Governance Code Research Articles

Transnational Migration of Laws and Norms in Corporate Governance: Fiduciary Duties and Corporate Codes

This paper explores the intersection of transnational law with contemporary corporate governance laws and principles. Transnational law, it must be said, is a far from settled concept. There is uncertainty as to what the term actually means, and how it differs from other concepts, such as national legal ordering or global law. For early theorists, the essence of transnational law was whether it regulated conduct or events that crossed national boundaries. More recent scholarship, however, has focused not on what is being regulated, but rather on how laws and norms are transmitted between supranational and local levels.Corporate governance, with its complex array of public and private actors, fits naturally within the modern conception of transnational law as a species of law that “can no longer be viewed through a purely national lens”. Financial markets today are global and interconnected and events, such as the 2007-2009 global financial crisis and the current COVID-19 crisis, exemplify the risk of contagion across those markets.Not only can corporate governance problems transcend national boundaries, so too can their solutions, which often involve regulatory efforts that operate at a transnational level. In this environment, the corporation has taken on a greater societal role. Indeed, according to The British Academy’s influential Future of the Corporation project, the main purpose of business today is “to solve the problems of people and planet profitably”.This paper explores, from a transnational perspective, the transmission of laws and norms that are designed to constrain directors’ conduct and enhance corporate accountability. It focuses on two key examples of such accountability mechanisms —fiduciary duties and corporate codes.The paper begins with a comparative and historical examination of directors’ fiduciary duties in the United States, the United Kingdom and Australia, analyzing the extent to which the transfer of fiduciary law to these common law jurisdictions has resulted in a unified approach to directors’ duties, as is often assumed by studies such as the law matters hypothesis. The paper then moves on to discuss the modern phenomenon of codes, such as corporate governance codes and shareholder stewardship codes. Corporate codes originated in the United Kingdom in the early 1990s, but have subsequently spread throughout the world. The paper explores the global transmission of these codes, which constitute powerful “norm creators”. The rise of corporate codes epitomizes the fact that transnational legal ordering occurs “multi-directionally and recursively up from and down to the national and local levels”. It also demonstrates the importance of “who writes the rules”, because this can affect the substance of those rules and result in significant divergence between national codes.The paper assesses these various developments against the backdrop of convergence and path dependence theories in corporate governance.

Ownership Structure, Corporate Governance Reform and Firm Performance in Kuwait

This paper examines the link between ownership structure and firm performance in Kuwaiti firms in the context of recent corporate governance reform. Panel data robust regressions of firm performance against ownership structure specify variously the former using the returns on assets and equity, the debt to equity ratio, leverage, and Tobin’s Q and the latter as family, government and local and foreign institutional ownership. We find family ownership has the most influence on firm performance followed by government ownership, but disproportionately to their actual shares of ownership. Importantly, corporate governance reform appears to have had little effect in moving to a first voluntary then compulsory corporate governance code and guidelines, suggesting many firms had either adopted good governance principles under market pressure or exited the industry in anticipation of the more stringent regulatory controls.

Corporate Governance In Palm Oil Companies In Aceh Province

Nowadays, companies are not only required to provide information on financial accountability but also about corporate performance related to social and environmental aspects in order to promote shareholder values and sustainable practices, which eventually lead to the concept of corporate governance. This study aims to discuss the implementation of corporate governance, in palm oil companies in Aceh Province. A qualitative research method is applied with an empirical juridical approach. Data were collected by interviewing respondents and analyzing corporate reports. The result found that the implementation of corporate governence by the companies through the availability of code of good corporate governance (GCG) and code of conduct. Although it does not necessarily guarantee the implementation applied properly, but it can show company commitment to run a good business. Some companies also implement corporate social and environmental responsibility in a different approach. However, some of the activities are actually not in accordance with existing regulations, but is only limited to activities that have no direct impact on community.

