Corporate Law, Codes and Social Norms—Finding the Right Regulatory Combination and Institutional Structure

Abstract

UK corporate regulation ranges from detailed rules set out in primary legislation and supported by civil and criminal sanctions, through to non-legally enforceable, but commercially powerful, guidelines or norms developed by market participants. The general review of company law that took place between 1998 and 2001 included a re-examination of the sources of corporate regulation and the institutional framework. Current reform proposals include reorganisation of the sources of regulation and the establishment of a new regulatory infrastructure based on existing institutional arrangements for financial reporting. Whilst the proposals may result in a more coherent institutional framework, this paper suggests that they mark a shift towards greater state control of regulation, and addresses the concern that there may be a loss of advantages commonly associated with market-based regulation. The paper also highlights the significance of the continuing preference for criminal sanctions in shaping reform proposals concerning the sources of corporate regulatory rules.