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Six Components of Corporate Governance That Cannot Be Ignored

44 Pages Posted: 10 Mar 2014 Last revised: 26 May 2014

Joseph A. McCahery

Tilburg University - School of Law; European Banking Center (EBC); Tilburg Law and Economics Center (TILEC); European Corporate Governance Institute (ECGI)

Erik P. M. Vermeulen

Tilburg University - Department of Business Law; Philips Lighting - Legal Department; Tilburg Law and Economics Center (TILEC); Kyushu University - Graduate School of Law

Date Written: March 9, 2014

Abstract

Recent regulatory initiatives that attempt to encourage shareholder engagement, ensure board independence and improve the operation and transparency of corporate groups are of great interest to both academics and practitioners. These initiatives reflect a ‘one-size-fits-all’ approach that may lead to disappointing and counterproductive results and could destabilize and disrupt workable arrangements between management, the board of directors and investors. In this paper, we take a different perspective by showing how there is more to corporate governance than just providing protection to investors and other stakeholders. An important reason for corporate governance is that it also facilitates companies to be innovative, create value and maintain a competitive advantage. To show this, this paper focuses on six components that successful and innovative companies have in common. We support our argument with case studies to show how these companies have found different ways to give substance to the six components.

Keywords: board of directors, CEO, conglomerate, controlling ownership, corporate culture, corporate governance, corporate group, innovation, investor conference, investor relations, one-size-fits-all, shareholder engagement, widely dispersed ownership

JEL Classification: G01, G32, G34, K20, K22, L22, L25, M14, O16

Suggested Citation

McCahery, Joseph A. and Vermeulen, Erik P. M., Six Components of Corporate Governance That Cannot Be Ignored (March 9, 2014). Lex Research Topics in Corporate Law & Economics Working Paper No. 2014-2; European Corporate Governance Institute (ECGI) - Law Working Paper No. 248/2014; Tilburg Law School Research Paper No. 08/2014. Available at SSRN: https://ssrn.com/abstract=2406565 or http://dx.doi.org/10.2139/ssrn.2406565

Joseph A. McCahery

Tilburg University - School of Law; European Banking Center (EBC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands
+31-(0)13-466-2306 (Phone)
+31-(0)13-466-2323 (Fax)

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

European Corporate Governance Institute (ECGI)

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

HOME PAGE: http://www.ecgi.org

Erik P.M. Vermeulen (Contact Author)

Kyushu University - Graduate School of Law ( email )

6-19-1, Hakozaki, Higashiku
Fukuoka, 812-8581
Japan

Tilburg University - Department of Business Law ( email )

Philips Lighting - Legal Department ( email )

Amstelplein 2
Amsterdam
Netherlands

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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