Published: 28 February 2013 at 11:19
Anglia Ruskin academic proposes updated definition of corporate governance
A new definition of corporate governance to tackle the potential dangers posed by the “ownerless company” has been proposed by an Anglia Ruskin University academic.
Writing in his latest book Theory and Practice of Corporate Governance, published on 28 February by Cambridge University Press, Stephen Bloomfield states that the financial collapse of 2007-08 was partly brought about by the governance codes that control the behaviour of listed companies and that the current definition, taken from the 1992 Cadbury Report, is no longer fit for purpose.
The corporate governance reforms of the 1990s, particularly those contained in the Greenbury Report, accelerated the trends to short-termism. By formally establishing a link between shareholders’ returns and the pay of managers expressed as bonuses, Bloomfield claims that the corporate governance codes have built instability into the system.
The book goes on to argue how this link, supposedly monitored by shareholders but actually determined by managers of the large companies, has strengthened the fixation on short-termism and allows the managers to inflate their own rewards at the expense of the security and safety of the businesses they are responsible for.
Bloomfield, Director of the Corporate Governance Unit at Anglia Ruskin’s Lord Ashcroft International Business School, said:
In his book Bloomfield suggests a number of changes, including breaking down the concept of corporate governance into four categories, which would better enable future problems to be highlighted and managed.
These are “procedural governance”, which deals with matters of share ownership and shareholders rights, and is regulated by law; “behavioural governance”, which is the way that directors approach their tasks and is controlled by regulation and codes; “structural governance”, which is the way that companies behave under the guidance of the board of directors and is determined by ethics and morality; and “systemic governance”, which is the operation of oversight by regulators and the political system.