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.
Volume 157 Issue 5 2009 Article