Abstract
Corporate governance mechanisms differ from organization to organization and from countries to countries. The governance mechanism in each organization is shaped by its own objective (vision, mission) & political, economic, legal and social history of a country. The governance practices adopted in any organization reflect mindset of top management and value systems adopted in that organization over a long period of time. For most of the organization the corporate governance standards did not evolve and emerge through a natural business process. It has been a forced adoption because of the requirement of legal compliance within a particular country or to confirm industry standard. Hence different organizations have set the code of corporate governance in their own way. In view of this, a pertinent question arises as to whether it is possible to have a set of universally acceptable corporate governance standards. Whether a standard corporate norms can be established at global level. As today, companies are not confined to one country only. They have crossed the borders and have presence in many countries. In such scenario, there is definitely a need of universally acceptable governance standard to be followed by each organization or firm. Since the mid-1990s, there has been much talk of the convergence of corporate governance systems to Anglo-American standards, and several trends have pointed in this direction. Comparative research in the field of Corporate governance has emphasized that Anglo-American corporate governance is characterized by low ownership concentration, one-tier boards and shareholder value norms, whereas high levels of insider ownership, two-tier boards and stakeholder concerns are more characteristic of continental Europe. The objective of the paper is to discuss the issues like - whether companies should follow an Anglo-American model or European model and why the convergence of corporate governance standards is required in the globalized world. This paper also discusses that in such a divergent world, is it actually possible to have universal corporate governance norms, which would be uniformly followed by all the countries of the world.
Highlights
A number of theoretical studies argue that regulatory and institutional convergence of corporate governance practice worldwide is likely, but the studies are in disagreement as to the direction of the convergence
How well a country’s corporate governance system adapts to its changed environment, not how well it adheres to any particular model, will determine its success
The debate has largely been premised on the false assumption that the American model finished evolving and had reached the end in the evolution of corporate governance
Summary
The increasing economic globalisation has fuelled vivid debates on the similarities of and differences between national corporate governance systems and the barriers to the development of a single system of corporate governance (see e.g. McCahery et al 2002).It is widely accepted that corporate governance systems vary across nations. Firms expanding into global markets often prefer to use stock, rather than cash, as acquisition currency If they want American investors to buy and hold that stock, they are pressed to adopt corporate governance measures that those investors feel comfortable with. Convergence might be the result of globalization in the capital markets: new financial instruments (such as ADRs and GDRs), deeper integration of markets, stronger, international competition and the emergence and growth of new financial intermediaries have radically changed the corporate finance landscape in a global way, at least for the larger enterprises The latter, along with the governments of their countries, are increasingly conscious that, in order to tap this large pool of global financial resources, they need to meet certain governance conditions
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