Thinking Outside the Box - Eliminating the Perniciousness of Box-Ticking in the New Corporate Governance Code

62 Pages Posted: 13 May 2019 Last revised: 25 Jan 2021

See all articles by Bobby V. Reddy

Bobby V. Reddy

Faculty of Law, University of Cambridge

Date Written: July 23, 2018

Abstract

On 16 July 2018, a new corporate governance code was published. As with previous iterations, it applies on a ‘comply-or-explain’ basis, whereby companies are required to either comply with provisions or explain reasons for non-compliance. However, the new code substantially simplified the previous version of the code in an attempt to attenuate the process of ‘box-ticking’. Box-ticking manifests itself in two ways: firstly, by companies complying with the letter rather than the spirit of the provisions, and, second, by companies not utilising the inherent flexibility to implement the optimum firm-specific governance structures by explaining rather than complying. This article will elucidate the history of box-ticking, and the reasons why companies succumb thereto, since Adrian Cadbury pioneered the concept of ‘comply-or-explain’ in 1992, before proposing an exclusively principles-driven approach to the corporate governance code which would alleviate box-ticking and fulfill the original aspirations of Cadbury over a quarter of a century ago.

Keywords: Corporate Governance Code, Box-Ticking, Listing Rules, Comply or Explain, Compliance

JEL Classification: G30, G32, G34, G38, K22

Suggested Citation

Reddy, Bobby, Thinking Outside the Box - Eliminating the Perniciousness of Box-Ticking in the New Corporate Governance Code (July 23, 2018). 82 Modern Law Review (2019) 692, University of Cambridge Faculty of Law Research Paper No. 3/2020, Available at SSRN: https://ssrn.com/abstract=3357762 or http://dx.doi.org/10.2139/ssrn.3357762

Bobby Reddy (Contact Author)

Faculty of Law, University of Cambridge ( email )

10 West Road
Cambridge, CB3 9DZ
United Kingdom

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