Are codes fostering convergence in corporate governance? An institutional perspective

This chapter discusses the role of corporate governance codes in the context of pressures for corporate governance convergence across countries. We show that there is a diverging convergence as corporate governance practices continually evolve. Further, given that codes are non-mandatory in most countries, firms can cherry pick to adopt those practices that best fit their interests. This is consistent with the view that firms as agents have some degrees of freedom in creating their corporate governance portfolio even though they are embedded in a given national or institutional environment (Aguilera & Jackson, 2003; Aguilera, Desender, & Castro-Kabbach, 2011). In this chapter, we seek to address the following questions posed in this book through the lenses of codes: What are the institutional drivers that propel firms in different nations towards convergence in corporate governance? What are the major impediments that stand in the way of convergence? What empirical evidence suggests that we are moving towards or away from convergence?