A Systematic Review of Corporate Governance Literature

The UK’s Corporate Governance Code was also known previously as the ‘Combined Code’, is a world renowned and one of the most influential CG Codes in the world. The Code is recognised and distinguished by its main characteristic of being Flexible. In comparison with the Sarbanes-Oxley Act of the US, the ‘Comply-or-Explain’ maxim of the UK’s CG Code offers Flexibility and Voluntariness to the companies. This maxim has not only been supported in the UK but also supported and recognised in the EU and beyond.
However, despite all the recognition, support and undeniable advantages of its flexibility the UK’s CG Code has been subject to various criticisms and limitations which has led to a call for reforms in this area of Corporate/Business Law. Some argue that the objectives of the ‘Comply-or-Explain’ Principle has not been met and has not contributed towards a meaningful improvement in Corporate Governance in the UK.
The main objective of this study is to determine if the ‘Comply or Explain’ approach of CG in the UK should be reformed. To do so, the author conducts a systematic literature review on Corporate Governance.
The author argues that although the ‘Comply-or-Explain’ Principle suffers from practicality, reality and applicability deficiencies, it should not be completely abrogated. Instead certain regulatory amendments and interventions of soft laws are needed to fix the deficiencies of the code. Same should be done considering the VUCA Business world that has recently thought us the importance of Resilience in order to be Sustainable. Most research, articles, theories in the Scope of Business Management stressed much on the importance of Sustainability not considering and anticipating impacts such as the Covid-19 Pandemic. This paper highlights that Resilience is an important factor to be considered for businesses and laws that regulate businesses, in order to achieve business sustainability, viability and continuity in the event of an unexpected, undiscovered, and unprecedented impact. Through this perspective and aspect the effectiveness and efficiency of the ‘Comply-or-Explain’ maxim can be advanced and the deficiencies could be corrected without destabilizing the foundations of the UK CG.
This Paper in conclusion proposes that the existing advantages of the ‘Comply-or Explain’ Model should be preserved and the overall quality of the model should be improved by considering its compatibility with the modern trends in trade and anticipation of unexpected, unprecedented or undiscovered impacts in order to become applicable, realistic and practical.