Corporate Governance 5e

Christine A. Mallin

Chapter 3
Development of Corporate
Governance Codes

© Christine A. Mallin 2016

 Learning objectives

• To understand the key factors affecting the

development of corporate governance codes
• To be aware of the main developments in
corporate governance codes

Mallin: Corporate Governance, 5th edition

 Learning objectives

• To have an awareness of the corporate

governance codes which have been most
influential globally
• To critically assess the characteristics of
corporate governance codes and the mode of
operation

Mallin: Corporate Governance, 5th edition

 Corporate governance in the UK

• Cadbury (1992)
• Greenbury (1995)
• Hampel (1998)
• Above three reports’ recommendations
encompassed in the Combined Code (1998)

Mallin: Corporate Governance, 5th edition

 Corporate governance in the UK

• Turnbull (1999, 2005)

• Myners (2001, 2008)
• Higgs (2003)
• Smith (2003, 2008)
• Above reports’ recommendations largely
incorporated in revisions of the Combined
Code (2003, 2006, 2008)

Mallin: Corporate Governance, 5th edition

 Corporate governance in the UK

• Walker Review (2009)

• UK Corporate Governance Code (2010,
2012, 2014)
• UK Stewardship Code (2010, 2012)
• Davies Report (2011-2015)

Mallin: Corporate Governance, 5th edition

 Corporate governance in the UK

• Recent FRC publications include:

• Guidance on Risk Management, Internal
Control and Related Financial and Business
Reporting (2014)
• Developments in Corporate Governance and
Stewardship 2014 (2015)

Mallin: Corporate Governance, 5th edition

 Corporate governance in the UK

• In addition, the Companies Act 2006; FSA

Reviews 2005 and 2009 (Turner); HM
Treasury 2009 (Walker Review); EU
Directives; US Sarbanes-Oxley; and the
impact of institutional investors and their
representative groups all have influence on
UK corporate governance

Mallin: Corporate Governance, 5th edition

 International Corporate Governance
Influences

• OECD Principles of Corporate Governance

(1999) as revised (2004)
• Covers effective corporate governance
frameworks, rights of shareholders, equitable
treatment of shareholders, role of
stakeholders, disclosure and transparency,
and responsibilities of the board.

Mallin: Corporate Governance, 5th edition

 International Corporate Governance
Influences

• In 2014 OECD issued Principles of Corporate

Governance – Draft for Public Comment
November 2014.
• G20/OECD Principles of Corporate
Governance (2015)

Mallin: Corporate Governance, 5th edition

 International Corporate Governance
Influences

• World Bank
• Global Corporate Governance Forum
• International Corporate Governance Network
• Commonwealth Association for Corporate
Governance
• Basle Committee guidance on corporate
governance for banking organizations (2006,
2010, 2015)

Mallin: Corporate Governance, 5th edition

 International Corporate Governance
Influences
• EU Action Plan on ‘Modernising Company Law and
Enhancing Corporate Governance in the EU’
• EU Amendments to EU 4th and 7th Company Law
Directives
• EU High-Level Group on Financial Supervision in the
EU (de Larosiere) (2009)

Mallin: Corporate Governance, 5th edition

 International Corporate Governance
Influences
• EU Green Paper on EU Corporate Governance
Framework (2011)
• EU (2012), Action Plan: European Company Law and
Corporate Governance - a modern legal framework
for more engaged shareholders and sustainable
companies
• EU (2014) Shareholder Rights Directive

Mallin: Corporate Governance, 5th edition

 US Corporate Governance

• Delaware General Corporation Law

• Employee Retirement Income Security Act
(ERISA) (1974)
• Sarbanes-Oxley Act (2002)
• Commission on Public Trust and Private
Enterprise (2003)
• NYSE Corporate Governance Rules (2003,
2010)

Mallin: Corporate Governance, 5th edition

 NGOs, Public Sector, Non-profit
Organizations and Charities

• Independent Commission for Good

Governance in Public Services - ‘Good
Governance Standard for Public Services’
2005 (Langlands Report)
• NCVO - ‘Good Governance: A Code for the
Voluntary and Community Sector’ (2005,
2010)

Mallin: Corporate Governance, 5th edition