Raising Corporate Governance Standards in Response to Corporate Rescue and Insolvency
University of South Australia - School of Law; Durham University - Law School
June 15, 2009
Corporate Rescue & Insolvency, Vol. 2, No. 1, pp. 5-9, 2009
Government responses to the financial crisis have placed a focus upon corporate governance issues; especially now that government has become a major stakeholder in many UK and other banks that have sought public support. Many have argued that as a significant stakeholder in these companies government should place pressure on boards to make them act in a more socially responsible way. But, not surprisingly, government in the UK has been reluctant to do this. This article argues that we are currently witnessing a conflict between the prevailing ideology of unregulated markets (where, at most, a 'principled' or 'light touch' type of regulation has been favoured) and a more rigorous approach to handling issues of corporate governance within the banking sector and other listed companies. The extent to which this faith in the self regulating power of markets has been undermined in recent times has been illustrated by the selfish failure of banks and other financial institutions in failing to lend to each other at critical times in the current crisis. Regrettably, for a number of reasons, most institutional shareholders have been somewhat timid as investors in British companies and as a result boards have remained largely been free to manage companies without much concern for shareholder opinions. The courts have also imposed minimal constraints upon the conduct of directors. This paper briefly reflects upon the haphazard manner in which corporate governance rules have been developed by British courts since the mid to late nineteenth century and argues that not only have courts failed to take judicial notice of changing attitudes within the business community in regard to the development of higher standards of corporate conduct, they have also fallen behind comparable legal developments in other parts of the world, such as in Australia and the United States.
Number of Pages in PDF File: 10
Keywords: banking crisis, corporate governance, insolvency, directors' duties
JEL Classification: K22, G21, G28, G33
Date posted: June 17, 2009 ; Last revised: June 23, 2009
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