When the Solution Becomes the Problem: The Triple Failure of Corporate Governance Codes

See for example ‘One of the most important governance phenomena of the past 20 years has been the introduction of market controlled corporate governance codes designed to guide companies towards best practice…’, Kershaw (2015) and Haxhi and Aguilera (2012), pp. 238–239.

Thomsen (2006), pp. 845–861, he then explains how Nordic countries have adopted corporate governance codes under investor pressure, pp. 849–851.

Any corporate governance code is a part of a legal, social and cultural context. This chapter does not attempt to analyse each code in full in this sense. With this caveat the chapter rather investigates codes as they present themselves. What are they informed by? Which interests do they promote?

An overview of corporate governance codes from all over the world is found at European Corporate Governance Institute (2016). All codes referred to or quoted in this chapter may be found there, unless otherwise stated.

This question was posed by the topic of the ICGL Forum where this chapter was first presented. For a discussion of hard law, soft law and hybrids in an Australian context, see du Plessis (2015), Ch 5.

Current GHG emissions from industrialisation and deforestation are likely to result in breaching the safe warming threshold of two degrees Celsius, and thus the danger of run-away climate change looms, Field et al. (2014), p. 11 et seq., reiterates its message from its 2007 assessment, namely that we must urgently begin massively reducing emissions if humankind is to avoid dangerous anthropogenic global warming, Edenhofer et al. (2014), p. 88.

The IPCC reports that delaying mitigation efforts beyond those in place today through 2030 is estimated to substantially increase the difficulty of the transition to low longer term emissions levels; Edenhofer et al. (2014), p. 88.

As stated already in 2007: ‘The resilience of many ecosystems is likely to be exceeded this century by an unprecedented combination of climate change associated disturbances (e.g. flooding, drought, wildfire, insects, ocean acidification), and other global change drivers (e.g., land use change, pollution, over-exploitation of resources)’ Parry et al. (2007), pp. 7–22.

‘Economics of climate change: Stern warning’ The Economist (2006), p. 14.

As Stern (2007) explained, economic analysis must therefore be global, deal with long time horizons, have the economics of risk and uncertainty at centre stage, and examine the possibility of major, non-marginal change; Stern has become ever clearer in his statements, e.g.: ‘Failing to act on the grave threat posed by climate change devalues the lives of future generations and amounts to unacceptable “discrimination by date of birth”’, Kirchgaessner (2015).

UN Millennium Development Goals, see http://​www.​un.​org/​millenniumgoals/​; about the threat of climate change, see for example Islam (2013) ‘Climate change threatens Bangladesh’s MDG achievements – experts’; Hallegatte et al. (2016).

See more about the UN Sustainable Development Goals at un.​org/​sustainabledevel​opment/​sustainable-development-goals/​.

See the press release concerning the response to the Global Financial Crisis of 2007–2008: ‘Mobilizing and re-focusing the global economy towards investments in clean technologies and “natural” infrastructure such as forests and soils is the best bet for real growth, combating climate change and triggering an employment boom in the 21st century.’

Towards a Circular Economy: see ec.​europa.​eu/​priorities/​jobs-growth-and-investment/​towards-circular-economy_​en.

At COP 21 in Paris, the international community reached a new agreement aimed at combating climate change and to accelerate and intensify the actions and investments needed for a sustainable low carbon future, see http://​unfccc.​int/​paris_​agreement/​items/​9485.​php. The Paris Agreement has been referred to—despite the lack of legally binding commitments—as a turning point because of its ambitious nature, while scientists warn that ‘the real work has just begun’, see, for example IIASA (Dec 2015).

In the era of the Anthropocene, sustainable development can be defined as ‘development that meets the needs of the present while safeguarding Earth’s life-support system, on which the welfare of current and future generations depends’, Griggs et al. (2013).

Rockström et al. (2009), confirmed and updated in Steffen et al. (2012); See also Raworth (2012).

The term ‘company’ or (in the US, and increasingly other parts of the world: the ‘corporation’) encompasses both the private limited liability company (e.g.: aksjeselskap in Norway, GmbH in Germany) and the public limited liability company (e.g.: allmennaksjeselskap in Norway, AG in Germany). However, this chapter concentrates on the public limited liability company.

Whereas the enforceable contract may be the most innovative contribution of Roman law, see Watson (1984), pp. 1–20, company law has made a similar contribution to the contemporary economy, see Rajan and Zingales (2003).

