Chapter 5 What’s Wrong with Corporate Governance ‘Best’ Practices?

CORPORATE GOVERNANCE, H. Kent Baker, Ronald Anderson, eds., John Wiley & Sons Inc., New York, 2010

26 Pages Posted: 18 Nov 2009

See all articles by Shann Turnbull

Shann Turnbull

International Institute for Self-Governance; Sustainable Money Working Group; New Garden City Alliance

Date Written: November 16, 2009

Abstract

This chapter critiques corporate governance practices widely promoted as being “best” for Publicly Traded Corporations (PTCs). The criteria used to identify good governance are those that minimize the involvement of Regulators or Law Makers with PTCs. The different drivers of corporate evolution in Europe and the United States explain the development of some of the counterproductive practices in Anglophone countries. These include directors obtaining inappropriate powers and conflicts of interests for directors and auditors. These intrinsically flawed practices have become enshrined as “best” practices in governance codes, governance metrics, regulations, securities exchanges, and the law. This chapter uses the natural laws of requisite variety, identified by mathematicians who founded the science of governance in the 1940’s to explain why current practices are not “best”. Natural laws explain why the communication and control architecture of PTCs and corporate regulators do not permit executives, directors, and regulators to directly monitor or control on a reliable basis the complex workings of modern firms without co-regulators.

Keywords: Audit conflicts, Director conflicts, Power, Network governance, Self-governance

JEL Classification: G34, G38, H11, K22, M14, P11

Suggested Citation

Turnbull, Shann, Chapter 5 What’s Wrong with Corporate Governance ‘Best’ Practices? (November 16, 2009). CORPORATE GOVERNANCE, H. Kent Baker, Ronald Anderson, eds., John Wiley & Sons Inc., New York, 2010 , Available at SSRN: https://ssrn.com/abstract=1506954

Shann Turnbull (Contact Author)

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