Book Review
Principles of Contemporary Corporate Governance
Jean du Plessis, James McConvill, and Mirko Bagaric
ISBN: 978-0-521617-83-3 2005 PB; 395 pp + xxii pages Cambridge University Press, Cambridge
Angus Young
Faculty of Law and ICAN Research Centre, Faculty of Business, University of Technology, Sydney NSW
This book is written by three legal academics based in Melbourne. Unlike most law textbooks, readers will find this book relatively easy to read without being inundated with too much legal jargon. The targeted audiences are law and business students, as well as lawyers and accountants as part of their continuing professional training. It is divided into four parts with a total of fifteen chapters. Though this is not the first book about corporate governance in Australia, departing from John Farrar's book, Corporate Governance in Australia and New Zealand (first edition published 2001, and second in 2005 by Oxford University Press), the authors here have attempted to integrate sparingly some management and economics literature into general discussions throughout. This approach will aid the reader to become acquainted with corporate governance guidelines, codes and laws in a business context. As there have been many publications by academics and practitioners from various disciplines, each laying claim to the meaning, interpretation and application of corporate governance, this publication presents itself as a comprehensive yet condensed and eloquent guide, which is quite enlightening.
In the first chapter, the authors tackled the delicate task of defining corporate governance and what it encompasses. The second chapter attempts to develop the contributions of the stakeholder model in enhancing governance. Chapters 3 and 4 dive into the functions of the board of directors, and the critical role directors play in business, by drawing from management literature and various Australian corporate regulations to highlight the legal dimensions. The keys concepts and legal obligations were written in a plain and concise fashion for non-lawyers to appreciate the numerous traps for unwary directors.
The next four chapters (5, 6, 7 and 8) focused on Australia by listing a number of corporate guidelines and reports developed by Australian business and professional groups, as well as illuminating the role of regulators and the Australian Stock Exchange (ASX) in regulating corporations. The authors have chosen the collapse of the HIH Insurance Group and subsequent legal sagas to exemplify regulatory theories and enforcement in discussions on this case study. Another distinctive aspect of this manuscript is the inclusion of recent Australian legislative refinements under CLERP 9.
Chapters 9-11 attempted to apply the principles of corporate governance onto practical issues, thereby linking the theories with practise through detailed analysis of the ASX best practice recommendations. This was followed by an examination of auditor and director liabilities in a profound and lucid manner, in particular the explanations of both civil and criminal sanctions. Chapter 12 then took an international slant with a comparative study of corporate governance in the US, UK and Germany, as well as OECD principles, mentioned throughout the book.
The final part is divided into three chapters (13, 14, 15) that deal with what the authors felt were 'gaps' not adequately explored in other governance publications. Chapter 13 endeavoured to emphasize the importance of shareholder activism. It appears to be a synopsis of one of the co-author's PhD thesis, calling for reforms leading to greater shareholder participation as substitute for independent non-executive directors, by questioning the contribution of this persona in enhancing governance. The next chapter rightly includes the issue of ethics without actually prescribing a model or standard in ethical governance. The final chapter argues that voluntary and self-regulation will continue to dominate the quest for development of better governance mechanisms.
In conclusion, this book does what it is supposed to do: it explains corporate governance and the mechanisms of governance in a straightforward and comprehensive manner. It is an easy and pleasant read as a whole, but the authors have excessively quoted several governance codes and repeated guidelines that could become quite tedious for those who are unfamiliar with this writing genre. The authors have also chosen to discuss the stakeholder model in governance without much reference, until the last chapter, to other theories developed in the last three decades. Even then, they did not do justice to or reflect the richness of other theories in governance. The use of economic and management literature is enlightening in terms of helping the reader to 'clothe the dry bones of the law and codes', and yet somewhat meagre to invite business students and executives to fully grasp the multifaceted aspects of the subject matter. Another issue covered throughout this book is the role of non-executive directors in governance. It is an important facet deserving more attention, given the extensive recognition and implementation in laws and codes across many developed and developing nations. Perhaps the authors might consider discussing this in greater detail in their next edition.
Overall this book has no comparisons, particularly in respect of Australia. It contains a wealth of resources that will undoubtedly be quoted widely in future research. Furthermore, the plain language approach to explain corporate law is informative and valuable as a handbook for both students and practitioners.
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