See for example Zattoni and Cuomo (2008), Hopt (2011); although see Gerner-Beuerle (2014) for a more nuanced assessment of the internationalisation of corporate governance codes.

See for example, RiskMetrics Group (2009), Belcredi and Ferrarini (2013), pp. 67–142. See also Chen and Nowland (2011), pp. 229–250.

Sjåfjell et al. (2015), pp. 79–147.

See for example, Hamilton (2000), which explains the background to the US corporate governance debate from an historical perspective.

Sjåfjell et al. (2015), n 23.

COM (2001) 366 final (emphasis added). Although the Communication went on to speak of ‘not only fulfilling legal expectation, but also going beyond compliance and investing “more” into human capital, the environment and the relations with stakeholders’ (paras 20–21), the definition of CSR as voluntary has been dominant.

COM (2011) 681 final, Sect. 3.1 (emphasis added).

The marginalisation of CSR in the renamed DG GROW, the European Commission’s Directorate General for Internal Market, Industry, Entrepreneurship and SMEs, is also discouraging, with only two officers dedicated to CSR, see European Commission (2016).

See OECD guidelines, and UN Guiding Principles.

On Integrated Reporting (2016), see http://​integratedreport​ing.​org/​.

See Sect. 3.

See Rockström et al. (2009) and Steffen et al. (2012).

For more about this project, see http://​jus.​uio.​no/​companies, under Projects, Concluded Projects.

The board is used in this chapter as a general term encompassing the German Aufsichtsrat, the British board of directors and the board as constituted in the Nordic countries. Trying to fit quite different systems, exemplified by the German two-tier variant and the one-tier system of the UK, into one picture of a board level and a management level requires some simplifications, as the German Aufsichtsrat and the UK board of directors are two quite different entities, with the German Vorstand (‘management board’) having some similarities with the UK board that the Aufsichtsrat (‘supervisory board’) has not, and vice versa.

For an analysis of the role and duties of the general meeting in the Sustainable Companies Project, see Sjåfjell et al. (2015), pp. 79–147.

Sjåfjell et al. (2015).

In some jurisdictions environmental sustainability has begun tentatively making inroads into the explicit duties of the board; see for example Johnston (2014), p. 63; Lambooy (2010), pp. 107–46.

Villiers (2013).

Sjåfjell et al. (2015). This is supported for the institutional investors by the EY Report (2014).

Sjåfjell et al. (2015).

Along with that of shareholders owning companies, which, as a matter of company law, they clearly do not. For an eloquent dismantling of the myth, see Ireland (1999), See also Talbot (2015); du Plessis (2016a).

See Sjåfjell and Anker-Sørensen (2013).

As repeatedly emphasised by the Court of Justice of the European Union, see Daily Mail, Case 81/87 [1988] ECR 5483, para. 19: ‘companies are creatures of the law’ and ‘exist only by virtue of […] national legislation which determines their incorporation and functioning’; also repeated in Überseering, Case C-208/00 [2002] ECR I-9919 para. 81.

Sjåfjell et al. (2015).

Villiers and Mähönen (2015a), pp. 175–225.

Villiers and Mähönen (2015a).

Villiers and Mähönen (2015b), pp. 274–311. For a more optimistic view, see du Plessis (2016b).

Richardson (2015), pp. 226–273.

In spite of, for example the EY Report (2014), confirming that institutional investors are allowed to prioritise broader societal concerns.

See Haxhi and Aguilera (2012) at p. 238: ‘the wave of corporate scandals at the end of the 1980s and the low confidence of shareholders fostered (primarily in the US and the UK) the emergence of new modes of corporate governance regulations and codes’.

Sjåfjell et al. (2015); see also Haxhi and Aguilera (2012), p. 240.

Hadjikyprianou (2015), p. 18. See also: ‘Several scholars consider the Cadbury Code (1992) as the original corporate code, although similar codes had already been created in the late 1970s, triggered by the conglomerate merger movement, the managers’ hostile takeover behaviour, and the shareholder rights movement in the US at that time. … Following the example of the New York Stock Exchange, which has continued to issue codes since the late 1970s, other stock exchanges, for example, Hong Kong Stock Exchange, 1989, or investors’ organizations, for example, Irish Association of Investment Managers, 1991, issued their own codes’, Haxhi and Aguilera (2012), p. 240.

Cison et al. (2012), pp. 620–648. with further references.

UK Corporate Governance Code (September 2014), p. 1.

