The House of Cards of Corporate Governance: Re-Thinking Transparency and Disclosure of Ownership

The entire architecture of contemporary corporate governance is reminiscent of a house of cards. This particular metaphor invokes two ideas that are important for understanding the current state of the debate surrounding corporate governance. Firstly, it captures the fragile facade of corporate governance today. There is no doubt that a house of cards is impressive, but the removal of one card reveals the fundamental weakness of the whole structure. Beneath the impressive outward facade of contemporary corporate governance, there are similar structural weaknesses.Secondly, the metaphor of a house of cards alludes to the recent Netflix TV show and the Machiavellian intrigues that surround the power-hungry Democratic congressman, and later President, Francis "Frank" Underwood, as portrayed by Kevin Spacey. His self-serving machinations seem designed to expose the gap between the glossy image and base reality of contemporary US politics. The pertinent point in this context is the way in which the discourse and practice of contemporary corporate governance contributes to the creation of a similar false reality surrounding business regulation.In order to clarify the metaphor in more detail, this paper focuses on the issues of "disclosure, transparency and ownership" as examples of how the current framework is broken. The problems with the current approach to transparency and ownership - namely more rules leading to a "one-size-fits-all" approach, herd behavior and standardization - are illustrative of some more general problems with the contemporary regulation of corporate governance. But rather than simply diagnose the problem with the existing framework, this paper develops an alternative regulatory approach that is more likely to be effective. The paper begins by reviewing contemporary discussion on ownership and control (II-III), before discussing the results of an extensive empirical survey of the annual reports of 280 companies in fourteen jurisdictions (IV) and introducing an alternative disclosure model for "new generation firms" (V-VI).