Enforcement of Corporate Governance Codes

Abstract

Corporate governance codes have been published in several European jurisdictions. Most are of a self regulatory nature, others are rooted in the law. In both cases the provisions of the codes apply on a comply and explain basis. Enforcement mainly takes place through market mechanisms, including by shareholders using their legal and factual rights within the company. Moreover, the legal system will normally absorb these rules through blank norms, such as liability or contract rules. In states where the law has expressly referred to the code - in Germany and in the Netherlands, additional questions arise. The role of the market supervisors and of the auditors have expressly been discussed in these jurisdictions. The analysis concludes that market led enforcement, along with a strengthening of company law mechanisms constitutes the best equilibrium for developing adaptive but nevertheless effective corporate governance practices.