UK Corporate Governance Code (September 2014), Preface, item 8, p. 3.

UK Corporate Governance Code (September 2014), item 4, p. 2.

See also du Plessis et al. (2015), Ch 1 on the concept of corporate governance, p. 10: ‘how difficult it seems to break with the “shareholder dominance-indoctrination” that has been so strong over so many years. Clinging to the past and in fact only seeing the interests of other stakeholders in an “enlightened” way still makes these interests peripheral, as Dine and Koutsias (2013) put it, this approach is simply “a fig leaf for stakeholders other than shareholders”’.

Villiers (2015), pp. 105–173.

The UK Corporate Governance Code (September 2014), Preface, item 5, p. 2, and s D.

The UK Corporate Governance Code (September 2014), Schedule A: The design of performance-related remuneration for executive directors.

UK Corporate Governance Code (September 2014), s 10.

Now also endorsed by the G20, the Principles are now formally named G20/OECD Principles of Corporate Governance (as at 5 September 2015). The influence of the OECD Principles is made abundantly clear by the OECD itself, setting out that the Principles are ‘the international benchmark in corporate governance’; and ‘have been adopted as one of the Financial Stability Board’s key standards for sound financial systems, and have been used by the World Bank Group in more than 60 country reviews worldwide. They also serve as the basis for the guidelines on corporate governance of banks issued by the Basel Committee on Banking Supervision’.

Morrow and Johnston (2015), p. 2. See also the early criticism that the OECD Principles ‘fail to adequately discuss why shareholder rights are elevated to a universal norm, whereas accountability to other parties implicated in the corporation, such as creditors and workers, is not’; Sarra (2001).

‘… including the OECD Guidelines for Multinational Enterprises, the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, the UN Guiding Principles on Business and Human Rights, and the ILO Declaration on Fundamental Principles and Rights at Work, which are referenced in the Principles’, G20/OECD Principles of Corporate Governance (5 September 2015), Introduction, p. 10. Indeed, it as late as in the current G20/OECD Principles on Corporate Governance that a mere reference to the OECD Guidelines for Multinational Enterprises has been included for the first time.

Morrow and Johnston (2015), n 63, with reference inter alia to Mayer (2013) and Lazonick (2010), pp. 675–702.

The European Commission concluded in COM (2003) 284 Final, that there was no need for a joint EU corporate governance code, as the codes, as opposed to company law, showed a ‘remarkable degree of convergence’ with reference to ‘Comparative Study of Corporate Governance Codes Relevant to the European Union and its Member States’ (On behalf of the European Commission, Weil and Manges 2002), where the ‘growing interest in corporate governance codes’ is explained as a reflection of the understanding that ‘equity investors, whether foreign or domestic, are considering the quality of corporate governance along with financial performance and other factors when deciding whether to invest in a company’,(p. 2). Dismantling barriers in the legal regimes of the Member States was therefore perceived as more important, while a need was perceived to agree on ‘some specific rules and principles’ at EU level in Directives or Recommendations ‘and a certain co-ordination of corporate governance codes in the EU should be organised to encourage further convergence and the exchange of best practice’ and: ‘adequate co-ordination of corporate governance codes should be ensured. COM (2003) 284 Final, Sect. 3.1. The relevance of the OECD code was also emphasised; COM (2003) 284 Final, Sect. 3.1.

Directive 2006/46/EC of the European Parliament and of the Council (14 June 2006).

Cison et al. (2012), n 52, conclude that they ‘fail to find evidence of an unchecked thematic convergence towards an Anglo-Saxon model of corporate governance, with some code themes converging to UK practices while others diverge’. See also Haxhi and Aguilera (2012), n 1, p, 241.

And when Haxhi and Aguilera (2012) state that transnational code setters such as the OECD: ‘by promoting a common set of practices regardless of country characteristics, may indirectly be contributing to the achievement of convergence across national governance practices’ and that they ‘are not moving corporate governance toward a particular model (e.g., Anglo-Saxon or Continental European) but toward a more general global model’ (p. 241), they may be ignoring the very strong influence of the shareholder-focused Anglo-Saxon model on the OECD guidelines (although also the more pluralistic Continental-European perspectives have had some influence); see also Morrow and Johnston (2015), n 63. And indeed, Haxhi and Aguilera (2012) also point out ‘Considering that Anglo-Saxon business practices are the source of a transnational process, there may be isomorphic pressures that stretch beyond the nation state, thereby suggesting the possibility of the emergence of a transnational or converging community’, p. 242.

