The Elusive Quest for Global Governance Standards
In The Elusive Quest for Global Governance Standards, Professors Lucian Bebchuk and Assaf Hamdani argue that the currently available metrics for assessing the governance of public companies around the world suffer from a basic shortcoming. The impact of many key governance arrangements, they argue, depends considerably on companies' ownership structure: measures that protect outside investors in a company without a controlling shareholder are often irrelevant or even harmful when it comes to investor protection in companies with a controlling shareholder, and vice versa. Consequently, governance metrics that purport to apply to companies regardless of ownership structure are bound to miss the mark with respect to one or both types of firms. In particular, Bebchuk and Hamdani attempt to show that the influential metrics used extensively by scholars and shareholder advisers to assess governance arrangements around the world—the Corporate Governance Quotient (CGQ), the Anti-Director Rights Index, and the Anti-Self-Dealing Index—are inadequate for this purpose. They suggest that going forward, the quest for global governance standards should be replaced by an effort to develop and implement separate methodologies for assessing governance in companies with and without a controlling shareholder. The professors identify the key features that these separate methodologies should include and discuss how to apply such methodologies in either country-level or firm-level comparisons.