The Proliferation of Corporate Governance Codes in the Backdrop of Divergent Ownership Structures

Competition & Change (2018)

24 Pages Posted: 28 Dec 2018

See all articles by Umakanth Varottil

Umakanth Varottil

National University of Singapore (NUS) - Faculty of Law

Date Written: December 12, 2018


In the backdrop of the convergence-divergence debate, the goal of this article is to examine the proliferation of corporate governance codes in the light of a single factor, namely varying corporate ownership structures across countries. While such codes emanated and became popular in the United Kingdom (UK) where companies largely display dispersed shareholding, the concept has been disseminated to countries that carry considerably different ownership structures, i.e., mainly concentrated shareholding. This is bound to give rise to incongruities in the implementation of these codes. In order to enunciate the claim made above, the article will consider two aspects that convergence advocates have focused on, namely (i) shareholder empowerment, and (ii) self-regulation. For example, corporate governance codes place considerable emphasis on the structure and independence of the boards of directors of companies as a means to ensure shareholder protection. While this approach is meant to produce results in companies with dispersed shareholding, the same cannot be said of companies with concentrated shareholding where the empowerment of shareholders through director independence or other means would only embolden the already dominant controlling shareholders. Moving to self-regulation, a voluntary code operating on a “comply-or-explain” basis can demonstrate success only if certain factors are present in the jurisdiction where it is applied. Relying upon available empirical evidence, this chapter finds that use of self-regulation in voluntary codes of corporate governance may generate different results depending upon the ownership structures of companies, thereby exhibiting signs of divergence on this count.

Keywords: convergence, divergence, corporate governance codes, 'soft law', ownership structure, dispersed shareholding, concentrated shareholding, shareholder empowerment, board structure, independent directors, self-regulation

JEL Classification: K22

Suggested Citation

Varottil, Umakanth, The Proliferation of Corporate Governance Codes in the Backdrop of Divergent Ownership Structures (December 12, 2018). Competition & Change (2018), Available at SSRN:

Umakanth Varottil (Contact Author)

National University of Singapore (NUS) - Faculty of Law ( email )

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