Corporate governance in the UK: Is the comply or explain approach working?

Arcot, Sridhar; Bruno, Valentina; Faure-Grimaud, Antoine

doi:10.1016/j.irle.2010.03.002

Cited by 181 publications

(146 citation statements)

References 5 publications

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“…It also contributes to the existing regulatory debate about the choice of either a statutory regime or a flexible system on some governance issues (McNeil & Li, 2006;Arcot, Bruno & Faure-Grimaud, 2010;Fasterling, 2012), by providing new insights on the risks associated with a flexible system on the key corporate governance issue of INEDs. Moreover, by highlighting the potential implications of assessing directors' independence as compliance with rules, our study has attempted to answer the call of Aguilera and Cuervo-Cazurra (2009) for more careful examination of the content of the codes of corporate governance to help understand the soundness, or otherwise, of their recommendations.…”

Section: Discussion and Concluding Remarksmentioning

confidence: 99%

The remuneration of independent directors in the UK and Italy: An empirical analysis based on agency theory

Mallin

Melis

Gaia

2015

International Business Review

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This study investigates independent non-executive directors' remuneration from an agency theory perspective, taking into account both optimal contracting and managerial power perspectives. Using a sample of 1733 independent non-executive directors' year observations in Italian and UK non-financial firms listed in the period 2007-2009, we find that in both countries independent non-executive directors' remuneration is mainly based on the observable effort they exert and their responsibilities. Our findings also show that independent non-executive directors who do not fulfil formal independence criteria, as stated in the respective national corporate governance codes, seem to be paid more than those who do fulfil such criteria, particularly in the UK.Our findings contribute to the existing literature by providing evidence on the determinants of independent non-executive directors' remuneration in two major European economies and offer insights to policy-makers by questioning the effectiveness of adopting non-binding criteria when assessing non-executive directors' independence.

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Section: Discussion and Concluding Remarksmentioning

confidence: 99%

The remuneration of independent directors in the UK and Italy: An empirical analysis based on agency theory

Mallin

Melis

Gaia

2015

International Business Review

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“…8 7 For additional examples and discussion, see also Arcot and Bruno (2007). 8 The lack of any explanation and a common use of boilerplate explanations has been also recognized by the Financial Reporting Council (FRC) in its # CG Deviations that counts the total number of non-compliances, and it may range between 0 and 8.…”

Section: The Explanations For the Combined Code Non-compliancesmentioning

confidence: 99%

Silence is Not Golden: Corporate Governance Standards, Transparency, and Performance

Arcot,

Bruno

2009

SSRN Journal

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We examine corporate governance and disclosure choices in a regulatory environment suited to address the nature of governance as chosen by individual …rms. In this environment, companies choose whether to comply with governance standards or to report and explain their non-compliance. By using a voluntary regulatory arena, we can observe the impact of di¤erent corporate characteristics on corporate governance choices. We …nd that …rm ownership structure and …rm growth opportunities a¤ect the decision to deviate from regulatory standards. The disclosed reasons for deviation are often obscure and uninformative. Only those companies which adhere to the recommended standards or those with the highest level of disclosure have better performance. Our …ndings suggest that some companies adopt di¤erent corporate governance practices not because of their di¤erent characteristics but to extract private bene…ts.

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“…(ii) Explanations for non-compliance with governance codes remain relatively unexplored in the prior literature, with the exception of MacNeil and Li (2006), Pass (2006), Andres and Theissen (2008), Arcot, Bruno and Faure-Grimaud, (2010), Hooghiemstra (2012), and Seidl et al (2013) whose research is summarised in Table 1. As such, this paper contributes to an understanding of this under-researched area.…”

Section: Introductionmentioning

confidence: 99%

A typology for exploring the quality of explanations for non-compliance with UK corporate governance regulations

Shrives

Brennan

2015

The British Accounting Review

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Citation: Shrives, Philip and Brennan, Niamh (2015) A typology for exploring the quality of explanations for non-compliance with UK corporate governance regulations. The British Accounting Review, 47 (1 Northumbria University has developed Northumbria Research Link (NRL) to enable users to access the University's research output. Copyright © and moral rights for items on NRL are retained by the individual author(s) and/or other copyright owners. Single copies of full items can be reproduced, displayed or performed, and given to third parties in any format or medium for personal research or study, educational, or not-for-profit purposes without prior permission or charge, provided the authors, title and full bibliographic details are given, as well as a hyperlink and/or URL to the original metadata page. The content must not be changed in any way. Full items must not be sold commercially in any format or medium without formal permission of the copyright holder. The full policy is available online: http://nrl.northumbria.ac.uk/policies.html This document may differ from the final, published version of the research and has been made available online in accordance with publisher policies. To read and/or cite from the published version of the research, please visit the publisher's website (a subscription may be required.)A typology for exploring the quality of explanations for non-compliance with UK corporate governance regulations There were 204 (125) non-compliant companies, 537 (253) Code breaches and 438 (208) explanations for non-compliance, an average of 2.6 (2.0) Code breaches and 2.2 (1.7) explanations per non-compliant company. Although compliance increased over the period examined, explanations were found to be of variable quality. Results suggest that companies need to improve the quality of their explanations if they are to be useful to users, notably location, complexity and specificity of explanations. There are also important questions raised about the work of auditors and their apparent silence. Companies are being encouraged to move towards compliance. We argue that this is against the 'comply-or-explain' philosophy which accepts that 'one size does not fit all.'Better quality of explanation is more important than compliance and thus companies may be unwittingly heading in the wrong direction.

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Corporate governance in the UK: Is the comply or explain approach working?

Cited by 181 publications

References 5 publications

The remuneration of independent directors in the UK and Italy: An empirical analysis based on agency theory

The remuneration of independent directors in the UK and Italy: An empirical analysis based on agency theory

Silence is Not Golden: Corporate Governance Standards, Transparency, and Performance

A typology for exploring the quality of explanations for non-compliance with UK corporate governance regulations

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