ABSTRACT
This chapter explores the institutional elements of governance that form the environment in which companies and boards must operate. The different regional institutional regimes are examined, developing from contrasting historical and cultural experiences. The impact of the institutions of law and regulation, and financial and market institutions in shaping alternative corporate governance systems is considered. The range of control mechanisms that exist in corporate governance is outlined, and the cyclical crises in corporate governance systems is investigated. Finally, the emerging role of the institutional investors is analysed, posing the question of whether the increasing concentration of share ownership in the investment institutions will contribute towards more robust corporate governance. The conclusion reached is that as the power of the institutions expands further they could either become an irresistible force for further economic instability induced by short-termism, and the demand for immediate returns, or they could impress upon markets’ and companies’ longer-term horizons, improved governance and the pursuit of sustainability.
