On corporate governance: circa 2012 and 2014. What's changed?

I got a little bit fed-up with writing today, so I decided to read back through Musings, to see how the corporate governance discussion has changed over the last couple of years. Sadly, many of the topics discussed two years ago are still being discussed. Sure, the prevalence of articles about boardroom performance seems to be waxing, and the number of quota-based gender proposals has waned somewhat. That a very similar set of topics is being discussed is a shame. It suggests we are making slow progress. The following muse, originally written in October 2012, illustrates the point fairly well.

Have you noticed the rising tide of news stories about corporate governance in recent months? While some have highlighted the fraudulent behaviours of some boards and directors, most of the articles have focussed on efforts to improve the quality of governance around the world. 

Much of the current discussion is focussed on regulation and diversity. Some regulators, including those in Singapore, believe that good regulatory frameworks are key to investor confidence. Many others, including Hong Kong's Exchange HKEx and noted academic Dr Richard Leblanc, are promoting diversity as a means of improving the quality of governance. I applaud these moves, but question whether regulation and diversity are the variables that will reliably deliver the main goal of good governance: better company performance. Regulation, for example, is a compliance tool not a growth tool. While they provide important safeguards for shareholders and stakeholders, they don't help companies to grow.

My conclusion, having reading hundreds of research reports and peer-reviewed articles, is that behavioural factors, social context and an active involvement in strategic decision-making are far more important than regulatory, structural or composition factors. As such, this is where our efforts to improve governance performance should lie. Ultimately though, the bottom line remains the same. Shareholders—whether professional investors or small business owners—need to know that the board is fulfilling its mandate to maximise company performance. If regulation or diversity helps achieve that, then well and good. If not, then let's move our attention to other factors—quickly—for the good of our economy and society.