The session that followed the challenging commentary of Silke Machold explored the place and role of regulation in corporate governance and, more specifically, in decision-making:
  • Ilya Okhmatovsky, a Russian based in Canada, observed that much attention and scrutiny on corporate governance usually follows scandals and abuses from within the boardroom. However the regulatory response that inevitably follows—hard law and additional compliance requirements—rarely results in better decision-making or company performance outcomes. In fact, the direct regulation of decision-making appears to be impractical (and potentially, nonsensical) because it constrains board autonomy and innovation, and it often leads to another round of subversive activity. Okhmatovsky suggested that a balance between external regulation (to outlaw certain actions and conduct) and internal policies (aligned to the purpose of the company) is more likely to lead to the performance outcomes desired by boards and shareholders. He has recently commenced a study to determine whether his hypothesis is supported in reality, or not. I look forward to reading the results in due course.
  • Jean–Phillipe Denis, a Parisian scholar, asked whether the company failures experienced around 2000 (Enron, Worldcom, etc.) and 2007–2008 (GFC) were, in fact, predictable events Drawing on the title of the movie, Denis looked back to the future. He suggested that equity inevitably becomes overvalued, and that many boards, shareholders and regulators do not learn from the past as they should. Further, Denis noted that provisions built on an agency theory of board–management interaction did not prevent the circa–2000 failures. Nor did the responses to those failures (Sarbanes–Oxley) prevent the GFC. Consequently, what hope should we have that the most recent set of measures (Dodd–Frank and UK Corporate Governance code, amongst others) might prevent failures in the future?
Neither speaker argued for more regulation, not did they argue for less. Rather, the challenge was a call to learn from the past and to do things differently. The thought-provoking proposal left delegates with much to ponder.