality despite the rhetoric of corporate social responsibility. But the authors also argue that the strong and enduring mechanisms of employee voice may mediate these pressures and can have a significant and positive impact on the sustainability of “high-road” jobs (235). Clearly, the authors identify the exposure to the capital market as a key driver of changes in corporate governance, employee voice and work organization. They suggest that the “governance regime” holds greater explanatory power than the national institutional context and accounts for large part of the variation in practices and strategies. They also propose that further studies on corporate change need to move beyond “clusters of countries” and look into “clusters of companies” (232). Hence, an interesting line of inquiry would be to gauge how far the authors’ insights travel across cases and hold for service sector contexts.
The book deserves praise because it breaks new ground in many different areas. For some time, the literature in economic systems and varieties of capitalism has claimed to be a firm-centred approach to political economy (Hall & Soskice, Reference Hall and Soskice2001). However, many studies have failed to adequately tie the different levels of analyses and consider the interplay of national-level institutional configurations, with meso-level sectoral contexts and organizational practice. The authors manage to navigate skilfully between those different levels of analysis. Additionally, their contribution is timely, as it separates the role of managers from owners in the financialization debate and charts how the changes in their behaviour may shape the corporate governance of firms. It, therefore, takes the reader beyond corporate governance studies that are focused on changes in the legal and regulatory framework and sometimes ignore whether these are linked to actual business practice. Finally, the book provides a welcome update of work organization models taking into account the disintegration of production in industrialised nations and the increasing reliance of multinationals on global value chains. The book is strongly recommended for anyone interested in the dynamics of change in corporate governance and employee voice in contemporary capitalist economies and provides an elegant analytical structure that should set the benchmark for many studies to follow.
