Cross Country Analysis of Corporate Governance Codes in the European Union
IntroductionCorporate governance codes (further governance codes) are an important area of international corporate governance as they are designed to provide firms with guidelines how to set corporate best practice. Unlike other forms of regulation belonging to hard law, a governance code is a "set of best practice recommendations regarding the behaviour and structure of the board of directors of a firm" Since it consists of recommendations on how company may efficiently and transparently adjust its governing body in order "to address deficiencies in the corporate governance system" (Aguilera, 2004, p. 419) a governance code is considered an element of soft law. The contents address the key issues affecting the relationship between owners and managers in order to eliminate information asymmetry and improve transparency in company's functioning (Cuomo et al. 2015).The code issued in the Unites States in 1978 was the first of its kind followed by a code from Hong Kong in 1989 and Ireland in 1991. However, the number began to grow rapidly after establishing the first European code so called the Cadbury Report issued in the United Kingdom in 1992, which became a model for many other national and international codes in the following years. The report recommends implementing the code for listed companies on the principle of "comply or explain" which became the cornerstone of governance codes further on. This approach allows a company to deviate from the recommendations of the code, but it must satisfactorily explain the reason of such behaviour. The principle has spread to other countries and this manner of governance reporting is also recommended by the OECD Principles of Corporate Governance (OECD, 2004).Until the end of year 2014, their figure has grown to 91 countries with at least one code and the total of 345 codes (91 original codes and 254 revisions) (Cuomo et al. 2015) Moreover, international organizations such as the Organization for Economic Cooperation and Development, the World Bank or the United Nations also have their own versions of codes.In this paper, we will analyse the governance codes of the European Union member states and examine to what extent they comply with international best practice. For the purpose of this study, we consider the EC recommendations as best practice. We examine whether contents of national codes are influenced by these recommendations as exogenous force or are driven by domestic stakeholders representing endogenous forces and how the contents evolve over time. The remainder of the paper is organised as follows. First, we discuss theoretical background of governance codes and present state of the art in the research area. Then we describe the corporate governance framework for the European Union. Afterwards, we describe the methodology, individual findings and their further analysis. Finally, we discuss conclusions and provide suggestions for further research.1. Literature Review of Governance CodesResearch of governance codes has emerged in the wake of the first wave of codes at the end of 1990s. Existing research is to a large extent linked with comparative corporate governance, which investigates the differences in governance systems among countries and analyses the level and trends of either convergence or divergence between systems over time and space (Aguilera and Jackson, 2010; Hopt, 2011) Codes have become an important tool for such comparisons because their form and contents varies considerably across the world. These particular differences and similarities may help explain the existing diversity in the practice of corporate governance. Research essentially examines codes in different countries and analysing how codes diffuse and the extent to which they comply with the international best practice. Within the domain of comparative corporate governance, the contribution of governance codes in the explanation of the differences and similarities across countries can be regarded from perspectives of various scholarly disciplines (Aguilera and Jackson, 2010; Fissi et al.