Prof. Andrew Keay

AN ANALYTICAL STUDY OF BOARD ACCOUNTABILITY IN TRANSNATIONAL CODES OF CORPORATE GOVERNANCE

The accountability of boards of directors is a critical element of good corporate governance (Young, 2009). It has been said that good corporate governance is in fact able to be best achieved by holding directors accountable for their behaviour and decisions (Solomon and Solomon, 2014). Many countries have adopted voluntary codes of corporate governance and they play an important role in each country’s corporate governance framework and it would follow logically they should provide in some way for board accountability, especially given the fact that codes are regarded as a set of best practice recommendations regarding, inter alia, the behaviour and role of the board of directors (Aguilera and Cuervo-Cazurra, 2004). Certainly one of the first voluntary corporate governance code, the UK’s Combined Code pointed up the importance of accountability as one of the principles on which it was based. In fact the Cadbury Report, on which the Combined Code, and ultimately the UK Corporate Governance Code, was based, said: ‘The issue for corporate governance is how to strengthen the accountability of boards of directors to shareholders.’ (para 6.1.)

It is clear that in the formulation of a number of national codes the architects of such codes have incorporated key recommendations in, and generally drawn on, what have been referred to as transnational codes or principles (Cuomo, Mallin and Zattoni, 2015), the primary ones being those drafted by the OECD and ICGN. The advent of the 2015 G20/OECD Principles of Corporate Governance are likely to foster further consideration in the amendment and/or development of existing or new codes. This paper analyses the OECD, ICGN and other transnational codes in order to ascertain the extent to which they make provision for the accountability of boards of directors. The way that they do provide for accountability might be regarded as a pattern for national codes to follow, or, if it is found that there is a failure to make provision, that might indicate a weakness inherent in transnational codes which has to be taken into account in the drafting or amendment of national codes.