Corporate Governance and Performance of Financial Institutions in Kenya

The introduction of corporate governance code by the central bank of Kenya in early 2000, corporate governance has attracted an incomparable attention of researchers because of expanding financial troubles financial firms are experiencing everywhere in the globe. Recent scandals regarding the moral deficiency of some financial institutions have stimulated public sensitivity towards cooperative governance issues of these firms. This study’s main objective is based on empirical analysis which seeks to establish the effects of corporate governance on firm’s performance within the Kenyan financial sector, including the characteristics of the management body, i.e. Board size, ownership concentration, auditor’s reputation, independent directors, CEO’s duality and annual number of board meetings, firm’s size and leverage i.e. financial risk management. The researcher did a rigorous desktop review of secondary information on ‘cooperate governance’ and ‘performance’ from 2014 to date in the online library of various documents, publications and reports including journals and magazines. Based on the previous studies reviewed, the researcher appreciated that corporate governance is the key to the global integrity especially for financial institutions whose existence is wholly dependent on trust and integrity. Different scholars have advocated for different measurers to corporate governance on the measure of firms’ performance and the common identified are board size, ownership concentration and auditor’s reputation have a positive and significant impact on firms’ return on assets (ROA), whereas the percentage of independent directors and the annual number of board meetings have negative and significant impact on firms’ return on equity (ROE). CEO duality is found to not be an important determinant factor of firms’ performance, as the results suggest that it shows insignificant effect on ROA and ROE. Firm’s size and leverage are found to have negative and insignificant relationship with firms’ performance. The study, recommended among others that Financial Institutions should increase their board size but within the maximum limit set by the code of corporate governance and ensure that all regulations provided by Central Bank are fully complied with.

Corporate governance and financial performance: evidence from Romania

PurposeThe purpose of this research is to evaluate the impact of adopting the principles of corporate governance on the financial performance of companies listed on the Bucharest Stock Exchange (BSE). To assess the implementation of corporate governance principles, the authors built an index based on the principles specified in the BSE Corporate Governance Code (CGC).Design/methodology/approachAn econometric analysis was conducted to estimate the impact that the authors’ corporate governance indicator had on financial performance, measured successively through Tobin's Q, return on equity (ROE), economic value added (EVA) and total shareholder return (TSR).FindingsFollowing the regression model, the authors noticed the absence of a significant impact of corporate governance practices on performance measured by ROE, EVA and TSR but instead, a significant and positive relationship for Tobin's Q rate was found.Research limitations/implicationsDue to the lack of data before the implementation of the BSE Code of Corporate Governance, the research period is limited to 2010–2015, but the authors’ future studies will try to extend the research period.Originality/valueAlthough numerous studies have been conducted to analyze the empirical relationship between corporate governance and financial performance, no conclusive results have been obtained. The diversity of these findings can refer to methods used in the construction of a corporate governance measure as well as to the accuracy of financial reporting.

Evolution of Corporate Governance in Emerging Economies – Indian Experience

Evolution of corporate governance in India from 1850 to 2020 provides significant insights into how discontinuities in the corporate Eco system impacts corporate governance practices. Although the concept of corporate governance and monitoring board emerged in 1972 in USA and spread across the globe in 1990s, after the Cadbury Committee in UK submitted its report, the issues on the governance of joint stock companies bothered regulators and academicians, and of course, minority shareholders, much before the emergence of the term corporate governance. India saw three significant structural discontinuities from 1850 to 2020. The period 1850 to 1947 was the colonial era when Indian business groups were emerging. The managing agency system emerged during that period as an institution to address the twin challenges of capital scarcity and scarcity of managerial skills. This facilitated industrialisation and also increased concentration of ownership. 1947 to 1991 was the period when the Indian government adopted the command economy framework and implemented the same through five-year plans and the licensing system. Public sector enterprises emerged as the dominating force in the Indian economy, although private sector was allowed to operate in those sectors which were not reserved for the state sector. Obtaining a license to start a new industry or expand the existing capacity was the key to the success of a business enterprise. Managing agency system continued until 1970. Some business groups consolidated their position because they could stand at the front of the queue for obtaining the licences. In the closed economy, they operated in the sellers' market. Licensing system and closed market resulted in unrelated diversification. The change in the social structure also resulted in division in business group due to the weakening of the joint family norms. Moreover, public sector development financial institutions (DFIs) acted on the behest of political bosses, often supporting the management resulting in weak corporate governance. In 1991, the Indian government opened the India economy and the country ushered into the era of market economy. Licensing system was dismantled. During the period between 1990 and 2020, the capital market developed, New entrepreneurs entered the corporate sector. Mutual fund industry achieved high growth. FDI and FPI increased very significantly, and start-ups emerged and grew. In the year 2000, for the first time, Security and Exchange Board of India (SEBI), the capital market regulator, introduced the Code of corporate governance. Indian business survived in the competitive market. The Indian corporate governance code revised number of times in the past two decade bench-marking with global best corporate governance practices. However, Indian corporate sector being dominated by the family business, the question 'how independent are independent directors' remains. With significant increase in the shareholding of FDI and FPI in top 200 companies, the average standard of corporate governance is improving. This essay examines the evolution of corporate governance and how discontinuities impacted the evolution process. It also predicts how and why the Indian corporate governance practices are expected to improve in coming days based on the emerging trends.

