Essays on Comparing Corporate Governance in Australia and the USA Case Study

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The paper "Comparing Corporate Governance in Australia and the USA" is a perfect example of a business case study.   At the start of the millennium, a number of scholars argued that corporate governance regimes could only converge, and this was inevitable as much as imminent (Hansmann & Kraakman 2001). This convergence was attributed to a cohesive Anglo-American model of governance. Moreover, Pinto (2005 cited in Hill, 2007) attributed this to the-then high interest in globalization, which was then the basis for a new debate on the international export of US model of corporate governance concepts.

However, the debate on convergence/divergence became more complicated in the aftermath of major corporate scandals such as the case of Enron. What emerged is that at the center of these scandals were conflicts of interests, e.g. gatekeeper conflicts and other conflicts related to the structure of packages for executive compensation. As a result of these scandals common jurisdictions of law, e.g. the US and Australia, set up a number of regulatory responses. Despite these moves affirming- to an extent- the hypothesis of convergence, based on common reform themes following the scandals, there still remain significant differences, especially in relation to focus and structure, as well as specific details of the regulatory frameworks.

For example, while the Australian reforms emphasized the need to strengthen the participatory rights of shareholders, the US did not (Hill, 2007). Equally, the shape of the reforms influenced subsequent debates on corporate laws that addressed different policy issues in both the US and Australia. Although shared themes that not only necessitated the need for reforms but equally informed them became the basis for certain corporate regulatory similarities between the US and Australia, there are still more notable differences.

This paper aims to point out and account for these differences between the Australian and the US corporate governance systems. Discussion The international corporate scandals did elicit a number of regulatory responses in most common jurisdictions of law, such as Australia and the US. These reforms included both legislative reforms as well as changes of governance by self-regulating organizations. At some point, the corporate governance reforms addressed the same governance concerns, especially regarding gatekeeper interest conflicts (Coffee, 2004a).

But as it were, the similarities mainly go as far as common needs for change. Hill (2007) reveals that despite influences of globalization, most of the undertaken reforms responded particularly to the internal/local issues. The US’ s Sarbanes-Oxley Act 2002, for instance, was based on the Enron scandal (Ribstein 2002). And in Australia, the CLERP 9 Act 2004 is mainly based on the collapse of the HIH Insurance (HIH Royal Commission, 2003). Equally, the post-scandal corporate reforms have been found to bear aspects of the prevailing local political pressures, both in terms of timing as well as evolution (Hill, 2007).

In line with this premise, it has been argued that the actual inspiration for the US reforms was the political climate that resulted from the WorldCom scandal, during which the protection of investors became a central political agenda as elections loomed (Langevoort 2006). Unusual bipartisan cooperation saw a smooth and quick passage of the reforms, which then remodelled the allocation of regulatory capacity and ability between US states and the federal law (Chandler & Strine 2003 cited in Langevoort 2006). Thus the defects of the Sarbanes-Oxley Act legislation have largely been attributed to haste, a reason for which Romano (2005) calls the legislation, ‘ emergency legislation’ (p.

1528).

Bibliography

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Chapple, L & Christensen, B 2005, ‘The non-binding vote on executive pay: a review of the CLERP 9 reform’, Australian Journal of Corporate Law, vol. 18, no.3, pp. 263-287

Coffee, JC 2004a, ‘Gatekeeper failure and reform: the challenge of fashioning reforms’, Boston University Law Review, vol. 84, no. 2, pp. 301-364

Hansmann, H & Kraakman, R 2001, ‘The end of history for corporate law’, Georgetown Law Journal, vol. 89, no. 2, pp. 439-468

HIH Royal Commission 2003, The failure of HIH insurance: volume I: a corporate collapse and its lessons, Commonwealth of Australia, Canberra

Hill, JG 2006, ‘Regulating executive remuneration: international development in the post-scandal era’, European Company Law, vol. 3, no. 3, pp. 64-74

Hill, J 2007, Evolving rules of the game in corporate governance reform, for presentation at ESRC/GOVNET Workshop, Canberra, 14-15 March.

Humphrey, R 2003, ‘If not, why not?’, address to the Australian Institute of Company Directors Forum, Sydney, 2 April.

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McConvill, J & Bagaric, M 2004, ‘Towards mandatory shareholder committees in Australian companies’, Melbourne University Law Review, vol. 28, no. 1, pp. 125-168

Ribstein, LE 2002, ‘Markets vs. regulatory responses to corporate fraud: a critique of the Sarbanes-Oxley Act of 2002’, Journal of Corporation Law, vol. 28, no. 1, pp. 1- 67

Romano, R 2005, ‘The Sarbanes-Oxley Act and the making of quack corporate governance’, Yale Law Journal, vol. 114, no. 7, pp. 1521-1611

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