Publication: Uses and Limits of Conventional Corporate Governance Instruments : Analysis and Guidance for Reform - Part One
Date
2009-06
ISSN
Published
2009-06
Author(s)
Wong, Simon C.Y.
Abstract
This private sector opinion seeks to
demonstrate that while conventional governance mechanisms
can be highly effective in many situations, they are not
appropriate remedies in all contexts. In some cases, the
prescribed medicine actually exacerbated the governance
ailment that it was designed to cure. To illustrate, the
rapid growth of executive compensation persisted and in some
markets, accelerated after the introduction of individual
executive pay disclosure. In the financial sector, the shift
toward a board dominated by independent directors perceived
by many to be key for effective monitoring of management
ultimately proved to be its Achilles' heel as weak
industry knowledge meant that non-executive directors were
unable to pick up on warning signs of imprudent risk taking
by management. This section will examine how the core set of
corporate governance instruments comprising transparency,
independent monitoring, economic incentives, shareholder
rights, and financial liability has been applied to
different issues and contexts. It will discuss the extent to
which these mechanisms have been effective and analyze the
limits of their application by surveying cases where they
have failed to work as intended. In addition, it will set
forth proposals to improve the use of specific tools and
suggest how certain governance issues should be addressed.
Citation
“Wong, Simon C.Y.. 2009. Uses and Limits of Conventional Corporate Governance Instruments : Analysis and Guidance for Reform - Part One. Private Sector Opinion; No. 14. © World Bank, Washington, DC. http://openknowledge.worldbank.org/entities/publication/07569d67-0566-59a5-95cb-013eb617eb2e License: CC BY-NC-ND 3.0 IGO.”