ABSTRACT
This chapter explores the institutional elements of governance that form the environment in which companies and boards must operate. It considers the impact of the institutions of law and regulation and financial and market institutions in shaping alternative corporate governance systems. The chapter outlines the range of control mechanisms that exists in corporate governance and investigates the cyclical crises in corporate governance systems. It then analyses the emerging role of the institutional investors. The work of Berle and Means examined the profound implications of the separation of ownership and control in a series of publications which had a major impact on corporate governance theory and practice for generations to come. Related closely to the development of law and regulation in corporate governance is the issue of corporate finance. The two principal ways of raising external finance are through bank finance or equity finance by selling shares on the stock market.