And while there are undoubtedly cultural (societal and institutional) divergences in implementation of, for example, the ‘comply and explain’ principle, Haxhi and Aguilera (2012), pp. 243–244, my point here is the general promotion of the shareholder focus by the corporate governance codes. See also Maurović and Grgorinić (2009) after analysing the following European codes: French, Italian, Austrian, German, UK, Swiss, Slovenian, Norwegian and Croatian: ‘For the most part, the code recommendations are very similar and encourage companies to adopt best governance practice’ and: ‘Today, the main challenge in the corporate governance development may not be to establish the rules and procedures to assure the accountability of management in front of the shareholders, but to convince shareholders, that they have also to take over more responsibility – the one of an owner’ [sic]. Concerning the responsibility of shareholders, see Sjåfjell (forthcoming).

See Sect. 3.3.

For an early contribution, see Schaafsma (1992), pp. 226–227. This is in line with report regarding takeover defences published just after the Takeover Directive was adopted, which stated that the decision-makers would have to be ‘guided by the interests of the company, its enterprise and all its stakeholders when exercising voting rights’—adding that even a ‘hostile takeover may be in the interest of the company’, Dortmond (2004), p. 25 [as in the printed version]. The Netherlands therefore opted out of the board neutrality rule of the Takeover Directive; while the Dutch corporate governance code ‘[i]n an effort to restore trust and confidence in corporate management and supervision and also to bring Dutch corporate governance rules and practices into line with the best in the Western world,’ is negative towards takeover defences, see, the argumentation against the legislative choice in para. 8 of the committee’s comments in The Dutch Corporate Governance Code (9 December 2003). The resulting pressure on Dutch companies to dismantle anti-takeover mechanisms is discussed in the current Dutch Corporate Governance Code (10 December 2008), in the section on developments after the introduction of the 2003 code, p. 47, with the tension reflected in the omission of a separate chapter on takeovers, p. 52, and with the concession on p. 7 that ‘decision-making should also take account of other relevant interests’ in takeovers.

See the French AFEP-MEDEF Corporate governance code of listed corporations (Revised June 2013). The AFG Recommendations on corporate governance (revised 2011), for ‘professional management companies’, mentions in item 1 a reference to ‘social and environmental factors’ and encourages to give them the ‘the same level of consideration that it does to consolidated accounts’. See also the multi-jurisdictional company law analysis in Sjåfjell et al., n 23.

Setting the interests of the enterprise first and the shareholders on line with other interests: ‘The Management Board is responsible for independently managing the enterprise in the interest of the enterprise, thus taking into account the interests of the shareholders, its employees and other stakeholders, with the objective of sustainable creation of value, German Corporate Governance Code (revised 2015), Principle 4.1.1. This was included in 2009, to strengthen stakeholder interests in order to meet ‘public criticism of capitalism’, see the German Corporate Governance Code as amended on 18 June 2009.

Heuschmid (2012) The protection of workers under EU company law:—the current position and future prospects, p. 127. For a more in-depth comparative company law analysis, Sjåfjell et al. (2015), n 23.

German Corporate Governance Code (revised 2015), Principle 3.7.

Sjåfjell (2011).

See for example, already Davies (2001), p. 451: ‘Historically, the roles played by boards have been (and probably still are) much more varied than the prescriptions of modern corporate governance codes would suggest’, and Sjåfjell et al. (2015), n 23.

Sjåfjell (2013), pp. 1–58.

See about the Panama Papers at panamapapers.​icij.​org/​. See also Anker-Sørensen (2016).

The Code of Corporate Governance for Listed Companies in China, item 81 (under Principle 5 on ‘Stakeholders’).

The Code of Corporate Governance for Listed Companies in China, item 43 (under Principle 3 on ‘Duties and Composition of the Board of Directors’).

G20/OECD Principles of Corporate Governance (5 September 2015), Principle IV, see also Principle IV, item D, p. 37.

G20/OECD Principles of Corporate Governance (5 September 2015), Principle IV (emphasis added).

G20/OECD Principles of Corporate Governance (5 September 2015), Principle VI, Item D, p. 7.

Szabó and Engsig Sørensen (2013).

Szabó and Engsig Sørensen (2013).

Szabó and Engsig Sørensen (2013).

