Issues of legitimacy and accountability affecting corporate governance codes
22/2007 , p 20..35
Author(s):
Voicu-Dan DRAGOMIR
Keywords:
Corporate governance, stakeholder theory, financial markets, conceptual framework, accountability
Abstract:
Corporate governance codes are a hot topic, especially since Directive 2006/46/EC has imposed annual compliance disclosure for European listed groups. However, the degree and quality of corresponding accountability mechanism are still controversial, especially for member countries that are seeking to adopt a corporate governance regime suitable for their needs and corporate culture.
British codes starting with the Cadbury Report (1992) are venerable market-targeted documents that have reached an uncontestable degree of maturity. However, are there any dangers behind their ‘comply or explain’ mechanism?
Firstly, the paper analyses issues of legitimacy concerning the codes themselves and particular deviations implemented by each company. A critique of the compliance mechanism is devised in the light of the rights-based literature. Secondly, the social philosophy underpinning governance codes is investigated in the context of the utilitarian/individualist dispute. The findings may come as a surprise for advocates of British accountability: any reflection on the morality of the boards and the support of the stakeholder society are abolished in favor of the old and plain shareholder value maximization doctrine.
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