Department of Trade and Industry project

Key drivers of ‘Good’ Corporate Governance & appropriateness of policy responses

IBCM Group members are currently involved in a research project commissioned by the Department of Trade and Industry “Identifying the Key Drivers of ‘Good’ Corporate Governance and the Appropriateness of Policy Responses”.

This Project will help to assess previous regulatory initiatives, create additional understanding around current and future policy options, and inject innovation and focus into public policy regarding a broad range of corporate governance issues.

Specifically, the objectives of the project are:

Concerning ‘good’ corporate governance:
  • Identify key determinants of good corporate governance drawing on a broad and integrated perspective of governance issues.
  • Understand the social science evidence regarding these determinants in order to increase the evidence base upon which public policy is made.

Concerning recent public policy initiatives:
  • Identify whether and how key drivers of good corporate governance are addressed within recent public policy initiatives.
  • Evaluate the extent to which those policies successfully support the drivers of good corporate governance.

Concerning implementation:
  • Identify the areas that the DTI would need to target in order to close gaps in existing regulation.
  • Understand the strengths and deficiencies in the implementation and enforcement of existing regulatory frameworks.

At the heart of our approach is a deep understanding of multiple dimensions of corporate governance, including economic, strategic, social and legal factors associated with corporate governance mechanisms, and their firm-level and macro-economic implications.

The main objectives of the first stage of the Project are
  1. to review corporate governance literature,
  2. to understand to what extent a “good” corporate governance framework suggested by the literature can be usefully deployed in the process of policy evaluation, and
  3. to see what are the main drivers of “good” corporate governance, and how can they be translated into the policy evaluation benchmarks.

On the basis of this literature review, the team members will identify drivers of “good” corporate governance and develop a number of policy evaluation benchmarks. To verify the effectiveness and appropriateness of these benchmarks, the team will conduct a Web-based survey of leading experts in the corporate governance field. This methodology provides a cost-effective and timely access to a pool of expertise both in the UK and abroad.

The next stage of the Project will involve a Focus Group discussion which objectives are to help the researchers (1) develop an in-depth understanding of organisational issues related to corporate governance regulatory processes, (2) obtain feedback on the research framework and benchmarking methods that would allow them to refine research outcomes, and (3) define more precisely the structure of gap analysis and metrics that will be used in the evaluation.

The next step will be the development of a gap analysis of regulatory initiatives versus “good” corporate governance benchmarks using information obtained at earlier stages of the Project. This analysis will map policy initiatives against the identified drivers of “good” corporate governance and will provide an evaluation of these initiatives along two dimensions:

* Content Gaps: Are there “good” governance drivers that are not adequately covered by the governance regulation?
* Efficiency Gaps: To what extent do the outcomes of the regulatory initiatives meet their objectives?

This analysis of regulatory gaps is closely related to the issues around choices of regulation implementation methods. Even when regulatory initiatives reflect “good” governance drivers, specific implementation problems may reduce the expected outcomes. In this part of the Project, our Team will focus on efficiency and context aspects of the implementation of regulatory initiatives. The Project’s main output will be a Final Report that will summarize research results and policy recommendations. It will form a fact base, which DTI staff can use to direct future corporate governance reform in the UK. In particular, the project will help to develop metrics for a more detailed assessment of the impact of UK corporate governance policies and utilise this methodology in a full evaluation of governance developments in the UK. The project will also help to create a clear view on the role of the DTI, and identify a series of priority actions required to execute effective and efficient corporate governance regulation strategies.

Project team

Igor Filatotchev will lead the Project. He is Professor of International Strategic Management and Head of the IMCB Group. He has published more than 100 refereed articles, books and book chapters on corporate governance and business strategy issues. His current research is focused on interlinks between the dynamics of corporate governance and business strategy, in particular in fast-growing firms. This research attracted funding from a number of sources, including the Institute of Chartered Accountants of England and Wales, Ernst & Young LLP(UK) and others. In 2004, he co-organized a workshop “Corporate Governance, Human Resource Management and Firm Performance: The Research Agenda and Practical Implications” for the Department of Trade and Industry, and the workshop’s papers were published by the DTI in 2005 as an Economics Paper. In 2003 he organised an international workshop on “Corporate Governance Life-cycle”. The Conference participants included leading researchers on corporate governance and business strategy issues from the UK and USA, as well as representatives of the UK Government and business community, such as the DTI, Institute of Directors, National Association of Pension Funds, Association of British Insurers, UK Society of Investment Professional, British Venture Capital Association, etc. It was sponsored by Robson Rhodes, Yorkshire Forward and the British Academy of Management. Conference proceedings are published in a book “Corporate Governance Life-Cycle” (co-editor with Wright M), London, New York: Edward Elgar, 2005. He has done research on corporate governance issues for a number of public and private organisations, including the European Bank for Reconstruction and Development, OECD Corporate Governance Network, International Labour Organisation, Ernst & Young LLP(UK) and others.

Gregory Jackson is Senior Lecturer in Comparative Management at King's College London. He has written extensively on the comparative aspects of corporate governance in different countries, particularly the UK, Germany, Japan and the USA. Beyond his academic publications, he has a unique background in social science-based policy research. He was previously Fellow at the Research of Economy, Trade and Industry (RIETI) in Tokyo, an independent policy research institute affiliated with the Ministry of Economy, Trade and Industry. There he researched issues of stakeholder participation and shareholder activism in Japan. He also developed a web-based public policy platform 'Corporate Governance Japan' and was involved in various public-private study groups for corporate governance at METI. This resulted in the forthcoming publication Corporate Governance in Japan: Institutional Change and Organizational Diversity by Oxford University Press. Previously he was also Fellow at the Max-Planck-Institute for the Study of Societies in Cologne, Germany. The MPI is a leading social science research institute specialized on governance and the EU, as well the impact of internationalisation on national public policy. At the MPI, his activities included a comparative study for the Anglo-German Foundation on public interest aspects of corporate regulation entitled The Public Interest and the Corporation in the UK and Germany.

Howard Gospel is Professor of Management at King’s College London. He has written extensively on comparative aspects of management and corporate governance, with particular reference to the UK, US, Germany, France, and Japan. His current research interests are in the growth of large firms, corporate governance and performance outcomes, and reporting to employees and other stakeholders. He is also a Fellow of the Said Business School, University of Oxford, and Centre for Economic Performance, London School of Economics. These give him access to a wide network of scholars who work on aspects of finance, governance, and performance. Recently he organised a series of seminars, financed by the European Science Foundation, which brought together scholars from various European countries, the US, and Japan to examine developing aspects of company finance and corporate governance, with particular reference to employee stakeholders. This resulted in the publication in 2005 of Corporate Governance and Labour Management by Oxford University Press. He has done research for DTI on corporate governance and labour market flexibility, for the DfES on regulatory frameworks and workforce development, and for the International Labour Organisation where he was a special adviser on corporate governance and corporate social responsibility. He also sits as an expert on the DTI Forum on the impact of employment regulation.

Debbie Allcock is a part-time Research Assistant who will provide input into the literature search and review, and conduct meta-analysis of existing research on various governance factors. She is currently doing her PhD at the Bradford University School of Management. Her research interests include corporate governance aspects of entrepreneurial firms and Initial Public Offerings (IPOs), with a particular focus on the roles and organizational outcomes of equity-based executive remuneration.

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