An Analytical Study of Board Accountability in Transnational Codes of Corporate Governance

The accountability of boards of directors is a critical element of good corporate governance. It has been widely observed that good corporate governance is best achieved by holding directors accountable for their behaviour and decisions. The World Bank has stated that corporate governance is ‘concerned with the systems of law and practice which will promote enterprise and ensure accountability.’ Many countries have codes of corporate governance. Such codes play an important role in a country’s corporate governance framework and so it follows that they should provide in some way for board accountability, especially given that codes are regarded as providing a set of best practice recommendations regarding, inter alia, the behaviour and role of the board of directors, and the content of codes is heavily affected by corporate governance practices. Certainly one of the first voluntary corporate governance codes, the UK’s Combined Code, stressed the importance of accountability as one of the principles on which it was based. In fact the Report of the Committee on the Financial Aspects of Corporate Governance (commonly referred to as ‘the Cadbury Report’), on which the UK’s Combined Code, and ultimately the UK Corporate Governance Code, was based, stated: ‘The issue for corporate governance is how to strengthen the accountability of boards of directors to shareholders.’ Enforcement of codes is a matter governed by external market forces and, most importantly, the board of directors. If the latter is not accountable then the enforceability of codes is likely to be diminished.