About half of the codes attempt to define ‘stakeholders’, mostly by ‘giving examples of groups which could be considered stakeholders. Most of these codes interpret the concept broadly, covering for example: employees, clients, creditors, and the communities in which the company operates, while some codes add ‘further groups to the already broad definition, such as civil society groups, local government and self-government bodies and local businesses that sell goods and services to the company’s employees and the public sector’, Szabó and Sørensen (2013), p. 12.

Szabó and Engsig Sørensen (2013), s 3. On p 11, the authors note that: ‘Despite the frequent use of the term ‘stakeholder’, further analysis suggests that the requirements in the corporate governance codes are far from reflecting a uniform, comprehensive strategic approach to stakeholders. For example, a group of codes, despite of mentioning stakeholders, do not seem to impose any requirements in relation to stakeholders, and some of these codes only mention the stakeholders in their introductions, forewords or preambles’.

See also Szabó and Sørensen (2013), p. 27: ‘Similarly to the recommendations for CSR transparency, recommendations for integrating CSR into business operations are also scarce and diverse’.

Norwegian Code of Practice for Corporate Governance, 30 October 2014, Introduction.

Norwegian Code of Practice for Corporate Governance, 30 October 2014, Principle 1, elaborated on in the commentary to this principle in the following manner: ‘At the core of the concept of corporate social responsibility is the company’s responsibility for the manner in which its activities affect people, society and the environment, and it typically addresses human rights, prevention of corruption, employee rights, health and safety and the working environment, and discrimination, as well as environmental issues’, see the Norwegian Code of Practice for Corporate Governance, 30 October 2014, p. 13.

Norwegian Code of Practice for Corporate Governance, 30 October 2014, Principle 10.

Norwegian Code of Practice for Corporate Governance, 30 October 2014, commentary to Principle 10, p. 43.

Norwegian Code of Practice for Corporate Governance, 30 October 2014, pp. 43–44.

Only stating generically that the members of the board should meet ‘the company’s need for expertise, capacity and diversity’, The Norwegian Code of Practice for Corporate Governance, 30 October 2014, Principle 8, although it does say in the commentary to that principle that: ‘The board is responsible as a collegiate body for balancing the interests of various stakeholders in order to promote value creation by the company’, see the Norwegian Code, p. 32.

Norwegian Code of Practice for Corporate Governance, 30 October 2014, Principle 8, as emphasised also in the commentary to this principle, stating that share ownership by board members ‘can contribute to creating an increased common financial interest between shareholders and the members of the board’, see the Norwegian Code, p. 35.

Informed by the mainstream legal-economic postulate of board members as agents for shareholders. That this may have a negative impact is indirectly conceded by the code, when it in the commentary to Principle 8, adds that: ‘At the same time, members of the board who do hold shares should take care not to let this encourage a short-term approach which is not in the best interests of the company and its shareholders over the longer term’, see the Norwegian Code of Practice for Corporate Governance, 30 October 2014, p. 35.

Norwegian Code of Practice for Corporate Governance, 30 October 2014, Principle 12, while not allowing the same for board members, which should not be granted share options, Principle 11 (but are encouraged to own shares, see Principle 8, and to use part of their remuneration to buy shares, see the commentary to Principle 11 on p 45).

Norwegian Code of Practice for Corporate Governance, 30 October 2014, Principle 14, and see the commentary to this principle, p. 52. See further Sjåfjell (2011), n 77.

Code of Corporate Governance for Listed Companies in China, item 86 (under Principle 5 on stakeholders).

Australian Corporate Governance Principles and Recommendations, Principle 3: ‘Acting ethically and responsibly goes well beyond mere compliance with legal obligations and involves acting with honesty, integrity and in a manner that is consistent with the reasonable expectations of investors and the broader community. It includes being, and being seen to be, a “good corporate citizen”’, where the examples include human rights, labour, environmental responsibility and ‘only dealing with business partners who demonstrate similar ethical and responsible business practices’.

Australian Corporate Governance Principles and Recommendations, Principle 7.4: ‘A listed entity should disclose whether it has any material exposure to economic, environmental and social sustainability risks and, if it does, how it manages or intends to manage those risks’, where it in its commentary exceptionally also emphasises the broader risk beyond the company and its investors: ‘How a listed entity conducts its business activities impacts directly on a range of stakeholders, including security holders, employees, customers, suppliers, creditors, consumers, governments and the local communities in which it operates. Whether it does so sustainably can impact in the longer term on society and the environment’.

