Corporate Governance, Accountability and Enterprise

Abstract

A system of corporate governance requires that a board of directors be accountable, while allowing the board to create wealth for the shareholders of the company. While recognising these twin objectives of a system of good corporate governance, the Cadbury Report's recommendations were directed towards issues of control and accountability. This has led to accusations that the emphasis on corporate accountability risks damaging the spirit of enterprise necessary for commercial and economic success. Given that the discussion concerning accountability and enterprise to date has been to a large degree anecdotal, the purpose of this paper is to offer a thorough review of the available evidence and arguments. In particular, the paper considers whether the present system of corporate governance operating in the UK, with its emphasis on market solutions and monitoring by non‐executive directors, allows the goals of accountability and enterprise to be jointly achieved. The paper concludes that a far greater understanding of the links between governance mechanisms and their effects on accountability and enterprise is required, in order to ensure that measures to increase accountability do not have unforeseen effects on the enterprise activities of the corporation.

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