Corporate governance code

Self-regulation as a source of corporate governance

Corporate governance is a progressive, ever-evolving reality, influenced, in its formation and adaptation, by regulatory acts, market forces, and cultural and social movements.

Market automatisms are indeed insufficient to solve the problems peculiar to corporations, typically related to the misalignment of interests between their ownership and control, which can be explained through the well-known agency theory.

The limitations of corporate law derive, essentially, from its nature as a heteronomous source. The legal norm, in fact, directs the will of the individuals to which it is subject, but it does not have any influence on it, since it is not the result of a process of reflection and repentance of these individuals.

Another source of governance becomes, therefore, that which is formed within the business environment itself, more functional in ensuring the genuine formation of business ethics, which is the basis of good corporate governance. Attention to such good governance does not, therefore, derive from external rules, but is rather the product of so-called moral suasion, that is, the belief on the part of businesses in the need for self-discipline.

Clear, in any case, is the importance of a stable connection between corporate governance codes and state-source corporate law. In particular, where corporate law reaches, there is no need for self-regulation to intervene; if, on the other hand, corporate law is silent, it is important for self-regulation to fill in the gaps.

The principle of "comply or explain"

Each company should therefore have its own code, specifying and clarifying, in particular, the roles and functions of corporate bodies.

These codes have, in the various countries (an essential overview of which is given below), different sources and origins, but equally have an essentially voluntary basis. And indeed, the only obligation for companies is to communicate externally (so-called disclosure) the adoption or non-adoption of the code, as well as, possibly, from which individual standards they have deviated. This is the principle of comply or explain, where fundamental is not so much the decision itself, but rather its justification. It is precisely from this obligation to explain that, if not an obligation to adopt the code (which, as mentioned, does not exist), at least a kind of presumption, on the part of the legislature, of its adoption is inferred.

According to Italian law, it is up to the directors of the company to decide whether or not to adopt the code, with only a judgment of expediency on the directors' decision remaining with the shareholders.

The rules dictated by the self-regulatory code, if implemented, end up acquiring, directly by statute and indirectly by law, binding force.

European corporate governance codes: an overview

1) Cadbury Code 1992

This is the Report of the Committee on Financial Aspects of Corporate Governance, better known as the Cadbury Report by Adrian Cadbury, chairman of the committee. Submitted on 1.12.1992, it is the first and most important report on corporate governance.

2) Italian Corporate Governance Code 2020

Fur further details see the Report on Corporate Governance in Italy: the implementation of the Italian Corporate Governance Code.

3) UK Stewardship Code 2020

4) German Corporate Governance Code 2022

References

• M. Tonello, Corporate governance e tutela del risparmio. Convergenza internazionale e competizione tra modelli regolamentari, in Trattato di diritto commerciale e di diritto pubblico dell’economia, edited by F. Galgano, vol. XXXV, Cedam, Padova, 2006, pp. 197-198-377.
• L. Enriques, Codici di “corporate governance”, diritto societario e assetti proprietari: alcune considerazioni preliminari, in Banca Impresa Società, 2003, p. 99.
• M. Cera, Le società con azioni quotate nei mercati, Zanichelli, 2020, pp. 123 ss.