The term corporate governanceis used loosely in practice, but often refers to the
structure of relationships and responsibilities among shareholders, board members
and managers designed to meet corporate objectives. For example, the OECD pro-
vides the following definition:^34
The definition of governance as the interaction between owners and managers in con-
trolling and directing a company is commonly accepted and used. A broader definition
would include “stakeholders” in addition to owners. Good governance has traditionally
been framed as an issue of what systems and procedures best ensure that managers are
accountable for, and act responsibly with, the assets they hold in trust. The contempo-
rary governance debate continues to attribute great importance to the issue of account-
ability though it increasingly focuses on what systems of governance best promote eco-
nomic efficiency and generate “Shareholder value” or returns for owners.Corporate governance disclosures are receiving close scrutiny as the public fo-
cuses attention on perceived weaknesses in how companies are governed. Violations
of required corporate governance disclosures, or failure to disclose potentially in-
flammatory information, have received wide publicity in the United States. For ex-
ample, when it was revealed in 2002 that General Electric failed to disclose specific
information about remarkably generous retirement benefits granted to Jack Welch, its
former CEO, Welch and the company were so embarrassed that the benefits were
13.9 CORPORATE GOVERNANCE DISCLOSURES 13 • 31Exhibit 13.14. Number of Firms Disclosing Forward-Looking Information in 1993/94
Annual Reportsa
aRefer to Frost and Ramin [1997] for sample selection details and empirical results. The
mean market capitalization for each country subsample of 40 companies ranged from US$
2.48 billion (Japan) to US$ 2.76 billion (France).
France Germany Japan U.K. U.S.Number of Sample Firms 40 40 40 40 40
Firms making no forward-looking disclosures 3 0 5 3 0
Firms making one or more forward-looking 37 40 35 37 40
disclosures
A. Firms disclosing Management’s Plans 29 28 33 25 39
or Objectives
B. Firms disclosing Forecasts:
Earnings 4 16 2 2 3
Sales 7 14 1 1 2
Capital Expenditures 2 6 0 4 22
Other 2 3 0 9 18
At least one forecast 11 22 2 11 31
C. Firms disclosing “softer” prospective 29 36 6 31 36
information
(^34) Variation in topics covered by different corporate governance codes further illustrates the range in
(implicit) definitions of governance. For example, the OECD’s Principles of Corporate Governance ad-
dress five areas: (1) The rights of shareholders; (2) The equitable treatment of shareholders; (3) The role
of stakeholders; (4) Disclosure and transparency; and (5) The responsibilities of the board. In contrast,
the United Kingdom’s Combined Code focuses on (1) Company directors; (2) Directors’ remuneration;
(3) Relations with shareholders; (4) Accountability and audit; and (5) Institutional shareholders.