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Governance Culture and Development: A Different Perspective on Corporate Governance
OECD Observer

Many experts argue that OECD’s Principles of Corporate Governance are not relevant to the issues faced by developing and emerging market economies. Cases such as Parmalat or Enron belong to the rich world, and their affairs to those of wealthy OECD countries. But if poor governance of corporations can ruinously affect a nation’s economic growth – in addition to the lives of millions of individuals – shouldn’t developing countries take notice?

Yes, says Governance Culture and Development, though with some caveats. After all, as this report from the OECD Development Centre points out, the strong growth sustained both in continental Europe after the war, and in certain countries during the “Asian Miracle” from the 1960s to the 1990s, was achieved despite corporate governance structures which would be deemed very poor by today's standards. Indeed, the Golden Age from 1945-1973 in France (known as the Trente Glorieuses), when the country experienced the highest sustained growth in its history, also bears witness to this, and the book examines the French experience in some depth.

The trouble is, most developing and emerging market economies have to deal with the demanding governance challenges of today’s global market, whether they are trying to catch up, or make a transition to more innovation-based growth. So, while up-to-date structures satisfy lawmakers and stakeholders in the OECD area, do they help or hinder growth elsewhere?

There is no easy answer to this question, says Governance Culture and Development, but it acknowledges that good corporate and public governance lifts a country’s long-term development. Those countries, like Korea and Singapore, that succeeded in spectacularly catching up with advanced economies like Japan and the US, had put in place systems that focused on public governance and general interest, rather than giving priority to a corporate focus, with potentially conflicting private interests. Developing countries could look more at these new examples, rather than focusing on the orthodox school of governance from the US and Britain, argues Governance Culture and Development. By shedding new light on different governance cultures, their logic, their dynamics and their potential traps, the report demonstrates that while fostering good governance counts, we must change the way we judge the quality of a country’s institutions of governance.

©OECD Observer No 244, September 2004

Economic data

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