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Round Table Discussions
Round Table Discussions
GROUP C: Has regulation after perceived failures been justified
Regulation was inevitable; historically, it has been the natural reaction to crashes, as society and
investors demand something be done to prevent repetition of mistakes. Current regulation has
helped restore trust among larger funds, but has not necessarily had an impact on small private
investors.
Historically, reform has a strong element of periodicity: fraud is discovered, new codes and regulations
are created, contraventions become more sophisticated, and public interest in the topic falls.
Are these reforms appropriate
The answer to this question depends on how the codes are judged. Essentially, they will be considered
to have “worked” if they prevent another Enron and improve shareholder value over the long
term – it is too soon to say whether this is the case.
It seems that the reaction has been broadly appropriate, as minimum standards of disclosure,
etc., are prerequisites for allowing shareholders to monitor their companies (particularly if the governance
will rely on codes rather than direct regulation). However, Sarbanes-Oxley may prove to
have been a bit too ambitious.
How much bureaucratic interference comes from codes
If a code is addressing a market failure, it must be of some benefit. Properly designed codes are
worth the extra bureaucratic effort. Problems arise when separate board committees are created to
deal with regulation, as they must learn to work together.
GROUP D: Is active institutional involvement always a good thing
Yes, when stock is underperforming, or institutional shareholders cannot sell. They must intervene
where there is a high risk of underperformance or fraud. However, factors that promote effective
institutions vary depending on context (political culture, sector, etc.). From management’s point
of view, some underperformance is normal. Shareholders should be notified (and should be entitled
to act) regarding election/re-election, major transactions, audits, and remuneration.
How to regulate global companies
Product market competition is preferable to regulation via corporate governance, with notable
exceptions: antitrust legislation, international accounting standards, timing of AGMS (spaced to
avoid overload), Ratings information should be effectively comparable.
What is the balance between internal and external regulation
Half and half. Internal regulation should be the first resort, with external regulations dealing primarily
with market failures. Additionally, transparency should be enforced for the sake of investors
and annual reports should include disclosure of CG activities and expenditure.
OTHER THEMES
Can there be a European regulatory framework,
given the obvious variances between codes
of conduct, market culture, etc. between the
European countries/regions, namely pronounced
in the underlying differences between
UK and the mainland philosophies of business
The question of whether regulation undermines
performance is a matter of balance.
Regulation is not an undermining factor per se,
but should not simply be applied “straight out of
the box.”
In terms of “good” and “bad,” the latter category
applies when regulation gets too politicized
and/or too loosely structured. Transparency and
compatibility are ideals worth striving for.
Business has not made its voice heard due to
bad organization. The corporate lobby is not as
well organized as the new governance industry.
There are numerous ways of regulating; market
regulation, i.e., through consumer behaviour,
might be a way forward.
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