In Europe, two models of corporate governance1 are present. Firstly, there are ‘closed governance’ corporations that are characterised by concentrated ownership, with controlling owners, who are generally banks, institutions or family owned, that take in upon themselves to discipline the management of the firm. Secondly, in an ‘open’ system, the ownership of the corporation is dispersed, with agency theory governing the relationship between shareholders and managers contractual arm’s length relationships between shareholders and managers. In this system the interests of the shareholders and directors are aligned, through stock market-based compensation. Below I have presented brief summary and history of corproate structure and governance codes in Germany, Italy and France.
In Continental European each country has different codes that create different systems of governance. For example, under German law, the composition of a corporation is a two-tier board structure, which is made up of a "supervisory board" and a "managerial board.". Fohlin2 states that banks and financial institutions play a central role in the supervisory boards of German corporations, they tend to have the majority of the shareholdings, or they act as proxies for their clients in shareholder meetings. Theisen raises that point that supervisory boards that are composed of financial institutions and employees have proved to be an ineffective method of monitoring the executives on behalf of outside investors3. Reforms are in the pipework, . Hopt and Leyens states that the German Corporate Code recommends that the auditors deliver an annual statement declaring their independence, and the auditors firm must rotate every six years4. Moreover the updates in 2010 to the Code include recommendations to enable steady growth and avoid taking unnecessary risks5.

In Italy, which traditionally has a unitary board structure, the regulations stipulate that a corporation must be comprised of a separate board of auditors, who are composed of an internal body of independent members that will carry out the audit function. Wojcik states that in Italy neither the board of directors nor the board of auditors have ever been able to exercise effective control over managers6, because there Italian corporations possess a dominant shareholder, as we studied last week with the Parmalat scandal. Aganin and Volpin point out that throughout history Italian corporate law has provided poor protection for investors, and the Italian courts or the Italian Securities and Exchange Commission (Consob), have been unable to enforce the spirit of the law7. Recent amendments to Italian corporate governance codes have strengthen the minority shareholder’s rights8, and taking power away from dominant shareholders. The Codice di Autodisciplina, which is the Italian Code of Conduct stipulates that there should be an "adequate number" of non-executive directors which will be determined in accordance with the corporate structure 9", this is comparable to the French and Combined Code10. Furthermore, the internal control committee is recommended with the task of giving advice and making proposals to the board.

In France, which is a civil law country, the executive power has