股东价值原则与公司治理结构（英文）-311正式版

TheEnlightenedShareholderValuePrincipleandCorporateGovernanceTheenlightenedshareholdervalue(ESV)principlewasformulatedduringthecomprehensivereviewofUKcompanylawbytheCompanyLawSteeringGroupinthelate1990sandearly2000sandrequiresdirectorsofcompaniestoactinthecollectivebestinterestsoftheirshareholders.TheprinciplewastakenupbythethenUKGovernmentandisnowembeddedintheCompaniesAct2006.Theemergenceoftheprincipleconstitutesanimpor-tantdevelopmentincorporategovernance,particularlyindeterminingwhatdirectorsmustconsiderwhenmanagingtheaffairsoftheircompanies.ThisbookexplainsandanalysesthenatureofESVanditscontributiontocorporategovernancewhilstalsoexaminingwhereitfitsintotheexistingtheoreticallandscape.AndrewKeaytracesthedevelopmentoftheprincipleofESVandconsidersitinthecontextoftheexistingprincipleswhichhavehistoricallyinfluencedcorporategovernance.Indoingso,thebookdrawsonseveralempiricalstudiestherebyenablingustogaugehowtheESVprincipleisaddressedincommercialpractice.KeaygoesontocompareESVwiththeconstituencystatutesthatapplyintheUSinordertodeterminewhetheranythingcanbelearntfromtheAmericanexperience.ThebookalsoassessesthereactionofotherjurisdictionstotheadventofESVandconsiderswhatimpactESVwillhaveonfinancialinstitutionsandnon-financialinstitutionsintheaftermathoftheglobalfinancialcrisis.AndrewKeayisProfessorofCorporateandCommercialLawattheUniversityofLeeds.Heisalsoabarrister-at-lawatKingsChambers.ProfessorKeayisaspecialistincorporatelawandinsolvencylaw.Herecentlyauthoredtheinfluentialbook,TheCorporateObjective(EdwardElgar,2011).RoutledgeResearchinCorporateLawAvailabletitlesinthisseriesinclude:CorporateSocialResponsibility,HumanRightsandtheLawMultinationalcorporationsindevelopingcountriesOlufemiAmaoThePoliticalDeterminantsofCorporateGovernanceinChinaChenxiaShiTheEnlightenedShareholderValuePrincipleandCorporateGovernanceAndrewKeayForthcomingtitlesinthisseriesinclude:RethinkingCorporateGovernanceThelawandeconomicsofcontrolpowersAlessioPaccesProgressiveCorporateGovernanceforthe21stCenturyLorraineTalbotDirectors’DecisionsandtheLawPromotingsuccessAliceBelcherTheEnlightenedShareholderValuePrincipleandCorporateGovernanceAndrewKeayFirstpublished2013byRoutledge2ParkSquare,MiltonPark,Abingdon,OxonOX144RNSimultaneouslypublishedintheUSAandCanadabyRoutledge711ThirdAvenue,NewYork,NY10017RoutledgeisanimprintoftheTaylor&FrancisGroup,aninformabusiness©

2013AndrewKeayTherightofAndrewKeaytobeidentifiedasauthorofthisworkhasbeenassertedbyhiminaccordancewithsections77and78oftheCopyright,DesignsandPatentsAct1988.Allrightsreserved.Nopartofthisbookmaybereprintedorreproducedorutilisedinanyformorbyanyelectronic,mechanical,orothermeans,nowknownorhereafterinvented,includingphotocopyingandrecording,orinanyinformationstorageorretrievalsystem,withoutpermissioninwritingfromthepublishers.Trademarknotice:Productorcorporatenamesmaybetrademarksorregisteredtrademarks,andareusedonlyforidentificationandexplanationwithoutintenttoinfringe.BritishLibraryCataloguinginPublicationDataAcataloguerecordforthisbookisavailablefromtheBritishLibraryLibraryofCongressCataloguinginPublicationDataKeay,AndrewR.Theenlightenedshareholdervalueprincipleandcorporategovernance/AndrewKeay.p.cm.ISBN978-0-415-68434-7(hardback)–ISBN978-0-203-10492-7(e-book)1.Corporategovernance–Lawandlegislation–GreatBritain.2.Directorsofcorporations–Legalstatus,laws,etc.