Corporate Governance Convergence Through Cross-Border Mergers: The Case of Aventis

In this paper we illustrate the role of cross-border mergers in the process of corporate governance convergence. We explore in detail the corporate governance provisions in Rhone-Poulenc, a French company, and Hoechst, a German firm, and the resulting structure after the two firms merged in 1999 to create Aventis, legally a French corporation. We show that, despite the nationality of the firm, the corporate governance structure of Aventis is a combination of the corporate governance systems of Hoechst and Rhone-Poulenc, where the newly merged firm adopted the most protective provisions of the two merging firms. In some cases this resulted in Aventis' borrowing from the corporate governance structure of Hoechst while in others Aventis replicated Rhone-Poulenc's structure. Most interesting is the situation where Aventis introduced improved provisions over both systems. The resulting corporate governance system in Aventis is significantly more protective than the default French legal system of investor protection.