From Value Protection to Value Creation: Rethinking Corporate Governance Standards for Firm Innovation

A company’s pro-innovation needs are often met by the exploitation of its resources, widely defined. The resource-based theory of the firm provides immense empirical insights into how a firm’s corporate governance factors can contribute to promoting innovation. However, these implications may conflict with the prevailing standards of corporate governance imposed on many securities markets for listed companies, which have developed based on theoretical models supporting a shareholder-centered and agency-based theory of the firm. Although prevailing corporate governance standards can to an extent support firm innovation, tensions are created in some circumstances where companies pit their corporate governance compliance against resource-based needs that promote innovation. In the present context of steady internationalization and convergence in corporate governance standards in global securities markets towards a shareholder-centered agency-based model, we argue that there is a need to provide some room for accommodating the resource-based needs for companies in relation to promoting innovation. We explore a number of options and suggest that the most practicable option would be the development of recognized exceptions that deviate from prevailing corporate governance standards. We further suggest as to how an exceptions-based regime can be implemented in the U.K. and U.S., comparing the rules-based regime in the U.S. with the principles-based regime in the U.K

From Multilateral to Unilateral Lines of Attack: The Sustainability of Offshore Tax Havens and Financial Centres in the International Legal Order

Many micro-states have an economic model that attracts global corporations and international financial activities, because plugging into the global economy is important for states that have small domestic economies. To attract businesses, micro-states often offer low business and corporation taxes or lax regulatory regimes to compete in the fiercely competitive global market. Therefore, micro-states are criticised as offering havens, engaging in harmful tax competition and leading a race to the bottom. Although international efforts—such as those led by the Organisation for Economic Co-Operation and Development (“OECD”) and Financial Action Task Force (“FATF”)—have secured some co-operation from such micro-states, the micro-states’ position remains an uneasy one in the international legal order, as they engage in regulatory competition with onshore jurisdictions and with each other. Following the global financial crisis from 2007 to 2009, a slew of aggressive extra-territorial legislation in the area of taxation and finance has been introduced by a number of powerful jurisdictions to bring a new onslaught onto the micro-states’ economic models. This article argues that the US, EU and UK are leading such a move from the traditional multilateral approaches to governing micro-states’ role in regulatory competition to unilateral approaches that are more overtly antagonistic to micro-states’ economic models in offshore tax and finance. This article examines why such a move has occurred, and the confluence of driving factors for such a move. This article also examines the key unilateral measures, i.e. the rise of automatic information reporting regimes such as the US FATCA, the more modest EU equivalent, the UK’s new corporate reporting and tax enforcement regimes, and the EU’s reforms in financial regulation. We also see a trend in these unilateral strategies giving rise to more coordinated multilateral adoption of such strategies. Based on a consultancy project the author led in 2015, we have gained first-hand insights into policy-making in a micro-state which is facing the challenges described above. Micro-states offering the old models of tax and financial services are at the cusp of change. However, they have little choice but to continue to try and thrive in global economic competition. We provide some reflections on micro-states’ continuing role in regulatory competition in the changing international legal order

