Abstract

Professional management and dispersed ownership have driven the corporation into becoming the major form of business organization, mostly because it is believed that it favours a better allocation of resources. However, the classical theory that shareholder value maximization is the ultimate corporate goal has been challenged by the proponents of stakeholder theory, who argue that the constituencies’ satisfaction is of primary concern for managers and directors. The massive dissemination of a corpus of recommendations, mainly formalized as best practice codes, serves the purpose of controlling the managers’ actions. Corporate governance codes are mostly focused on the methods to reduce conflicts of interests, by way of an optimal arrangement of board composition and managerial supervision; in this context, director independence plays a consistent role and is strongly encouraged. The issuers and promoters of corporate governance codes have always put forward their capacity to preserve or even to generate market value. Our paper contributes to the generous discussion on the development capacity of these codes. Methodologically, we ventured to mix qualitative and quantitative elements, on the basis of critical and comparative approach. Our contribution rests on a selection of very recent corporate governance reports issued by several leading European business groups. Each company’s degree of compliance with the respective national corporate governance code was subject to a critical analysis intended to capture the significant departures from the ‘good practice’ recommendations. As a conclusion, we fear that the current economic crisis will alter the significance of corporate governance. Many large corporations are now seeking to survive rather than prosper; thus ‘good practice’ may become the first victim in the quest to break even. Consequently, how can corporate governance codes contribute to a relative stability of financial markets and maintain a decent level of trust?