THE CORPORATE GOVERNANCE WAR is over: the good guys won!
Any discussion on the shape of things to come in corporate governance must begin with the remarkable transformation that has occurred in the last 20 years in corporate governance in this country. This includes the development of the institutional investor (a phrase which itself became commonplace only with the rise of the takeover battles in the 1980s) as an active participant, and the increased monitoring of corporate performance by public pension funds in the 1990s. While the development of corporate governance in the U.S. was not without some considerable debate resulting in harsh rhetoric and even occasional lawsuits, today there is a historic consensus among larger Corporate America and institutional investors about what constitutes "good" corporate governance.
This consensus can be seen in a number of ways. For example, the governance guidelines developed by General Motors Corp. and the Business Roundtable are not significantly different from those promulgated by such institutional investors as CalPERS and TIAA-CREF. More generally, the parameters within which the governance debate occurs, whether among investors, practitioners or even academics, is within the framework of this consensus; thus, it is assumed that all companies face similar governance issues to those occurring at General Motors, and the solutions to these similar problems are to create more "independent" structures (again, defined largely the same by GM, the Business Roundtable, CalPERS and TIAA-CREF) to limit the problems caused by the diffusion of ownership from control. The old phrase about "what's good for GM is good for America" is thus given new life.
In considering the shape of things to come in corporate governance, the biggest question I have is whether this assumption is true? More specifically, are the issues of corporate governance for the next several years going to be solved by looking at how the problems at GM and other large, well-established companies were solved?
I believe the answer to both of these questions is "no." Rather, the shape of things to come in corporate governance is going to be determined not by what occurs (or has occurred) at General Motors or others on the Fortune 100 list, but rather by looking at the problems faced by the massive number of public companies that have nothing particularly in common with GM other than the fact that both have public shareholders.