Corporate Governance Codes: Are there any Dangers Behind their Comply-or-Explain Mechanism?

By Voicu D. Dragomir.

Published by The International Journal of Knowledge, Culture and Change Management

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Article: Print	$US10.00
Article: Electronic	$US5.00

British codes, starting with the Cadbury Report (1992), are venerable market-targeted documents that have reached an uncontestable degree of maturity. Are there any dangers behind their ‘comply or explain’ mechanism? It can be argued that the ties that bind accountability / input legitimacy / regulation together are unbreakable. A system cannot be rendered accountable unless the legitimacy it claims is founded on the integrity of the decision-making process. On the other hand, decision-making is regulated in order to prevent abuse. Governance codes can be seen as a tradeoff: they promote a system that involves output legitimacy, within a framework of accountability and strictly designed institutions. In other words, the fantasy world of governance codes is populated with enemy races – shareholders and stakeholders – fighting for supremacy. Corporate governance codes appear as politically polluted documents, comprising ambiguous and contradictory propositions. In our opinion, only the Cadbury code has come to express a unitary and judicious vision on the universe of corporate governance. The dissolution of accountability, as witnessed by the reports issued subsequently, may well be triggered by the due process of ‘public consultation’ of corporations that have feared their rights and liberties menaced by new layers of regulation.

Keywords:	Corporate Governance, Stakeholder Theory, Financial Markets, Conceptual Framework, Accountability

International Journal of Knowledge, Culture and Change Management, Volume 8, Issue 1, pp.25-34. Article: Print (Spiral Bound). Article: Electronic (PDF File; 615.936KB).

Prof. Voicu D. Dragomir

Assistant lecturer, Ph.D. student, The Department of International Accounting, The Faculty of Accounting and Management Information Systems, The Academy of Economic Studies of Bucharest, Romania

I became a member of the faculty of the Academy of Economic Studies of Bucharest, Romania, in 2006 – at the same time being admitted in the doctoral programme. My thesis and field of interest is centered on corporate governance in conjunction with business ethics, accountability and corporate social responsibility. My philosophical formation has led me to investigate thoroughly areas concerning European regulatory instruments and non-binding legislation, such as corporate governance codes and other codes of conduct. Although very young, only 24 years old, I have already presented papers at five international conferences, both in and outside Romania, and have had four articles published in national journals.

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