How important is corporate governance to an organisation, to global markets, and to society in general? As with most such questions, not everyone agrees. Many see good corporate governance practices as being of fundamental importance, not only to the efficient functioning of corporations and businesses, but to the validity of the corporation and the role of ‘business’ itself within modern society. At the other end of the spectrum, some see the increasing body of corporate governance laws and regulations as creating a burdensome box-ticking exercise, a series of red-tape rules (or indeed guidelines) that businesses – which, after all, are there to make money – have to comply with in order to avoid bad publicity. Inevitably, there is a large constituency that stands somewhere in between. And, of course, many people (including a large number of legal practitioners) have probably never really thought about it.
There is no over-arching view on that debate within this publication, not least because perspectives on corporate governance differ from jurisdiction to jurisdiction. However, the events (and non-events) of 2020-21 have pushed these issues more firmly into the spotlight than ever. Public and private companies in many parts of the world are under increasing pressure from some quarters to promote short-term interests over long-term value. At the same time, governments, regulators, investor associations and major corporations are increasingly focussing (and wish to be seen to be focussing) on creating long-term value, protecting the interests of employees and other stakeholders as well as shareholders, and promoting Environmental, Social and Governance (ESG) goals as a matter of policy. Sustainability and social responsibility are playing an ever more significant role in investment decisions. The debate will go on.
What do we mean by “corporate governance”? There is no universally accepted definition, but there is a general coalescence around the “what”, the “how”, the “who” and the “why”. What legal entities can be used for business in a particular jurisdiction? How are those entities operated and owned? Who manages them and who will be held accountable for any failures and shortcomings (and to whom)? Finally, and more nebulously, why do these entities exist – for what purpose are they created and operated?
Corporate governance rules and regulations in different jurisdictions exist to provide answers to each of these questions. They are therefore a key part of the legal landscape of every country where people come together to do business. So, wherever you sit within the ‘most important rules’ vs ‘necessary evil’ debate, we hope that this guide will serve as a useful introduction to the key legal aspects of corporate governance in each jurisdiction.