Australian Corporate Governance Principles and Recommendations, p. 3.

Australian Corporate Governance Principles and Recommendations, Principle 3.

Australian Corporate Governance Principles and Recommendations, Commentary to Principle 3.

Australian Corporate Governance Principles and Recommendations: And it appears more of an afterthought than a true integration when the commentary to Principle 6.2 on the entity’s investor relations programme in its last paragraph concedes that: ‘A listed entity’s investor relations program may also run in tandem with a wider stakeholder engagement program involving interactions with politicians, bureaucrats, regulators, unions, consumer groups, environmental groups, local community groups and other stakeholders’, Commentary to Principle 6.2.

The issuer of the Brazilian code, IBGC—a Brazilian non-for-profit organisation—intends to contribute to ‘the sustainable performance of organizations and influencing the agents of our society towards greater transparency, fairness and responsibility’ (emphasis added), Brazilian Code of Best Practice of Corporate Governance, p. 4; see also da Silveira (2015).

Brazilian Code of Best Practice of Corporate Governance, p. 19. However, also the Brazilian code refers to shareholders as owners, p. 21.

Brazilian Code of Best Practice of Corporate Governance, Principle 2.1.

Stakeholders are defined as ‘shareholders and other stakeholders’, the latter understood as: ‘Any person, entity, or system that affects or is affected by the activities of an organization’, Brazilian Code of Best Practice of Corporate Governance, Principle 2.2.

Brazilian Code of Best Practice of Corporate Governance, Principle 2.3.2. The referred to Principle 3.5 states: ‘As a result of a clear policy of communication and relationship with stakeholders, the organization should disclose, at least on its website, full, objective, timely and equitable reports from time to time on all aspects of its business activities, including its social and environmental agenda, related party transactions (…), costs of political and philanthropic activities (…), administrators’ compensation, and risk factors, among others, in addition to economic and financial and other information required by law’.

Brazilian Code of Best Practice of Corporate Governance, Principle 3.5, following on from the quote in the note immediately above.

See Sect. 4.

The code defines sustainability of a company as ‘conducting operations in a manner that meets existing needs without compromising the ability of future generations to meet their needs. It means having regard to the impact that the business operations have on the economic life of the community in which it operates. Sustainability includes environmental, social and governance issues’, King Code of Governance for South Africa 2009 (King III), p. 61.

King Code of Governance for South Africa 2009 (King III), introduction, s 8 on key aspects of the report, item 2, on p. 9.

King Code of Governance for South Africa 2009 (King III), s 5 on corporate governance and the financial crisis, p. 8, adding that: ‘Populist calls for more general legislative corporate governance reform must be treated with the appropriate caution’.

King Code of Governance for South Africa 2009 (King III), introduction, explaining the difference on in this way: ‘In the ‘enlightened shareholder’ approach the legitimate interests and expectations of stakeholders only have an instrumental value. Stakeholders are only considered in as far as it would be in the interests of shareholders to do so. In the case of the ‘stakeholder inclusive’ approach, the board of directors considers the legitimate interests and expectations of stakeholders on the basis that this is in the best interests of the company, and not merely as an instrument to serve the interests of the shareholder’, p. 12.

King Code of Governance for South Africa 2009 (King III).

Ubuntu is defined in the code as a concept which is captured in the expression ‘uMuntu ngumuntu ngabantu’, ‘I am because you are; you are because we are’. Ubuntu means humaneness and the philosophy of ubuntu includes mutual support and respect, interdependence, unity, collective work and responsibility, King Code of Governance for South Africa 2009 (King III); see further Ulwazi (2016).

King Code of Governance for South Africa 2009 (King III), introduction, s 8 on key aspects of the report, item 1, p. 9.

King Code of Governance for South Africa 2009 (King III), on key aspects of the report, item 3, p. 10.

King Code of Governance for South Africa 2009 (King III), see Principle 1 on Ethical leadership and Corporate Citizenship and Principle 2 on Boards and directors, pp. 20–31.

King Code of Governance for South Africa 2009 (King III), introduction, p. 11.

See further Institute of Directors Southern Africa (IODSA) (2016).

King Code of Governance for South Africa 2009 (King III), item 8.3.1, p. 47.

