Addressing Accountability Failures of Public Listed Companies under Modern Corporate Governance Codes: Projected Goals, Failures and Mistreatments
- March 8, 2019
- Posted by: RSIS
- Category: Law
International Journal of Research and Scientific Innovation (IJRSI) | Volume VI, Issue II, February 2019 | ISSN 2321–2705
Md. Omar Faruque Munshi
Department of Law, Uttara University, Dhaka, Bangladesh
Abstract— This paper in its legal theoretical analysis examines the success, failures and mistreatments of modern Corporate Governance Codes of companies. The Codes of most countries followed the common pattern of recommendations, pervasively expanded globally, in addressing the accountability failures of modern companies. The analyses of this paper find that the most important mistreatments under the Corporate Governance Codes stems from the failure to consider the presence of divergent interest-centric shareholder groups in modern public listed companies, who are fundamentally different in character in respect of their attachment and detachment to the actual business of the company and share market dynamism— the diffused ‘free-rider public investors’ who are loosely connected to the company’s substantial business, and the ‘entrepreneur shareholders’. Thus the modern public listed companies can no longer be equated with the classical companies. Also there are debenture holders, creditors, suppliers, dealers, employees, etc. The Codes’ defect is a ‘general accountability’ framework, not designed upon the interest-specific concerns and oversight performed by/for those different groups. Further that, the codes provisions in an attempt to bring accountability produced a conflicting Board structure by recommending the board’s composition with two types of directors, ‘executives’ and ‘non-executives/supervisory/monitoring’, whereas nothing is provided to address this conflict perspective. This paper intends to provide insight in formulating the accountability program under the Codes upon pragmatic treatments to the issues of modern companies, and ways for removing its shortcomings.
Keywords: Accountability of Companies, Corporate Governance Codes, Company Law Reformations, Modern Companies, Protection of Investors, Public Listed Companies.
A broad comprehensive definition of the term ‘corporate governance’ refers to the ‘corporate functional mechanism’ covering a broad set of relationships between different corporate actors, such as, shareholders, directors, auditors, corporate regulators, as well as corporate employees, suppliers, dealers and the society at large.