THE ENFORCEMENT OF CORPORATE GOVERNANCE CODES

Corporate governance codes have been published in several European jurisdictions. Most are of a self-regulatory nature, although some are rooted in the law. In both cases the provisions of the codes apply on a "comply or explain" basis. Enforcement mainly takes place through market mechanisms, including by shareholders using their legal and factual rights within the company. Moreover, the legal system will normally absorb these self-regulatory rules through blank norms, such as liability or contract rules. In states where the law has expressly referred to the code, such as in Germany and the Netherlands, additional questions arise. The role of market supervisors and of auditors has expressly been discussed in these jurisdictions. This analysis concludes that market-led enforcement, along with a strengthening of company law mechanisms, constitutes the best means of developing adaptive but nevertheless effective corporate governance practices.