CAMBRIDGE, Mass. — In the wake of last year's global financial meltdown, there is now widespread recognition that inadequate investor protection can significantly affect how stock markets and economies develop, as well as how individual firms perform.
The increased focus on improving corporate governance has produced a demand for reliable standards for evaluating governance in publicly traded companies. World Bank officials, shareholder advisers and financial economists have all made considerable efforts to develop such standards.
The notion of a single set of criteria to evaluate the governance of publicly traded firms is undoubtedly appealing. Both investors and publicly traded firms are operating in increasingly integrated global capital markets. But the quest for a single set of governance standards is misguided.