Corporate Governance and the Surrogates of Managerial Performance

This paper discusses the theorized approaches to corporate governance (CG) in the UK-US-Australian tradition, and in this context the new surrogates of governance that have emerged since Berle and Means articulated their celebrated separation thesis in 1932. It shows that these developments have inverted the pyramid of CG from that of the Board dictating the agenda and direction of the corporation, to share price driving the actions of the Board. The paper argues that this shift in the marketplace requires a reorienting of the study of CG from its present preoccupation with finding ways and means of making managers more accountable to shareholders, to that which will provide a better understanding of the interrelationship between share price, takeovers market, and executive compensation, as well as their cumulative impact on securities markets and the long term financial stability of corporations