An Institutional Theory of Corporate Regulation

The regulation of corporate behavior has persisted in spite of peaks of neo-liberalism in many developed jurisdictions of the world, including the U.K. This paradox is described as “regulatory capitalism” by a number of scholars. Of particular note is the proliferation of corporate regulation to govern “socially responsible” behavior in recent legislative reforms in the EU and U.K. In seeking to answer the broader question of whether corporate regulation indeed effectively governs and moderates corporate behavior, this paper focuses on the nature of corporate regulation. Although different pieces of corporate regulation purport to achieve different objectives and impose different types of obligations, this paper offers an institutional account of corporate regulation, specifically in relation to the U.K.’s regulatory capitalism, as the U.K. is typically held up as having a liberal market economy (which is broadly similar to the U.S.). In this article, I argue that the nature and effectiveness of corporate regulation crucially depends on the nature of regulatory capitalism in the type of economic order under discussion. Hence the study of the U.K.’s economic order and its efforts in introducing corporate regulation to change corporate behavior holds lessons more generally for corporate regulation in economies that share similar features. The examination in this article provides an overarching framework for distilling the achievements and limitations of corporate regulation in such economic contexts. First, the paper clarifies that regulatory capitalism in the U.K. is characterized by three key tenets that reflect the spirit of the liberal market economy embraced here. Over time, gaps have been revealed in the achievements of these tenets of regulatory capitalism, particularly in relation to social expectations of the regulation of corporate behavior. These gaps have become the subject of debates in the realm of “corporate social responsibility” (CSR), where business, civil society, and the state frame the expectations of corporate behavior in contested ways: in relation to the scope of responsibility, the motivations for corporate behavior, the theoretical premises, and business practices. In the aftermath of the global financial crisis in 2007-2009, we observe increasing legalization in the EU and U.K. of CSR issues, framed in “new governance” regulatory techniques. They hold promise for change in corporate conduct through deeper forms of corporate engagement and accountability, but they appear at the same time relatively undemanding and susceptible to cosmetic compliance. By discussing key examples in new corporate regulation reforms in the EU and U.K., we seek to understand why recent corporate regulation reforms seem to offer mixed and, in some cases, relatively limited achievements in governing corporate behavior. We argue that the institutional account of corporate regulation continues to be able to explain regulatory weaknesses and limited achievements, in spite of the deployment of “new governance” regulatory techniques. This is because new governance regulatory techniques are implemented within the ethos of regulatory capitalism which limits their potential to introduce paradigm shifts. However, the limitations of these regulatory reforms highlight more sharply the institutional shifts that are needed in order to connect the efficacy of corporate regulation with meeting social expectations

Building a Single Market for Sustainable Finance in the EU-Mixed Implications and the Missing Link of Digitalisation

This article critically analyses the EU’s sustainable finance reforms and argues that the interaction between its regulative and enabling aspects creates mixed messages for governance and market-building. The Regulations adopt an incentive-based approach towards market-building for quality sustainable finance, but lower-level products are not shut out. However, if the market responds to quality signals facilitated by regulatory reforms, the article predicts that market-building may be concentrated in passively-managed indexed products which appeal to retail investors. This market may be dominated by large investment intermediaries who may gain an advantage precisely because of more stringent governance imposed on them. The article further argues that retail investors can be helped by policy bridging between sustainable and digital finance, such as adjustments to the legal duty of suitability to cater for investment advice incorporating sustainability preferences, including robo-advisory channels. The connection between digital and sustainable finance can be highly synergistic in attracting both institutional and retail demand

Protecting What Matters: Reflections on a Central Bank\u27s Role at Times of War

This Article explores the important and multifaceted roles of a central bank in extraordinary times of crisis such as war, focusing on the National Bank of Ukraine (NBU) and its responses in the face of the Russian invasion of Ukraine which began on February 24, 2022. During a time of martial law, institutional preservation and legitimacy can be threatened, but preserving these very institutional tenets is important in defending the nation under siege and in securing future restoration and rebuilding. In this light, we examine the NBU\u27s difficult and conflicting choices in three respects: providing war finance, preserving banking and financial systemic stability, and catering for citizens\u27 financial welfare. The navigation of these difficult and conflicting objectives by the NBU reflects the challenges for its institutional preservation and legitimacy. However, we also argue that there is a role for international solidarity with the NBU, in relation to European central banks concerned with the financial needs of Ukrainian refugees abroad, and the network of central bankers in the Financial Stability Board

Relief and rescue : suspensions and elasticity in financial regulation, and lessons from the UK’s management of the Covid-19 pandemic crisis

This Article analyzes the UK’s approach to handling the economic impact of COVID-19, offering insight for developed financial jurisdictions embarking on regulatory suspensions. When existing law no longer meets overarching policy goals such as financial stability, regulators resort to the theorization of legal elasticity. This Article situates regulatory suspension within this theory analyzing the tensions, hazards, and accompanying decision-making frameworks. The authors make three proposals for deployment of legal elasticity by regulators: (1) evaluate institutional stability; (2) engage in relational paradigms with relevant agencies, entities, and stakeholders; and (3) establish ex ante frameworks for crisis management and the potential use of legal elasticity