Cultural Norms and Company Laws in Europe

This article will examine the EU Member States with the largest economies, the UK, Italy, France and Germany. The work will consider the relationship between company law rules and national cultures in these varied systems. It will consider whether the current diversity of laws is likely to endure. This article examines the four European Union Member States with the largest national economies by GDP, namely Germany, France, the UK and Italy. The work will consider how their company law rules relate to their national cultures. Broadly, two of the countries under consideration here are Southern European and mainly Catholic in culture, namely France and Italy, while the other two, the UK and Germany, are Northern European with mainly Protestant cultures. The countries are diverse in terms of their economic structures, particularly average company size and the use of capital markets by business, even though the sizes of the national economies are similar. This study will seek to explain and explore the diversity of company laws between those nations. It will also consider whether it is likely to endure, in the EU political context and under pressure from increasing economic globalisation. Explaining the development of business and rules in terms of interaction between culture and law is something of a chicken-and-egg problem. Legal institutions and rules may in themselves become part of the national cultural fabric. They are, however, likely to achieve this status only if they are basically compatible with the underlying values and habits of the people. For de Soto 1 , formal legal rules if they are to be effective must develop in accordance with the underlying social contract; that is, understandings that have developed locally about use of property. At the more abstract and larger level of national corporate law, which also governs how assets are to be held, used and exchanged and how value is to be created and distributed, analogous considerations surely apply. The legal arrangements are best built in conformity with local tradition. Of the interplay between rules and culture, Licht refers to culture as an „old mother‟: “It knows a lot, but some of this knowledge might be obsolete today; it is sometimes nagging; it will resist change unless absolutely required. Most importantly, it must not be ignored.” 2