Diffusion of regulatory innovations: the case of corporate governance codes

Abstract

Abstract. Since the 1990s, most European countries have adopted detailed corporate governance codes regulating listed companies. Even though the initial codes were designed against the backdrop of a particular jurisdiction, best practice standards have become remarkably similar across legal traditions. This raises the question whether the codes are sufficiently responsive to local conditions, or standard setters are mainly motivated by the concern not to fall behind internationally accepted benchmark standards. The article quantifies central corporate governance provisions and maps their international diffusion. Controlling for differences in legal families and ownership structure, the article shows that the diffusion of best practice standards leads to a statistically significant increase in the likelihood that a foreign standard setter will adopt a broadly similar provision. The findings indicate that codes are often seen as signalling devices, irrespective of whether or not the adopted standards are well aligned with the domestic economic and legal environment.

Founder involvement in CEO turnover

“…On the other hand, the CEO will monitor the decisions of the executive board, which he probably created and recently left. As a consequence, the transition of a former CEO to the supervisory board is a controversial topic in the governance literature (Gerner‐Beuerle, 2017). Many countries introduced a cooling‐off period for former top executive members' as a component of their corporate governance codes of best practice.…”