A Preliminary Study Of Academicians’ Perception Towards Women PN Boards In Malaysian Public Listed Companies

Gender diversity in the corporate board is still an issue for certain countries including Malaysia. The Malaysian Code of Corporate Governance (MCCG) 2017 anticipates 30% of women to be on the corporate board. However, recently the number of women on board reported is still lower. This study aims to examine the perception of academician towards women on board (WOB). The survey questionnaires were sent among academicians. The result indicates that the academicians believe that the appointment of women on boards will improve and enhance the companies’ performance. There are equal opportunities for men and women to be in management positions. The finding of this study will assist the policymakers and companies especially in formulating women policy to support the national agenda.

Corporate Governance, Boards, Standards of Accounting and Management in Financial Institutions

Corporate governance are very important.Albania has a new economy. After the communist regime, Albania has adopt the new standard of accounting. In this period Albanian companies is focused in respecting of financial standards and applied of standards accounting. In this way all the Albanian company has adopt their standards of accounting. A lot of company has adopt their code of corporate governance in their institutions. Albania has a lot of to do about corporate governance. Albania’s remarkable economic transformation has been affected by the global financial crisis. The country’s main challenges include maintaining macro-fiscal and financial sector sustainability, improving the investment climate and unleashing private sector growth, removing barriers to employment for job creation, and improving governance and public service delivery. This paper is contain some elements of corporate boardc, management and standards in accounting and some aspect of corporate governance. Keywords: Corporate governance, Accounting Standards etc. DOI: 10.7176/RJFA/11-24-09 Publication date: December 31 st 2020

Governance and Nominating Committee

The fulfilment of the legal duties and responsibilities of the board of directors with respect to compliance with corporate governance regulations and principles is typically led by a board-level governance and nominating committee. This chapter covers regulatory requirements relating qualifications of directors, including “independence” and financial expertise; the scope of duties and responsibilities of the committee, including identification and selection of qualified directors, development and implementation of governance codes and policy statements and oversight of directors’ education and performance assessment; and processes for evaluation of the performance of the committee and the entire board (including individual members of the board).

Public health and corporate social responsibility: exploratory study on pharmaceutical companies in an emerging market

BackgroundCorporate social responsibility (CSR) is studied from many perspectives and has gained unprecedented importance in recent years, especially in emerging economies. Pharmaceutical companies play a very important role in a population’s well-being and health through the CSR and corporate governance practices that they apply.MethodsWe used an exploratory approach to measure compliance with the Corporate Governance Code of pharmaceutical companies listed on the Romanian capital market and with practices declared through CSR.ResultsThe results show that pharmaceutical companies are involved in actions that consider the well-being of society by offering financial support and managing various sustainable projects, targeting social and economic issues, leading public health awareness campaigns, and investing in health projects.ConclusionThis study highlights the increasingly important role played by corporate governance and corporate social responsibility in pharmaceutical companies in improving public health in countries with emerging economies.

The compliance of the Romanian listed companies with the principles and provisions of the Corporate Governance Code

Starting from the research assumption that the Corporate Governance Code issued by Bucharest Stock Exchange (BSE) aims at building an internationally attractive capital market in Romania, based on best practices, transparency and trust that encourages companies to build a strong relationship with their shareholders and other stakeholders, communicate effectively and transparently and show openness towards all potential investors, in this paper we would like to present the degree of compliance of the companies listed on the Bucharest Stock Exchange with the principles and provisions of the Corporate Governance Code. The aim of this paper is achieved by presenting and commenting on the principles issued by the BSE regarding the corporate governance and by analysing the Corporate Governance Reports of the companies, presenting at the same time the compliance of the listed companies with these principles and provisions, by using the data issued in 2018 by the entities included in our study, namely the listed companies on the main market of the Bucharest Stock Exchange. Our analysis reflects that, although the provisions and principles of the Corporate Governance Code are not mandatory for the listed companies, they are largely implemented in the activity of companies because an efficient corporate governance system can represent a competitive advantage for any economic entity in the context of globalisation.