–GreatBritain.3.Stockholderwealth–GreatBritain.4.GreatBritain.CompaniesAct2006.I.Title.KD2088.K432012346.41’06642–dc232012019164ISBN978-0-415-68434-7(hbk)ISBN978-0-203-10492-7(ebk)TypesetinGaramondbyCenveoPublisherServicesContentsPrefacevii123Introductionandbackground1Thetheoreticalbackground14Thedevelopmentoftheenlightenedshareholdervalueprinciple658545Thedutytopromotethesuccessofthecompany:ananalysisofsection172oftheCompaniesAct2006TheBusinessReview:ananalysisofsection417oftheCompaniesAct20061451852032632826789ConstituencystatutesAnevaluationofenlightenedshareholdervalueanditsimpactThefutureEpilogueIndex293PrefaceCorporategovernanceisindeedafast-movingandever-changingarea.Thishaswarrantedtheofferingofmanycontributionstotheliteratureinthefield,oftencomingfromatrans-disciplinaryorinter-disciplinaryperspective.Thisvolumeseekstofollowinthatfashion.Itscontributionistoexaminetheenlightenedshareholdervalueprinciplethatwasintroduced,relativelyrecently,intheUnitedKingdom,andtoanalysehowitaffectsthefieldofcorporategovernance.Whilstenlightenedshareholdervalue(‘ESV’)onlyoperatesthroughlegis-lationintheUK,academiccommentators,policy-makersandlawyersinotherjurisdictions,suchastheUnitedStatesofAmerica,Australia,Canada,SouthAfricaandHongKonghaveconsidereditindetailandsomehavearguedthatitisworthyofapplicationinsomeformintheirownjurisdic-tions.Hence,whilethisworkfocusesontheUK’sbrandofESVandthelegislationthathasenactedit,itisrespectfullysuggestedthatsomeofwhatisdiscussedherewillbeofinterestelsewherearoundtheworld.TheESVprinciplewasenactedinlawthatbecameoperativeon1October2007and6April2008,butasyettherehasbeenlittleinthewayofcourtdecisionsthatprovidesagreatdealofguidanceorindicationastohowtheprinciplewillbeappliedandwhatitslikelyimpactintheUKwillbe.Thisworkseekstoanalysetheprincipleandtoassessthelikelyimpactofenlight-enedshareholdervaluegenerallyspeaking,andmoreespeciallyhowwillitaffectcorporategovernance.AsIhopethatthebookisreadbypeoplewhoworkinvariousdisciplines,Ihavewrittenoutinfullthenamesofjournalswhichareusedinreferences,ratherthanusingabbreviations,soallreadersmightbeabletofollowupanyreferenceswithouthavingtoascertainfirstwhatjournalisbeingreferredto.IhavewrittenseveralpiecesonESVorrelatedissuesthathavebeenpublished,butIfeltthattherewasmoretosayaboutESVandrelatedissuesandIwantedtoplaceadiscussionofESVinacorporategovernancecontextandtrytocovermostmattersthatarepertinenttoESVanditsapplication,somethingthatisnoteasilydoneinseparatearticles.SomeofthematerialinthebookdrawsonseveralarticleswhichIhavewrittenandpublished.IamviiiPrefacemostthankfultoseveralpublishersforallowingmetodrawuponmaterialthatIhavehadpublishedbytheminarticlesandbooks.IacknowledgethatIuse,withthepermissionofthenamedpublishers,wherenecessary,materialfromthefollowing:•••‘StakeholderTheoryinCorporateLaw:HasItGotWhatItTakes?’(2010)9RichmondJournalofGlobalLaw&Business240–300(UniversityofRichmond)‘ShareholderPrimacyinCorporateLaw:CanItSurvive?ShouldItSurvive?’[2010]EuropeanCompanyandFinancialLawReview369–413(DeGruyter)‘MovingTowardsStakeholderism?EnlightenedShareholderValue,ConstituencyStatutesandMore:MuchAdoAboutLittle?’