Corporate Governance

“The directors’ relationship with shareholders is different in kind from their relationship with the other stakeholder interests. This is not simply a technical point…to redefine the directors’ responsibilities in terms of stakeholders would mean identifying all the various stakeholder groups; and deciding the nature and extent of the directors responsibility to each. The result would be that the directors were not effectively accountable to anyone since there would be no clear yardstick for judging their performance. This is a recipe neither for good governance nor for corporate success”

(Hampel Report on Corporate Governance, 1998).

Your reading this week focuses on the background leading to calls for better corporate governance, as well as the theories that have formed the background to the development of corporate governance codes. Why does good corporate governance matter? What are the key characteristics of the five theories of the company set out in your materials? Which theory fits most closely with your understanding of what a company is? What are the different jurisdictions attempting to achieve with the various corporate governance codes? To what extent do they succeed in their objectives? Explain your answers with reference to practical examples from your own experience or observation wherever possible.