Corporate Governance Reform: Britain as an Exporter

Britain has a distinguished pedigree as an exporter of legal concepts and innovations but its influence has diminished in recent years. The pattern with respect to company law has been representative of these broader trends. Still, the possibility exists that the United Kingdom (UK) will become a reference point for other jurisdictions in the corporate governance area. This essay considers whether this is likely to occur. Two sets of initiatives are analysed. First, there is a discussion of the work done by three corporate governance panels which issued reports during the 1990s, these being the Cadbury, Greenbury and Hampel Committees. An innovative feature of the work done by these committees was the use of a "Code of Best Practice" approach. Each committee issued a succinct Code, key elements of which the London Stock Exchange subsequently adopted as part of its listing rules. The "Code of Best Practice" approach is proving to be highly influential outside the UK. In a substantial number of countries, committees studying corporate governance issues have issued best practice codes. Often, stock market officials and securities regulators have followed up by amending rules governing publicly traded companies. Second, proposals designed to advance the cause of "stakeholders" affected by corporate activity are considered. Britain's Department of Trade and Industy is currently undertaking a fundamental review of company law and its work is being co-ordinated by a Steering Group. In a consultation document released in 1999, the Steering Group considered the "pluralist" approach to the company. Under this approach, companies are supposed to serve the interests of a number of groups rather than treat the priorities of shareholders as being overriding. The Steering Group discussed various changes that could be made to align the law with the pluralist conception of the company. These proposals seem unlikely to have a major impact outside the UK. Since stakeholder issues have already been widely debated in continental Europe and in North America, the Steering Group's work is insufficiently novel or innovative to attract much attention.