Introduction

Citation

Paulet, E. (2011), "Introduction", Corporate Governance, Vol. 11 No. 3. https://doi.org/10.1108/cg.2011.26811caa.001

Introduction

Article Type: Introduction From: Corporate Governance, Volume 11, Issue 3

Since the 1980s, the global financial system has faced several crises that have led regulators to take into account issues linked to the present economic climate. The fluctuations in share prices have made speculative and risky strategies more valuable. Several crises (the new technology bubbles, sub-prime crisis …) have enabled economists and financial analysts to draw the following conclusions. Firstly, systemic risk has increased over the last 30 years. Secondly, the recent collapse of the stock market despite the national rescue measures shows the importance of anticipation. Thirdly, aggressive capitalism has shown its limits. Governance is becoming a key factor in producing an alternative to this fluctuating trend, which could lead to a fairer situation for all economic agents. This core concept is best defined by the OECD (2004) that states:

The corporate governance is one of the factors of improvement of efficiency and growth and of reinforcement of confidence towards investors. The corporate governance refers to the relationship that exists between the director (or the board of directors), the manager, the shareholders, and all relevant partners to the management of the firm. It determines also the structure by which the corporation objectives are defined and the tools used to achieve them in order to ensure the correct evaluation of the results obtained. Corporate governance that gives evidence of quality should incite the administration board to pursue objectives satisfying both the interest of the company and the requirements of the shareholders. The existence of an efficient corporate governance system, inside a particular enterprise and in a precise and global economy, contributes to ensure the necessary confidence for a stable economic system.

This definition points out some essential principles. Firstly, the rights of the shareholders are clearly expressed globally and individually. Secondly, a delicate arbitration should be made between individual interest and collective objectives in order to guarantee the stability of the whole system.

The recent crisis has indicated that this last point is far from being an easily attainable goal. Financial institutions have privileged the maximization of profit on a short-term basis. They have forgotten their primary function: to grant credits to companies and to manage risk. In such a context, corporate governance has not been applied correctly: profit was the main objective to the detriment of collective interest. Hence, the objective for the next few decades will be to prove that profitability and ethical factors in financial questions are not antonymic. Their concomitance could lead to a new form of profit both for the financial institutions and the economic system as a whole. This signifies a more strict application of corporate governance in all its dimensions, both for financial institutions and economic partners. This will surely lead to more efficiency and social welfare for economic agents both at the national and international level.

In this issue we aim to provide the reader with a broad discussion of governance including both the financial and managerial aspects. By means of an international case study (France, Germany, UK, Italy …) we intend to prove that the core debate is very similar and a common search for a solution would be a better choice than an individual approach. We hope that our discussion will be helpful for academic researchers and professionals to measure both the significance of the problems and the relevance of a cross-country solution to guarantee the stability of the international financial and banking system.

Elisabeth Paulet