ABSTRACT
This book has examined most key aspects of corporate governance and has traced its development, initially in OECD countries but now also in developing countries, and has sought understanding for the failure of corporate governance in the financial sector which led to the recent economic crisis. This event has revealed key weaknesses in both the process of corporate governance but more critically in the ethical beliefs needed to sustain it. Corporate governance has operated to date largely as a performance check against codes adopted by different countries, not as an evaluation of employee behaviours within and between companies. It has focused on meeting the letter of codes, rather than on the spirit needed to make them meaningful. Much of the damage caused by recent events is less a consequence of failure to observe governance codes, than a pointer to their inadequacy in shaping human behaviour. Codes have failed to address an ethical deficit in society which has encouraged individual and corporate greed, manifested in unrealistic reward structures and, at the extreme, in fraudulent and corrupt practices. Nor have codes focused on building corporate sustainability, in particular through developing the reputation of the business among its stakeholders. Reputation is built on trust, which is a product of human behaviour, not of codes. Both rules-based codes, as in the USA, and principle-based codes, developed out of the Cadbury Report, have been found to be deficient in practice.
