Evolving 'Rules of the Game' in Corporate Governance Reform

Sydney Law School Research Paper No. 07/47

Vanderbilt Law and Economics Research Paper No. 07-19

PRIVATE EQUITY, CORPORATE GOVERNANCE AND THE DYNAMICS OF CAPITAL MARKET REGULATION, O'Brien, ed., Imperial College Press, pp. 29-54, 2007

International Journal of Corporate Governance, Vol. 1, No. 1, pp. 28-48, 2008

25 Pages Posted: 12 Jul 2007 Last revised: 16 Apr 2008

Jennifer G. Hill

The University of Sydney Law School ; European Corporate Governance Institute (ECGI)

Date Written: July 2007

Abstract

The convergence/divergence debate at the turn of this decade was often underpinned by the assumption of a unified and cohesive common law governance model, which would (or, for path dependence theorists, would not) form the point of convergence of corporate governance regimes around the world.

The international corporate collapses complicated this debate. Common law jurisdictions, such as the US, UK, Australia and Canada introduced a variety of regulatory responses to the corporate scandals. While similar motivations underpinned these reforms, significant differences emerged in terms of focus, structure and regulatory detail. For example, there is an interesting dichotomy between strengthening of shareholder participatory rights versus protection of shareholder interests evident in the reforms. Strengthening of shareholder participatory rights was a significant theme in the UK and Australian reforms, but not in the US reforms. Another tension emerging within the common law reforms relates to principles-based versus rules-based regulation. The shape of these reforms has also affected subsequent corporate law debates in the US, UK and Australia, which address quite different policy concerns.

Scholars have noted that, even where similar motivations underpin various reforms, it is unlikely that their long-term effects will coincide. Another aspect of this long-term regulatory unpredictability is the impact of backlash, recently exemplified in the US by the Paulson Committee report.

The paper argues that post-scandal regulatory developments challenge any assumption of an orderly progression towards a uniform corporate governance model. Rather, they present a dynamic and fluid regulatory picture, with interesting differences of approach emerging within the common law world itself.

Keywords: Comparative corporate governance, regulation, corporate scandals, shareholders, shareholder participation, rules, principles

JEL Classification: G34, G38, K20, K22, M14

Suggested Citation

Hill, Jennifer G., Evolving 'Rules of the Game' in Corporate Governance Reform (July 2007). Sydney Law School Research Paper No. 07/47; Vanderbilt Law and Economics Research Paper No. 07-19; PRIVATE EQUITY, CORPORATE GOVERNANCE AND THE DYNAMICS OF CAPITAL MARKET REGULATION, O'Brien, ed., Imperial College Press, pp. 29-54, 2007; International Journal of Corporate Governance, Vol. 1, No. 1, pp. 28-48, 2008. Available at SSRN: https://ssrn.com/abstract=1000085 or http://dx.doi.org/10.2139/ssrn.1000085

Jennifer G. Hill (Contact Author)

The University of Sydney Law School ( email )

New Law Building, F10
The University of Sydney
Sydney, NSW 2006
Australia
+61 2 9351 0280 (Phone)
+61 2 9351 0200 (Fax)

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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