Why Codes of Governance Work

The McKinsey Quarterly, No. 2, 2004

6 Pages Posted: 21 Apr 2006

See all articles by paul coombes

paul coombes

McKinsey & Co. Inc.

Simon C. Y. Wong

Northwestern University School of Law; London School of Economics; Tapestry Networks

Abstract

Governance codes have proved effective at promoting reform and improving corporate behavior, despite their lack of teeth. Boards in the United Kingdom, for example, are more independent now than they were before the adoption of the Cadbury Code, 12 years ago. Since codes are voluntary, they are more flexible than laws and regulations while still signaling to investors that corporate governance is being taken seriously.

Today, 50 countries have governance codes. But this very success may threaten their future, as they tend to become increasingly detailed and rigid. What's more, the trend toward global standards ignores the significant differences between the needs of developed and developing nations.

Keywords: corporate governance, corporate governance codes, comply or explain

JEL Classification: G34, G39

Suggested Citation

coombes, paul and Wong, Simon C. Y., Why Codes of Governance Work. The McKinsey Quarterly, No. 2, 2004. Available at SSRN: https://ssrn.com/abstract=897422

Paul Coombes

McKinsey & Co. Inc. ( email )

Kurfurstendamm 185
10707 Berlin
Berlin
Germany

Simon C. Y. Wong (Contact Author)

Northwestern University School of Law ( email )

375 E. Chicago Ave
Chicago, IL 60611
United States

London School of Economics

Houghton Street
London, WC2A 2AE
United Kingdom

HOME PAGE: http://www.lse.ac.uk/collections/law/staff/simon-wong.htm

Tapestry Networks ( email )

404 Wyman St.
Suite 225
Waltham, MA 02451
United States

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