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In the wake of the financial scandals of recent years,
such as Enron, it has been argued that the trust in accountability
processes has been undermined. This paper discusses some
of the measures that have been taken to restore this trust
and considers the possible impact of these measures on corporate
governance practice internationally. It finds that measures
taken to restore trust fall into two broad categories -
legislation (e.g., the Sarbanes-Oxley Act) and revision
of codes and voluntary standards (e.g., Combined Code in
2003 and Organization for Economic Corporation and Development
(OECD) Principles of Corporate Governance in 2004). The
findings suggest that it is too early to judge the efficacy
of either approach. The legislative route has impacted exchange
competitiveness and poses a threat to the development of
common capital market platforms. It further indicates that
a universal definition of corporate governance will continue
to be difficult to arrive at as long as contextual needs
vary as significantly as they do across nations.
The term `corporate governance' has become an integral
aspect of business vocabulary in the last decade. This is
in part because of the high profile performance collapses
of established firms once considered to be leaders in their
various industries, such as Enron (US), WorldCom (US), Parmalat
(Italy), Royal Ahold (Netherlands), Barings Bank (UK), One
Tel (Australia), Dabhol (India), National Commercial Bank
and the Workers' Bank (Trinidad and Tobago), ABB (Sweden),
and Tyco (US) among others.
Such failures coincided with the puncture of the Internet
bubble, which itself caused considerable corporate failure.
While the end results were often the same however (corporate
failure), the causes of decline were very different. As
regards governance, illegal and duplicitous practice and
significant errors of omission and commission led to unsustainable
positions for companies so afflicted. The Internet bubble,
by contrast, was caused in large part by irrational exuberance
which was eventually deflated by sharp market corrections.
The OECD notes that in both cases, the catastrophic outcomes
could have been avoided or better anticipated had appropriate
governance principles been adhered to (Witherell, 2002).
It is, therefore, appropriate that we consider what exactly
we mean by the term `corporate governance'. The expression
has been employed and studied differently in the last decade,
suggesting that a universally accepted definition might
yet emerge (Cheffins, 1999). `Governance' as a subject area
and descriptive term has been employed in the literature
at the level of the transaction, team (Kaufman and Englander,
2005), resource (Mayer, 2006), firm (Monks and Minow, 2003),
policy (Clarkham 1998 and Griffiths and Zammuto, 2005),
market (Witherell, 2002 and Sasseen and Weber, 2006) and
nation (Macdonald 2000 and Griffiths and Zammuto, 2005)
using a multiplicity of theoretical perspectives (Mallin,
2004). The specific concept of corporate governance has
a cross cutting nature that also defies organizing principles
of academia, in that it has implications for law, finance
and accounting, general business, leadership, entrepreneurship,
etc., and so defies dominance by any single subject area
(Cheffins, 1999). An implicit understanding and shared perspective
on what corporate governance is, therefore, should not be
assumed.
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