Corporate governance and auditors’ expectation

This study investigated the impact of Code of Corporate governance on the auditor’s expectation gap, following the implementation of the Nigerian corporate governance code. The study outcomes were based on the literature review, the analysis of the qualitative data and discussions of generated themes. The results revealed that adopting effective corporate governance (accountability) system positively contributes in narrowing the audit expectation gap due to the increasing interest in the role of accountability in fighting corruption in Nigeria. The Study recommends; the need for continued sensitization of the public, by both the auditing profession and other stake holders on the role and duties of the auditor, management and the board to avoid expectation gap from the public. The CBN, NAICOM, PENCOM and NCC should implement and enforce the approved Code of Governance. Keywords: Audit Expectation Gap, Corporate Accountability, Audit committees, Code of Corporate Governance, Regulatory agencies.

Corporate Board and Firm Risk: An Emerging Market Perspective

This study examines the relationship between board features and firm risk of listed companies in Colombo Stock Exchange for the period of 2010 to 2017. This research was carried out based on positivistic paradigm with the quantitative methodology. Secondary data were collected and analyzed using panel data analyze techniques to obtain quantitative measures of descriptive statistics, correlations, and regression analyses. The results show that the board features variables such as Board size, Women on board, Non-executive director, CEO Duality and Director Interlock have significant impact on firm risk. The results are consistent with agency theory perspective. On the other hand, Audit committee does not show any impact on firm risk in Sri Lankan companies. Our findings reveal that consistence is with theoretical expectation and code best practices. Further, it suggests that as far as the risk is concerned the existing corporate governance practices and code of best practices are effective in Sri Lankan context.

Corporate governance research in Nigeria: a review

This paper analyzes the state of corporate governance (CG) research in Nigeria. It consolidates the literature to identify the current state of CG research in Nigeria and to identity opportunities for future research in the literature. Among other things, the review show that the Board of directors (BOD) is the most explored corporate governance mechanism in the Nigerian corporate governance literature. Secondly, most studies focus on some governance mechanisms but ignore other governance mechanisms in firms. Thirdly, there is some consensus that the corporate governance failures in Nigeria is caused by multiplicity of factors mainly, lack of political will by the government to enforce corporate governance laws, deliberate refusal to comply with existing CG laws by politically connected firms, weak compliance by firms, weak enforcement by regulators, and conflicting codes in the country’s corporate governance codes. Also, the review shows that current CG studies do not systematically build on previous Nigerian CG studies which indicates a lack of direction in the Nigerian corporate governance literature. Regarding methodology, the findings reveal that most Nigerian CG studies are merely experimenting different methods of analysis without necessarily advancing the literature in a significant way. These findings have implications.

The UK Corporate Governance Code Principle of ‘Comply or Explain’: Understanding Code Compliance as ‘Subjection’

The focus of this paper is on UK Code compliance and the contests and confusions that have surrounded its principle of ‘comply or explain’. In contrast to many agency theory‐informed studies, the paper suggests that visible compliance with the Code cannot itself be taken as a reliable proxy for board effectiveness. Instead, drawing upon Foucault's account of governance as subjection, we argue that, as a form of board accountability, visible compliance can only support the Code's primary objective of establishing norms which shape the conduct of directors within boards. The contests and confusions as to the meaning of comply or explain are then explored in terms of the challenge regulators have faced, throughout the subsequent life of the Code, in respecting the freedom of action of directors, whilst nevertheless seeking to influence how this is exercised. The paper first explores three key moments in the evolution of the UK Code: the initial Cadbury committee two‐page ‘Code of Best Practice’ in 1992, the more prescriptive 2003 post‐Enron changes to the UK Combined Code following the Higgs review, and the retreat from such prescription in the 2010 changes to the Code. This is complemented by drawing on qualitative empirical research to describe three very different ‘subject positions’—refusal, cynical distance, and willing embrace—which directors have come to adopt in response to the Code. The paper concludes by pointing to the very different consequences for actual board effectiveness implied by these contrasting, but largely invisible, responses to the Code.

Stewardship Activities and Agency Problems after Japanese Corporate Governance Reform

Japanese corporate governance reform is implemented by an introduction of corporate governance code and stewardship code, in which stewardship activities by institutional investors play an important role in terms of reduction of agency cost. In this report, stewardship activities are focused based upon the idea that agency theory, newly introduced as principal cost theory, could support a conceptual framework of governance reform and analyzed that as an important function for agency cost reduction. In order to make governance reform more effective, I make several proposals, cost sharing of stewardship activities by asset owners and full disclosure of those activities based on investment strategies, such as actively managed strategies and/or passively managed ones, for stewardship activities of both engagement and proxy voting, especially by index fund managers.

