Rules, Principles and Sarbanes-Oxley Corporate Governance Codes

Author:David CAMPBELL, ACCA

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Keywords:corporate governance, code, shareholders, rules based approach, principle based approach, provision

Abstract:
This article introduces some of the main themes in relation to the control of corporate governance and discusses how this control differs by country. The aim of the article is to clarify the features and characteristics of rules-based and principles-based approaches to corporate governance. It has always been important for investors to have a high level of assurance that directors will act in the best interests of the shareholder.\r\n„Codes” of corporate governance are intended to guide behaviour where the law is ambigous.\r\nThe development of codes has been reactionary. They appeared in response to certains corporate failure or serious breaches of the faiths by directors towards their shareholders. \r\nMany countries, including UK and many Commonwealth countries, adopted what became known as ”principles-based” approach to the enforcement of the provisions of corporate governace codes. Thus, the principle of ”comply or explain” emerged.\r\nAs a result of the high-profile collapes of Enron and Worldcom, the US Congress passed the Sarbanes-Oxley Act in 2002.\r\nOne of the criticisms of Sarbanes-Oxley Act is that it assumes a ”one size fit all” approach to corporate governance provisions.\r\nThe manner in which corporate governance provisions are provided and enforced is an important part of corporate activity in each country.\r\n

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