CHAPTER THREE CORPORATE GOVERNANCE ISSUES: THE CONTROL OF MANAGERIAL BEHAVIOUR
3.1 – Introduction In chapter two, attention was drawn to the identification of the corporate governance issues that underpinned the occurrence of corporate and financial crises over the last decade, and a theoretical background was provided. 1 Following from that preliminary recognition, the aim of this chapter is to provide a legal analysis of corporate governance issues that have persisted over the last ten years and have more prominently characterised the recent global crisis. In particular, the chapter seeks to critically assess how the persistence of shareholder value ideology substantially influenced corporate mechanisms of decision-making and control within Anglo-American corporations. It is observed through this analysis that legal mechanisms – both statute-based and market-based – directed at controlling managerial behaviours, have repeatedly exposed operational flaws over the last ten years. On one hand, the enforceability of statute-based legal strategies (directors’ duties most prominently) has remained problematic and doubts therefore persist as to the extent to which directors can be held accountable. On the other hand, undisputed reliance on market mechanisms, like stock options, has proved rather illusory because this strategy has achieved the undesired objective of increasing boards’ “short-termisms” without effectively aligning their interests with shareholders. The chapter ultimately aims to provide a clearer perspective for the examination of case studies conducted later in the thesis and an easier recognition of key corporate law issues therein. The discussion is structured as follows: section 3.2 provides a background for the analysis; section 3.3 discusses the legal structure of delegation in connection with
1 The identified themes were firms’ ownership structure and the definition of the corporate goal.
