Business Ethics and Corporate Governance, Second Edition

ENCOURAGING GOOD GOVERNANCE

Competition in product markets and the demand for corporate control encourage good governance. For good corporate governance, on one hand there are ethics, self-regulation and ‘fair play’, on the other, there are sharp practices and ‘cowboy’ behaviour.

The reputation effects of external auditors can be very important in enforcing good governance, particularly where there are complexities and other issues that make shareholder monitoring difficult. Takeover codes should not be ‘captured’, but should maintain a consumer and shareholder focus.