Evolving 'Rules of the Game' in Corporate Governance Reform

Abstract

The convergence/divergence debate at the turn of this decade was often underpinned by the assumption of a unified and cohesive common law governance model, which would (or, for path dependence theorists, would not) form the point of convergence of corporate governance regimes around the world. The international corporate collapses complicated this debate. Common law jurisdictions, such as the US, UK, Australia and Canada introduced a variety of regulatory responses to the corporate scandals. While similar motivations underpinned these reforms, significant differences emerged in terms of focus, structure and regulatory detail. For example, there is an interesting dichotomy between strengthening of shareholder participatory rights versus protection of shareholder interests evident in the reforms. Strengthening of shareholder participatory rights was a significant theme in the UK and Australian reforms, but not in the US reforms. Another tension emerging within the common law reforms relates to principles-based versus rules-based regulation. The shape of these reforms has also affected subsequent corporate law debates in the US, UK and Australia, which address quite different policy concerns. Scholars have noted that, even where similar motivations underpin various reforms, it is unlikely that their long-term effects will coincide. Another aspect of this long-term regulatory unpredictability is the impact of backlash, recently exemplified in the US by the Paulson Committee report. The paper argues that post-scandal regulatory developments challenge any assumption of an orderly progression towards a uniform corporate governance model. Rather, they present a dynamic and fluid regulatory picture, with interesting differences of approach emerging within the common law world itself.