PROF. MARC GOERGEN ON CORPORATE GOVERNANCE

There is a well established literature in economics (see e.g. the study by  Stephen Knack and Philip Keefer ) which shows that country level trust increases economic performance, as measured by GDP growth. These studies measure country trust by the percentage of respondents from the World Values Survey  who agree that "most people can be trusted"; the alternative being that one "need[s] to be very careful when dealing with people".  When it comes to what drives country trust, the literature is somewhat less consistent. Broadly speaking however, country trust is negatively affected by income inequality, ethno-linguistic diversity and the importance of hierarchical religions. Contradicting the "trickle-down" wealth effect, this literature finds that income inequality is bad for economic wealth, via the decrease in country trust which in turn hurts economic growth. Ethno-linguistic diversity is normally measured by the probability that two randomly selec...

Sometimes following so called  best practice  in corporate governance is just not good enough. Or what is currently best practice at the national level could not even be deemed to be good. This might be the case for firms based in emerging markets where corporate governance regulation is weak and the regulation that exists is not necessarily enforced. However, even some firms from developed economies, with relatively stringent regulation and good law enforcement, may feel that their national corporate governance standards are not good enough.  In 2007, while holding a chair in finance at Sheffield University, I organised a conference on contractual corporate governance  with the help of  Prof. Luc Renneboog  from Tilburg University. We defined contractual corporate governance as The ways and means by which individual companies can deviate from their national corporate governance standards by increasing (or reducing) the level of protection they offe...