Corporate Governance, Capital Market Regulation and the Challenge of Disembedded Markets

Abstract

Long before the current financial and economic crisis, corporate governance and securities regulation had become part of one of the most interesting and dynamic regulatory areas in law and policy making today. Both areas had been undergoing dramatic transformations over the past 30-40 years, which saw a global expansion of capital markets and a deep-running 'financialisation' of the corporation. Around the world governments saw themselves challenged to adapt their regulatory apparatus to the whims and hues of nervous investors with global sensitivities. Meanwhile, scholars in law, economics, but also political science and sociology fiercely debated whether what was unfolding constituted a worldwide convergence around a corporate governance philosophy that placed the shareholder at the centre or whether we would continue to have different, divergent corporate governance systems around the world. Today's crisis-responses appear to be primarily designed to 'fix the excesses' of the past decades, rather than driven by an interest to connect the present efforts at regulation with the earlier convergence vs. divergence debates, which themselves built on much older critiques of the embeddedness of the firm and the political economy context of corporate activity. The paper contends that the sustainability of future corporate governance and securities regulation depends on the effort to critically examine both areas in the context of a larger inquiry into the goals and challenges of market regulation.

Europe Reconstructed

“…The legal recognition and governance of the corporation has ever since been a battleground for the competing interests of industrialists, banks, investors, workers and suppliers. The past century has seen many and varied attempts by states to regulate the conduct of limited liability corporations in the interests of workers, suppliers and unsecured creditors, or to achieve broader ends such as environmental protection or social equality. The reconstruction of European securities regulation has meant the weakening of laws that regulated the corporation in the interests of achieving purposes beyond the protection of shareholder value.…”