Uses and Limits of Conventional Corporate Governance Instruments : Analysis and Guidance for Reform - Part One

This private sector opinion seeks to demonstrate that while conventional governance mechanisms can be highly effective in many situations, they are not appropriate remedies in all contexts. In some cases, the prescribed medicine actually exacerbated the governance ailment that it was designed to cure. To illustrate, the rapid growth of executive compensation persisted and in some markets, accelerated after the introduction of individual executive pay disclosure. In the financial sector, the shift toward a board dominated by independent directors perceived by many to be key for effective monitoring of management ultimately proved to be its Achilles' heel as weak industry knowledge meant that non-executive directors were unable to pick up on warning signs of imprudent risk taking by management. This section will examine how the core set of corporate governance instruments comprising transparency, independent monitoring, economic incentives, shareholder rights, and financial liability has been applied to different issues and contexts. It will discuss the extent to which these mechanisms have been effective and analyze the limits of their application by surveying cases where they have failed to work as intended. In addition, it will set forth proposals to improve the use of specific tools and suggest how certain governance issues should be addressed.

Bibliographic Details

Main Author:	Wong, Simon C.Y.
Language:	English
Published:	World Bank, Washington, DC 2009-06
Subjects:	ACCESS TO INFORMATION, ACCOUNTABILITY, ACCOUNTING, ACCOUNTING RULES, ACCOUNTING STANDARDS, ACQUISITIONS, AGENCY PROBLEMS, ARTICLES OF ASSOCIATION, ASSET MANAGEMENT, AUDIT COMMITTEE, AUTHORITY, BAD FAITH, BANK HOLDING, BANKS, BOARD MEETINGS, BOARD MEMBERS, BOARD MEMBERSHIP, BUSINESS JUDGMENT RULE, BUSINESS UNIT, BUSINESS UNITS, CAPITAL MARKET, CAPITAL MARKETS, CAPITAL REQUIREMENTS, CASH FLOW, CASH FLOWS, CD, CEO, CEOS, CHAIRMAN AND CEO, CHIEF EXECUTIVE, CODE OF CONDUCT, COLLECTIVE, COLLECTIVE ACTION, COMMERCIAL RELATIONSHIPS, COMPANY, COMPANY INFORMATION, COMPANY LAW, COMPENSATION POLICY, COMPETITORS, CONFLICT OF INTEREST, CONFLICTS OF INTEREST, CONGLOMERATE, CONSENSUS, CONTROLLING SHAREHOLDERS, CORPORATE EXECUTIVES, CORPORATE GOVERNANCE CODES, CORPORATE GOVERNANCE REFORM, CORPORATE GOVERNANCE REFORMS, CORPORATE GOVERNANCE REGIME, CORPORATE GOVERNANCE REGIMES, CORPORATE GOVERNANCE SYSTEM, CORPORATE OFFICERS, CORPORATE PERFORMANCE, CORPORATE SCANDALS, CORPORATION, CORPORATIONS, COUNTRY TO COUNTRY, CREDIT RATING, CREDIT RATING AGENCIES, CREDIT RATINGS, DEBT, DEBT ISSUES, DECISION-MAKING, DEPOSIT, DERIVATIVE, DERIVATIVES, DEVELOPING MARKETS, DIRECTOR LIABILITY, DISCLOSURE, DISCLOSURE