West must harness ingenuity to bridge governance gap

By Tony Jackson, for the Financial Times, April 25 2010

Suppose you had been asked a decade ago whether the western model of corporate governance should be copied by the developing world. “Certainly,” you would have said. But not now. The state capitalism of the emerging economies may have the edge.

That arresting notion comes not from me, but from Sir David Walker, the UK’s elder statesman of corporate governance. At the heart of his disquiet is the widening gap between western boards and their owners.

A note of caution here. The extreme example of that gap lately has been the banks, where malfunctioning boards and negligent shareholders combined to produce disaster. It need not follow that all companies are similarly at risk.

Again, the China model is admired today for having sailed through the financial crisis. But that does not mean it cannot suffer crises of its own.

Still, let us pursue the argument. It seems clear that the gap – the so-called agency problem – has indeed been widening in the developed world in recent years….(continue reading)

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