Food for Thought

• Date: 01 March 2016
• Published date: 01 March 2016
• DOI: http://doi.org/10.1002/bl.30042

MAR.–APR. 2016 5

“The culture of blame

is a major barrier to the

openness required if

sentinel events are to be

reported, lessons learned

and safety improved.

The system of clinical

negligence is part of this

culture of blame. It should

be abolished. It should

be replaced by effective

systems for identifying,

analysing, learning from

and preventing errors and

other sentinel events.”

The Report of the Public Inquiry

into children’s heart surgery at the

Bristol Royal Infirmary 1984–1995:

Learning From Bristol (Cm 5207).

The Stationery Office. July 2001.

http://webarchive.nationalarchives.

gov.uk/+/www.dh.gov.uk/en/

Publicationsandstatistics/Publications/

PublicationsPolicyAndGuidance/

DH_4005620

FOOD FOR THOUGHT

corporate ownership—concentrated or

dispersed, relative proportions of for-

eign and institutional investors.

Furthermore, I found that regula-

tory reform in corporate governance

is significantly influenced by changes

to international benchmark models of

good governance.

It is remarkable that, although the

probability of one country adopting a

particular regulatory mechanism in a

corporate governance code increases

the more other countries have adopted

a similar term, the amount of legal

variance between European countries’

corporate governance regimes has not

significantly diminished. So in spite of

much cross-border legal learning, the

convergence of corporate governance

regimes, defined formally as the lower

variance of legal variables over time,

has not yet occurred in Europe.

Caroline: How influential are corpo-

rate governance codes on practice?

Carsten: My research did not cover

this, but certainly the number of codes

is increasing around the world. The

European Corporate Governance Insti-

tute’s (ECGI) website3 makes available

the full texts of corporate governance

codes, principles of corporate gov-

ernance, and corporate governance

reforms both in Europe and elsewhere.

The United States does not have

one major recognized corporate gover-

nance code, although they do have the

New York Stock Exchange listing rules.

Generally, the United States operates

in a more rules-based manner when it

comes to corporate governance and

accounting. Codes tend to be more

influential in other parts of the world

where guidance based on principles is

the preferred approach.

There is evidence that the com-

pliance rate with the UK Corporate

Governance code is very good when

compared with that of other countries.

We do know, from an annual survey

of compliance by FTSE 350 compa-

nies carried out by Grant Thornton,4

that, in 2014, 94 percent of companies

complied with all but one or two of

the Code’s 54 provisions, while 61 per-

cent reported full compliance with the

what good corporate governance is

and isn’t.

Corporate governance codes there-

fore seem to be seen as important sig-

nals of best practice. Corporations in

every country want to send out signals

that they are well governed—good

places to do business—and having cor-

porate governance codes that measure

up to those of other respected jurisdic-

tions is one way of doing this.

One example of this in action is that

the whole idea of “independent direc-

tors,” which was originally proposed

by the Cadbury Committee,5 which

Code—an increase of 4 percent over

2013.

On the other hand, the relationship

between high rates of compliance

with corporate governance codes

and firm performance is still unclear.

And that link is never going to be

easy to identify given the difficulty of

separating out all the other factors

that influence performance. However,

there is some evidence showing an

association between compliance with

corporate governance codes and the

proper functioning of certain corpo-

rate governance mechanisms within

firms, such as compliance with disclo-

sure regulation.

Caroline: Do you have any opinions

or questions about the validity of the

determinants of corporate governance

codes that you found?

Carsten: It is heartening to find

that, holding all other factors constant,

group politics—one group trying to

create corporate governance norms

to advantage their interests over oth-

ers’ interests—is not what seems to be

happening.

What does seem to be happen-

ing, holding all other factors constant,

is that the more countries that have

adopted a particular code provision,

the more likely that other countries

will adopt the same provision when

introducing or revising their codes.

Therefore, what seems to be impor-

tant to authoring committees is what

are the common perceptions in the

wider world beyond themselves about

The relationship

between high rates

of compliance with

corporate governance

codes and firm

performance is still

unclear.

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