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Explaining the Production and Dissemination of Global Corporate Governance Standards: A Law and Economics Approach to Corporate Governance Codes as a Global Law-Making Technology

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Global Phenomena and Social Sciences

Abstract

The chapter questions the production and dissemination of global standards of corporate governance across OECD countries in the recent decades. It argues that convergence around similar corporate governance principles—defined in broad terms and at a high level of generality—was made possible due to deep changes in law-making technologies occurring over the same period. In the recent decades, traditional legal technologies became inefficient in meeting the new legal needs of economic agents generated by economic globalization and the increase of cross-border investment. In the field of corporate governance, this resulted in increased reliance on soft law, and especially corporate governance codes. We argue that the specific features of codes as a legal technology (characterized by a self-regulatory production process, legal standards rather than detailed rules, strong reliance on the comply-or-explain principle, and the use of non-legal sanctions) may have facilitated the emergence and dissemination of global corporate governance standards across OECD countries.

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Notes

  1. 1.

    The other flip of the coin is however that in some situations, self-regulation of corporate governance rules may result in the capture of rules by interest groups able to influence and bias the legal production process and its outcomes in favor of their own private interests (See Stigler’s theory of capture 1971 and Stigler and Friedland 1962).

  2. 2.

    However, some countries promote a rather different conception and use of codes that are enshrined in the legislation and are therefore mandatory—for instance, this is the case in the United States with the 2002 Sarbanes-Oxley Act.

  3. 3.

    However, one should not overestimate the opposition between legal and non-legal sanctions . In practice, legal and non-legal sanctions usually go together, the former being frequently used to reinforce the latter. According to Hopt (2011, 15), this combination provides “an interesting technique that lies between self-regulation and regulation by law, and may be described as ‘self-regulation in the shadow of the law’”.

  4. 4.

    In practice, market sanctions may nevertheless lack effectiveness. In particular, market agents may lack sufficient information to actually monitor firms’ choices of governance and performance (Goncharov et al. 2006; Weir and Laing 2000).

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Authors and Affiliations

  1. Faculté de droit, sciences économiques et de gestion, BETA—CNRS UMR 7522, Université de Lorraine, 13, place Carnot, CO no 026, 54035, Nancy cedex, France

    Sophie Harnay

  2. EconomiX, Université Paris Nanterre, Nanterre, France

    Sophie Harnay

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  1. Sophie Harnay
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Correspondence to Sophie Harnay .

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Editors and Affiliations

  1. University of Lyon, Lyon, France

    Jean-Sylvestre Bergé

  2. Faculté de droit, sciences économiques et de gestion, BETA—CNRS UMR, University of Lorraine, EonomiX, Université Paris Nanterre, France

    Sophie Harnay

  3. IAE Lyon, Lyon University, Lyon, France

    Ulrike Mayrhofer

  4. Department of Anthropology, Université Lyon 2, Lyon, France

    Lionel Obadia

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Harnay, S. (2018). Explaining the Production and Dissemination of Global Corporate Governance Standards: A Law and Economics Approach to Corporate Governance Codes as a Global Law-Making Technology. In: Bergé, JS., Harnay, S., Mayrhofer, U., Obadia, L. (eds) Global Phenomena and Social Sciences. Springer, Cham. https://doi.org/10.1007/978-3-319-60180-9_5

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