The Rise of Corporate Governance
19 Pages Posted: 19 Oct 2016 Last revised: 18 Jan 2017
Date Written: October 17, 2016
We provide a quantitative metric for assessing the increase in the importance of and attention to corporate governance over the past two decades. The metric is based on the use of the terms corporate governance or governance by publicly traded companies. In particular, we use Python natural-language processing to examine the number of times such terms were used in the 10,000 annual proxy statements of S&P 500 companies filed between 1994 and 2015. We document a dramatic increase: the percentage of companies that use the term governance increased from below 20% to close to 100%, and the average number of mentions per page increased eightfold — from 0.10 to 0.82. This dramatic increase in the use of governance terms took place during 1994–2004, with especially steep increases in 2003 and 2004 after the 2002 passage of the Sarbanes-Oxley legislation following the Enron and Worldcom scandals, and such use has remained at a high level since then. We conclude by suggesting alternative explanations for the documented rise in governance discourse, and we propose tests for investigating these explanations.
JEL Classification: G30, G38, K22
Suggested Citation: Suggested Citation