(2011)22EuropeanBusinessLawReview1–49(KluwerLaw)••‘GoodFaithandDirectors’DutytoPromotetheSuccessoftheirCompany’(2011)32TheCompanyLawyer138–43(SweetandMaxwell)‘Risk,ShareholderPressureandShort-termisminFinancialInstitutions.DoesEnlightenedShareholderValueOfferaPanacea?’(2011)LawandFinancialMarketsReview(HartPublishing)•Directors’Duties(JordanPublishing,2009)(www.jordanpublishing.co.uk)Ihaveundoubtedlybenefitedfromdiscussing,eitherorallyorinwriting,aspectsofESVandmattersrelatingtoitwithseveralfriends,colleaguesandstudents.IwouldliketoacknowledgeparticularlysuchdiscussionswithJoanLoughrey,PeterTaylorandDanielAttenborough.IamverygratefultoKateCarpenterfromRoutledgewhohelpedmegetthisbook‘offtheground’andtoStephenGutierrezalsoofRoutledgeforliaisingwithmeonbehalfofthepublisher.AndrewKeayLeeds20January20121IntroductionandbackgroundIntroductionThereislittledoubtthatcorporategovernanceisacriticalconceptinthecommercialworldoftoday,justasithasbeenformanyyears,arguablyasfarbackasthebirthofthelimitedliabilitycompany.Itwasnotuntilthelast20yearsorsothattheterm‘corporategovernance’hasbeenusedonafrequentbasis,emanatingoriginallyfromtheUS,butmanyoftheissueswhichitembraceshavebeenthesubjectofmuchconsiderationincompanylawandpracticeandspecificallyinthepromotion,incorporation,manage-ment,financingandregulationofcompaniesformanyyears.Nowcompaniesregularlyhavepartoftheircorporatewebsitedevotedtotalkingaboutwhattheydobywayofcorporategovernance.Asexplainedlaterinthischapter,thisbookdealswithanaspectofcompanylawthatrelatesto,andimpactson,corporategovernance.Thisaspectistheenlightenedshareholdervalue(ESV)principlethatemergedinthelastdaysofthepreviouscenturyandhasbeenintroducedintolegislationinrecentyearsintheUK.Thisnewprincipleisrelatedtocorporategovernanceasitprovidesforhowcompaniesaretobemanaged.ClearlytheCompanyLawReviewSteeringGroup(‘CLRSG’),thecommitteeappointedin1998bytheDepartmentofTradeandIndustryintheUKtoundertakeacomprehensivereviewofUKcompanylaw,includedmuchofitsdiscussionsaboutESVunderabroadcorporategovernanceheading.1Indeed,theCLRSGenvisagedESVhelpingtoimprovecorporategovernance.AttheoutsetitshouldbenotedthatESVisnowacentralelementinUKcompanylaw,butithasalsoattractedsignificantinterestanddiscussion1Forexample,seeCompanyLawReview,ModernCompanyLawforaCompetitiveEconomy:TheFinalReport,Volume1(2001)atChapter3.2Introductionabroad,includingthelikesoftheUnitedStates,2Australia,3Canada,4HongKong5andSouthAfrica.6Thischapterisintendedtobeageneralintroductiontothebook.Thenextsectionofthechaptersetsthesceneanddiscussestheroleofcompaniesinthecommercialworld.Thisisfollowedbyaverybriefdiscussionofthenatureofthecompany.Nextthechapterexaminesthemeaningofcorporategovern-ance.Afterthatthechapter,intwodiscretesections,discussesthemainplay-ersinthecontextofESV,namelythedirectorsandstakeholders(includingtheshareholders).Finally,thechapterexplainstheobjectiveandstructureofthebook.2Forexample,seeC.WilliamsandJ.Conley,‘AnEmergingThirdWay?TheErosionoftheAnglo-AmericanShareholderValueConstruct’(2005)38CornellInternationalLawJournal493;V.Ho,‘‘‘EnlightenedShareholderValue”:CorporateGovernanceBeyondtheShareholder-StakeholderDivide’(2010)36JournalofCorporationLaw59;D.Millon,‘EnlightenedShareholderValue,SocialResponsibility,andtheRedefinitionofCorporatePurposeWithoutLaw’at19,andaccessibleat</abstract=1625750>(accessed30December2010).3Forexample,seeParliamentaryJointCommitteeonCorporationsandFinancialServices,CommonwealthofAustralia,CorporateResponsibility:ManagingRiskandCreatingValue(2006)<.au/Senate/committee/corporations_ctte/corporate_responsibility/report/report.pdf>(accessed6October2011);CorporationsandMarketsAdvisoryCommittee,‘TheSocialResponsibilityofCorporations’December2006atpp102–107andaccessibleat.au/camac/camac.nsf/byHeadline/PDFFinal+Reports+2006/$file/CSR_Report.pdf.(accessed29September2011);R.Langford,‘TheDutyofDirectorstoActBonaFideintheInterestsoftheCompany;APositiveFiduciaryDuty?AustraliaandtheUKCompared’(2011)11JournalofCorporateLawStudies215.4Forexample,seeS.Carsley,‘ARudderlessRegime:TheUnitedKingdom’s“EnlightenedShareholderValue”asaModelfortheDutyofLoyaltyinCanada’2010,unpublishedLLMthesisattheUniversityofToronto;P.Vasudev,‘StakeholdersintheCBCA:AnAppraisalandSomeProposals’(2011)(unpublishedpaper,copyonfilewiththeauthor).5Forinstance,seeFinancialServicesandtheTreasuryBureau,‘SecondpublicconsultationonCompaniesOrdinancerewrite’,2April2008andaccessibleat<.hk/fsb/co_rewrite/eng/pub-press/doc/2ndPCCOR_e.pdfhk/fsb/co_rewrite/eng/pub-press/doc/2ndPCCOR_e.pdf>(accessed23September2011);J.Yap,‘Consideringtheenlightenedshareholdervalueprinciple’(2010)31CompanyLawyer34;J.Ho,‘Directors’dutytopromotethesuccessofthecompany–ShouldHongKongimplementasimilarprovision?’(2010)10JournalofCorporateLawStudies17andaccessibleat/abstract=1734128(accessed22September2011);J.Ho,‘Issection172oftheCompaniesAct2006theguidanceforSCR?’(2010)31CompanyLawyer7;D.Wu,‘Managerialbehaviour,companylaw,andtheproblemofenlightenedshareholdervalue’(2010)31CompanyLawyer53.6Forexample,seeSouthAfricanCompanyLawforthe21stCentury–GuidelinesforCorporateLawReform,SouthAfricanGovernmentGazette26493of23June2004andaccessibleathttp://us-cdn.creamermedia.co.za/assets/articles/attachments/01326_notice1183.pdf(accessed22September2011);I.Esser,‘RecognitionofVariousStakeholderInterestsinCompanyManagement’June2008,unpublishedLLDthesisattheUniversityofPretoria(copyonfilewiththeauthor).Introduction3SettingthesceneTheimportanceofcorporategovernanceismademoresignificantbecauseofthefactthatcompaniesareofgreatconsequenceintheworldoftoday.Theyhaveagreateffectonourdailylivesandhaveaninfluenceoverjustaboutallthatwedo.Companiesthatareprofit-making,andthisbookisfocusedonsuchcompanies,playafundamentalroleasthemostimportantinstitutionsforsocialwealthcreationincapitalisteconomies.7Undoubtedly,alargeelementofeconomicactivityisundertakenbycompaniesinmost,ifnotnearlyall,oftheworld’snations,8andtheyhavebeenandarethedominanteconomicinstitutionsintheworld.IntheUnitedStatescompaniesaccountfornearly100percentofallnationaloutput.9Thefactisthatforwelloveracenturythecompanyhasbeen‘oneoftheprimaryinstitutionsofcapital-ism’10andhasdevelopedasafrequentlyusedvehiclefortheownershipandcontrolofproperty,theaccumulationofcapitalandtheorganisationofproduction.11Butthecompanyhasalsobecometheprimaryvehiclefortheconductofbusinessesincountriesthatarenotregardedascapitalistinorien-tation.Clearlycompaniesingeneralarethemostusedstructureinvokedbybusinessesaroundtheworldforrunningtheiractivities.12Companiesobviouslyvaryinsize.Atthebottomof‘thepile’wehavesmallprivatecompanies(knownintheUSasclosely-heldcompanies13),whichhavefewshareholders,andpossiblyonlyone,andatthetopwehavehugemulti-nationalpubliccompaniesgeneratingmillionsofdollars,pounds,euro,yenetceachyear.Inmostcountriessmallprivatecompaniesarebyfarthemostprevalent.Theywilloftenrunasmallbusinessemployingafewpeople,andoperateinatown,regionornationally.Publiccompaniesarefewerinnumberbuttheytendtohaveagreaterinfluenceandeffect.Theyareoftenpartofcomplexcorporategroupingsoperatinginseveralsectorsofindustryandcommerce,andconsistingofmanylayersofsubsidiarycompanies.14Theyhaveaprofessionalmanagementandasophisticatedorganisationalstructure.7M.Blair,‘ForWhomShouldCorporationsBeRun?:AnEconomicRationaleforStakeholderManagement’(1998)31LongRangePlanning195at195.8M.Blair,OwnershipandControl(WashingtonDC,BrookingsInstitution,1995)at17.9R.Estes,TyrannyoftheBottomLine:WhyCorporationsMakeGoodPeopleDoBadThings,1996at86andreferredtoinC.BagleyandK.Page,‘TheDevilMadeMeDoIt:ReplacingCorporateDirectors’VeilofSecrecywiththeMantleofStewardship’(1999)16SanDiegoLawReview897at899.10J.McCahery,S.PicciottoandC.Scott,‘Introduction:CorporateControl:ChangingConceptsandPracticesoftheFirm’inJ.McCahery,S.PicciottoandC.Scott(eds),CorporateControlandAccountability,Oxford,ClarendonPress,1993,at2.11Ibid.12O.Couwenberg,‘CorporateArchitectureandLimitedLiability’(2008)4ReviewofLawandEconomics621at622.13Theyareknownas‘proprietarycompanies’inAustralia.14A.Keay,TheCorporateObjective,Cheltenham,EdwardElgar,2011,at2–3.4IntroductionTherearemanypubliccompaniesaroundtheworldthatarehugeandtheirverysizemeansthattheyhaveasignificantinfluenceonnotonlyindividualsbutonindustriesandnations.In2000,theInstituteforPolicyStudiesreleasedastudythatshowedthatoftheworld’s100largesteconomicentities,51werecorporationsand49werecountries,15and22Americancorporationshadmarketcapitalisationsattheendofthe1990sthatweregreaterthanthegrossdomesticproductof22countries,andthisincludedreasonablysignifi-canteconomiessuchasSpainandPoland.16Morerecentlythefiguressuggestthatthenumberofcompaniesintheworld’s100largesteconomicentitieshasinfactincreasedto52.17Allcompanies,whethertheyarelargeorsmall,multinationalorlocal,playafundamental,multi-dimensionalandevolvingroleinpromotingeconomicgrowth.18Ithasbeensaidthat‘thecorporationprovidesthelegalframeworkforthedevelopmentofresourcesandthegenerationofwealthintheprivatesector’.19Butcompaniesdonotmerelyhaveaninfluenceoneconomicaffairs;theirinfluence,andthisisparticularlysowithlargepubliccompanies,hassuchareachthattheycanaffectaspectsofsocialandpoliticallifeaswell.20Companiesownlargeamountsoflandandotherassets,theyenterintocontracts,borrowlargesumsofmoney,andemploypeople.Publiccompaniescanexertsignificantleveragewhendealingwiththecommunitiesinwhichtheyoperate,andtheycanaffectthedevelopmentofregions,andevennations;theirinvestmentdecisionscandeterminetherateofgrowthofparticularsectorsofbusiness.21Therearesomelargercompanieswhichprovidecriticalpublicservicessuchastelecommunications,water,electricity15S.AndersonandJ.Cavanagh,‘Top200:Theriseofcorporateglobalpower’,InstituteforPolicyStudies,2000,</downloads/Top_200.pdf>andreferredtobytheAustralianParliamentaryJointCommitteeonCorporationsandFinancialServices,CorporateResponsibility:ManagingRiskandCreatingValue,June2006atpara2.39(accessed6October2011).16G.Morgenson,‘ACompanyWorthMoreThanSpain’NewYorkTimes,December26,1999,at1andreferredtoinL.Mitchell,CorporateIrresponsibility,NewHaven,YalePress,2001,at2.17S.Andersonetal,FieldGuidetotheGlobalEconomy,2ndedn(2005)at69andreferredtobyK.Greenfield,‘DefendingStakeholderGovernance’(2008)58CaseWesternReserveLawReview1043atn4.18DepartmentoftheTreasury(Australia),Submission134,p.1,andreferredtoinPara2.34oftheAustralianParliamentaryJointCommitteeonCorporationsandFinancialServices,CorporateResponsibility:ManagingRiskandCreatingValue,June2006(accessed6October2011).19TeckCorporationvMillar(1972)33DLR(3d)288at314perBergerJ.20S.Bottomley,TheConstitutionalCorporation,Aldershot,Ashgate,2007,at3;C.Kaysen,‘TheCorporation:HowMuchPower?WhatScope’inE.Mason(ed),TheCorporationinModernSociety,Cambridge,Massachusetts,HarvardUniversityPress,1970reprint,at99;D.Votaw,‘TheMythologyofCorporations’(1962)(Spring)CaliforniaManagementReview58at68.21Kaysen,ibidat92.Introduction5andgas.ThomasDonaldson22hasnotedthat‘largecorporationsarecapableofinfluencingmainstreamsocietaleventsandthispowerisnotonlyeconomic,butsocialandpolitical’.23Onecanpointtoinstancesofcompaniesoperatingatalevelthatis‘beyondthatofnationallaw’,24andactingsoastoinfluencegovernmentpolicyandlaw-making.25Whilethelargeracompanythegreateritsimpactontheworld,generallyspeaking,itdoesnotmeanthatthewayasmallcompanyoperatesisofnosignificance.Thefactisthatnomatterwhatsizeacompanyisitmustbegovernedanditmustbesubjecttoappropriaterulesandprinciplesastohowitoperates.Therearemanyreasonsforthis,notleastisthefactthatthekindofcompaniestowhichwearereferringinthisworkarelimitedliabilitycompanies.Referringtotheminsuchamannerissomewhatmisleadingasitsuggeststhatthecompaniesenjoylimitedliability.Butthatisnotthecase.Insuchcompaniesitistheshareholderswhoenjoylimitedliability.Theliabilityofshareholdersislimitedtopayingwhattheyowe,ifanything,onthesharesforwhichtheyhavesubscribed.Limitedliabilityhasratheramixedpress,asisevidentfromwhatCookeJoftheNewZealandHighCourtstatedinNicholsonvPermakraft(NZ)Ltd:26It[limitedliability]isaprivilegehealthyastendingtotheexpansionofopportunitiesandcommerce,butitisopentoabuse.Irresponsiblestruc-turalengineering–involvingthecreating,dissolvingandtransformingofincorporatedcompaniestotheprejudiceofcreditors–isamischieftowhichthecourtsshouldbealive.ThecompanyWhatweknowasalimitedliabilitycompany,whetheritbeofthepublicorprivatevariety,isapeculiarthing.Itisnothuman,butitisalegalperson,asaconsequenceoftheprocessofincorporation(registration).Asaresultofbeinglegalpersonscompaniesareabletodomanythingswhichcanbedonebyhumans,namelyownproperty,enterintocontracts,commencelegal22CorporationsandMorality,EnglewoodCliffs,NJ,PrenticeHall,1982,at7.23Forfurtherdiscussionconcerningthepoliticalnatureofalargecompany,seeS.Bottomley,‘FromContractualismtoConstitutionalism:AFrameworkforCorporateGovernance’(1997)19SydneyLawReview277,andhissubsequentmonograph,TheConstitutionalCorporation,Aldershot,Ashgate,2007.24S.Wheeler,CorporationsandtheThirdWay,Oxford,HartPublishing,2002,at10andreferringtoF.Johns,‘TheInvisibilityoftheTransnationalCorporation:AnAnalysisofInternationalLawandLegalTheory’(1994)19MelbourneUniversityLawReview893.25J.Parkinson,CorporatePowerandResponsibility,Oxford,OxfordUniversityPress,1993,at19.26(1985)3ACLC453at459.6Introductionproceedingsintheirownnameand,mostimportantly,andunlikehumans,enjoyperpetualsuccession.Companiesarestructuresthatpeoplewhowanttocarryonbusinesscollec-tivelycanuseeffectivelyandproductively.Somehaveregardedthecompanyasoneofthebestsystemsthatmanhaseverdesigned.27Companieshavebeenfoundtobeusefulwhenabusinessisproducing,onaregularandorganisedbasis,goodsorservicesbecauseinundergoingthesetasksitisnormaltoneedawidevarietyofinputs,includingfinancialresources,risk-bearingservicesanddecision-making.28Thecompanyisregardedasbeingwell-suitedtoachievingthisasitavoidsthecostsassociatedwithmarkettransactionsinvolvingindividuals;thecompanyisabletodealwithallofthetransactionsandthisreducestransactioncostsandismoreeconomicallyefficient.RonaldCoase,therenownedeconomicstheorist,tooktheviewthatthecompanyisefficientasitpermitsthecollectionofvariousresources,suchascapitalandlabour,withouttheneedtonegotiatethetermsforeachandeveryuseoftheresources.29Onceacompanyisestablisheditcanrepeatthisforlatertransac-tions,andthisisbeneficialasitreducestheamountoftransactioncosts.Inthisbookseveralquotations,particularlyfromAmericancommentators,referto‘thecorporation’.Inmanycountriescompaniesareknownascorpora-tions.Notwithstandingsomeesotericdifferencesbetween‘company’and‘corporation’thisbookmakesnodistinctionbetweenthetwoterms.Whatiscorporategovernance?Ihavealreadyadvertedtothefactthatcorporategovernanceisacriticalmatterinthecommercialworld,andhasbeenformanyyears.30Butoneofthedifficultiesofdealingwithcorporategovernanceandissueswhichaffectitandrelatetoit,arethat,interalia,itisnotaneasyconcepttodefine.Ithasbeensaidtobeanambiguousconcept.31Ithasbeendefinedextremelybroadlybysome,suchastheCadburyReportwhereitwassaidtobe:‘thewholeframeworkwithinwhichcompaniesoperate’.32Otherswhohavealso27R.Tricker,CorporateGovernance–Principles,PoliciesandPractices,Oxford,OxfordUniversityPress,2009at8.28L.Putterman,‘OwnershipandtheNatureoftheFirm’(1993)17JournalofComparativeEconomics243at245.29SeeR.Coase,‘TheNatureoftheFirm’(1937)4Economica386.30IneconomicsitistracedbacktothetimeofAdamSmith(1776):R.Adams,B.HermalinandM.Weisbach,‘TheRoleofBoardsofDirectorsinCorporateGovernance:AConceptualFrameworkandSurvey’(2010)48JournalofEconomicLiterature58at96.31K.Keasey,S.ThompsonandM.Wright,‘Introduction’inCorporateGovernance–Economic,ManagementandFinancialIssues,Oxford,OxfordUniversityPress,1997at2.32TheCadburyCommittee,ReportoftheCommitteeontheFinancialAspectsofCorporateGovernance(TheCadburyReport),1992atpara.2.5andaccessibleat</codes/documents/cadbury.pdforg/codes/documents/cadbury.pdf>(accessed6October2011).Introduction7adoptedabroadapproachtoexplainingcorporategovernanceareThomasClarke,whenhesaidthat‘itconcernstheexerciseofpowerincorporateentities’,33andRobertMonksandNellMinnowwhosaidthat‘itistherela-tionshipamongvariousparticipantsindeterminingthedirectionandperformanceofcorporations’.34ProfessorJohnFarrarsaidthatcorporategovernancewasasubjectwhichinvolvesconsiderationsof‘thelegitimacyofcorporatepower,corporateaccountabilityandstandardsbywhichthecorpor