The code is unclear here: it says that the ‘board should oversee the establishment of mechanisms and processes that support stakeholders in constructive engagement with the company’, but it does not speak of recourse mechanisms, King Code of Governance for South Africa 2009 (King III), item 8.4.3, p. 47. The dispute resolution mechanism in item 8.6.1 on p. 48 seems in light of what the introduction of the code speaks of on regarding alternative dispute resolutions p. 13, to be focused mainly on resolving business contractual disputes (although item 8.6.1 does also speak of formal dispute resolution processes for internal disputes as well as external disputes, so employees may be encompassed). Stating that: ‘The ultimate compliance officer is the company’s stakeholders who will let the board know by their continued support of the company if they accept the departure from a recommended practice and the reasons furnished for doing so’, is in this context glib rather than convincing; King Code of Governance for South Africa 2009 (King III), p. 8.

Dutch Corporate Governance Code, Proposal for Revision, 2016, II.1, see Engen (2016). The Dutch proposal goes on to say that the current code confines itself to a paragraph in the preamble with a description of the underlying notion that a company is a ‘long-term alliance between the various parties involved in the company’.

Engen (2016); and see the Dutch Corporate Governance Code 2008, the preamble, for the current approach.

Dutch Corporate Governance Code, Proposal for Revision, 2016, II.1. Adding that, the supervisory board should discuss the company’s strategy, the implementation of the strategy in the business model of the enterprise affiliated with the company and the principal risks associated with it at least once per year. The supervisory board should render account of this discussion in the report of the supervisory board.

See Sect. 4.

The Dutch Corporate Governance Code, Proposal for Revision, 2016, II.1, pp. 8–9, n 129.

As set out in the preface of the ICGN Global Governance Principles 2014: ‘The combination of responsibilities of boards and shareholders in a single set of Principles emphasises a mutual interest in protecting and generating sustainable corporate value. Sustainability implies that the company must manage effectively the governance, social and environmental aspects of its activities as well as financial operations. In doing so, companies should aspire to meet the cost of capital invested and generate a return over and above such capital. This is achievable if a focus on economic returns and strategic planning includes the effective management of company relationships with stakeholders such as employees, suppliers, customers, local communities and the environment as a whole’.

The ICGN has also published a progressive statement on how human rights should be integrated into governance, which appears to have been similarly ignored. See https://​www.​icgn.​org/​policy/​viewpoints/​human-rights.

This idea for a reform proposal was in its first version presented together with Jukka Mähönen on the Nordic level, and thereafter, informed by inspiring discussions in the Sustainable Companies team, as a potential EU law proposal, Sjåfjell and Mähönen (2014). In Sjåfjell and Wiesbrock, n 46, pp. 97–117.

This distinguishes the proposal from the much debated ‘enlightened shareholder value’ in the UK Companies Act 2006, see for example Johnston (2014), pp. 63–66 and emphasises the non-negotiable ecological limits as opposed to what is done in the traditional pluralistic approach of Continental-European law. See also Lambooy (2010), pp. 107–146.

Using ‘investors’ rather than ‘shareholders’ recognises the complex structures of finance through, for instance, debt, equity or grants.

See Raworth, http://​www.​kateraworth.​com/​doughnut/​.

The duties of the board are arguably the best place in the regulatory ecology of the companies. On the significance of boards see for example Sjåfjell and Anker-Sørensen (2013). For a further discussion of the concept of regulatory ecology, see Sjåfjell and Taylor (2015).

COM (2011) 681 final, p. 5.

COM (2011) 681 final, p. 6.

OECD Guidelines for Multinational Enterprises (2011), pp. 42–46.

A tentative indication is that long-term here would be 15–30 years (or the full life span of the company if it has a shorter life expectancy).

For example, these periods could be 15–30 years in length, but broken down into three or 5 year segments.

With guidelines or standards endorsed by the European Commission to identify the relevant and sufficient indicators, such a check, which only needs to be undertaken when the business plan is drawn up or fundamentally revised, should not be too burdensome to require. An issue to be developed further is how this could be undertaken; most likely it can be covered by auditors with experience with sustainability assurance; see more in detail Sjåfjell (2015) Corporate governance for sustainability: the necessary reform of EU Company Law. Sjåfjell and Wiesbrock, pp. 97–117.

This is briefly discussed in Sjåfjell (forthcoming).

The international research project Sustainable Market Actors for Responsible Trade (SMART, 2016–2020) aims to contribute to such a systemic analysis, with the invaluable support of its growing global network, see http://​uio.​no/​smart. Interested scholars are invited to become members of the Sustainable Market Actors Network, see http://​jus.​uio.​no/​companies under Networks.