Corporate Governance Disclosure and Financial Performance of Deposit Money Banks in Nigeria

Given that a key mechanism of corporate governance is corporate disclosure, this study, anchored on agency theory and stakeholder theory, examined the effect of corporate governance disclosure on the financial performance of deposit money banks quoted on the Nigeria Stock Exchange. Based on the provisions of the Code of Corporate Governance for Public Companies in Nigeria, 2011 and the Code of Corporate Governance for Banks and Discount Houses 2014, the study developed a disclosure checklist and employed content analysis method to extract corporate governance from 78 annual reports of thirteen Nigerian deposit money banks from 2011 to 2016. The study categorized corporate governance disclosure into three – corporate governance disclosure on board of directors, corporate governance disclosure on risk framework, and corporate governance disclosure on whistle blowing policy. It constructed an overall corporate governance disclosure index as well as sub-indices corresponding to the three categories of corporate governance disclosure. The study formulated ten hypotheses and ranked ordinary least square methods of multiple regressions to explore the relationship between corporate governance disclosure and the financial performance of deposit money banks in Nigeria. The result showed a positive and significant association between overall corporate governance disclosure and the financial performance of deposit money banks in Nigeria. The result of the OLS regressions also supported a positive effect of corporate governance disclosure on board of directors and whistle blowing policy on the financial performance of the deposit money banks in Nigeria. Contrary to expectation, the study failed to document a significant association between corporate governance disclosure on risk framework and financial performance of deposit money banks. This study has contributed empirically to the body of knowledge by providing broader understanding of the effect of corporate governance disclosure on the financial performance of a critical sector of the Nigerian economy. Methodologically, the study is one of the few that developed disclosure checklist based on the provisions of both codes of corporate governance of Securities and Exchange Commission and Central bank of Nigeria and employed ranked OLS.

The Corporate Purpose Debate, 2018–20 Edition

A debate has been raging across the world about what the purpose of the modern corporation should be. While the debate is certainly not new, the most recent point of ignition has been a statement from the Business Round-table, a group of America’s top CEOs, about the purpose of the corporation. Parallelly, the UK corporate governance code has been amended to reflect the new expectations from companies; and in Australia, the ASX Corporate Governance Principles were amended with similar themes. This article will survey these developments in the US, UK, and Australia, summarize the academic discussion around this, and finally reflect on what this means for corporations in these countries. The article will argue that rather creating a big shift to stakeholder centric governance, these developments, at least in the UK and Australia, signify a focus on corporate culture and the relationship of company management with employees. This focus on culture and employees is aimed at preventing, or addressing at an earlier stage, egregious corporate scandals. In conclusion, the article will discuss the implications of these developments for India.

Does compliance with corporate governance codes help to mitigate financial distress?

This paper analyzes whether the compliance with corporate governance codes helps to mitigate the financial distress of firms. We examine three different levels of compliance: overall compliance, the compliance with the recommendations regarding the board of directors and the compliance with the recommendations on board subcommittees. Our results reveal that only the fulfillment with the recommendations about the board of directors leads to a reduction in the likelihood of financial distress. These findings extend the academic debate concerning the role of governance codes and their impact on firm outcomes, and have practical implications for both professionals and firms. Moreover, our findings emphasize the need to distinguish between the different types of recommendations to investigate the effects of these codes. In addition, the results can be useful for policymakers in the configuration of new requirements and recommendations regarding corporate governance structures. Furthermore, our results contribute to the literature, delving into the determinants of the financial distress of firms.

Corporate Governance Reforms under the Abenomics : the Economic Consequences of Two Codes

Corporate governance reform has been one of the central issues in the third arrow of the Abe administration's economic revival program. The Japanese Stewardship Code was introduced in 2014, followed by the Corporate Governance Code in 2015. This study quantifies how the reform changed the corporate governance of Japanese firms. First, we examine the changes in institutional ownership, cross-holdings and board structure following the reforms. Then, we study whether changes in ownership structure and board structure affect firm behavior and performance. We find that the introduction of the Stewardship Code is associated with more institutional ownership especially in mid-sized firms. Firms with few outside directors increased the number of outside directors to follow the Corporate Governance Code. However, the increase in institutional ownership and outside directors did not promote risk taking behavior or improve firm performance.