REQUIREMENT, DISCLOSURE REQUIREMENTS, DISSEMINATION OF INFORMATION, DIVIDENDS, ECONOMIC CRISIS, ECONOMIC DEVELOPMENT, ECONOMIC REFORM, ECONOMIC STRESS, EMERGING MARKET, EMERGING MARKETS, EMPLOYMENT, ENABLING ENVIRONMENT, ENTREPRENEURSHIP, EQUITY HOLDERS, EQUITY MARKETS, ESCROW, EXCHANGE COMMISSION, EXPANSION, EXPOSURE, FAIR PRICE, FAIR VALUE, FIDUCIARY OBLIGATIONS, FINANCE CORPORATION, FINANCIAL ADVISER, FINANCIAL CRISES, FINANCIAL CRISIS, FINANCIAL HEALTH, FINANCIAL INCENTIVES, FINANCIAL INSTITUTION, FINANCIAL INSTITUTIONS, FINANCIAL RESULTS, FINANCIAL SECTOR, FINANCIAL SERVICES, FINANCIAL STATEMENTS, FINANCIAL SYSTEM, FIRM SIZE, FIRMS, FOREIGN PORTFOLIO, FOREIGN PORTFOLIO INVESTORS, FRAUD, GENERAL PARTNERSHIP, GLOBAL CORPORATE GOVERNANCE, GLOBAL INVESTOR, GLOBAL INVESTORS, GOVERNANCE ARRANGEMENTS, GOVERNANCE GUIDELINES, GOVERNANCE ISSUES, GOVERNANCE MECHANISMS, GOVERNANCE PRACTICES, GUARANTOR, HOLDING COMPANY, HOLDINGS, HUMAN RESOURCES, INCOME, INCOME TAXES, INDEPENDENT BOARDS, INDEPENDENT DIRECTOR, INDEPENDENT DIRECTORS, INDIVIDUAL COMPANIES, INDIVIDUALS, INFORMATION ASYMMETRY, INSIDER DEALING, INSOLVENCY, INSOLVENCY REFORM, INSTITUTIONAL INVESTOR, INSTITUTIONAL INVESTORS, INSTITUTIONAL SHAREHOLDER, INSTRUMENT, INSURANCE, INSURERS, INTERNATIONAL FINANCE, INVESTEE COMPANIES, INVESTMENT BANKING, INVESTMENT BANKS, INVESTMENT DECISION, INVESTMENT DECISIONS, INVESTOR PARTICIPATION, ISSUANCE, JURISDICTIONS, LAWYER, LAWYERS, LEGAL FRAMEWORK, LEGISLATION, LENDING DECISIONS, LIMITED, LIMITED LIABILITY, LIMITED LIABILITY PARTNERSHIP, LIQUID MARKETS, LISTED COMPANIES, LOW-INCOME COUNTRIES, MAJORITY VOTE, MAJORITY VOTING, MARKET RISK, MATURITY, MERGERS, MINORITY INVESTORS, MINORITY SHAREHOLDERS, MOTIVATIONS, NUMBER OF SHAREHOLDERS, OUTSIDE INVESTORS, OWNERSHIP STRUCTURE, OWNERSHIP ­ RIGHT, PARTY, PORTFOLIO, PORTFOLIOS, PROPRIETARY, PUBLIC EQUITY, PUBLIC INFORMATION, QUALITY ASSURANCE MECHANISM, RAPID GROWTH, REGULATORY ENVIRONMENT, REPRESENTATIVES, RESERVE, RETURN, RISK EXPOSURES, RISK FACTORS, RISK MANAGEMENT, RISK PROFILE, SAVINGS, SCANDAL, SECURITIES, SECURITIES REGULATORS, SHARE OPTIONS, SHARE PRICE, SHARE VALUE, SHAREHOLDER, SHAREHOLDER ACTIVISTS, SHAREHOLDER BASE, SHAREHOLDER INTERESTS, SHAREHOLDER MEETINGS, SHAREHOLDER RIGHTS, SHAREHOLDERS, SHAREHOLDERS MEETING, SHAREHOLDERS MEETINGS, SMALLER COMPANIES, SPONSORS, STAKEHOLDERS, STOCK OPTIONS, SUBSIDIARY, SUPPLIERS, SYSTEMIC RISK, TAX, TAX LAW, TRADING, TRANSACTION, TRANSITION ECONOMIES, TRANSPARENCY, TRUST FUND, TURNOVER, UNDERWRITERS, UNION, WITHDRAWAL,
Online Access:	http://documents.worldbank.org/curated/en/2009/06/11503811/uses-limits-conventional-corporate-governance-instruments-analysis-guidance-reform-part-one https://hdl.handle.net/10986/11114
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