Institutionalizing codes of governance

Economic systems are undergoing a generalized effort to improve corporate governance structures and processes. Waves of scandals and increasing public scrutiny push institutional regulators and corporate boards of directors to establish and adopt new practices. Codes of good governance have emerged as a primary tool to increase the effectiveness of corporate governance systems. Building on extant views of institutional change, the authors study the process of the institutionalization of codes of governance and the role of the different actors involved in issuing the codes. They define four groups of actors: law-makers, model makers, market makers, and governance enactors. They analyze a sample of 150 codes of governance introduced in 78 countries from 1978 to 2004 to describe the following stages of institutionalization: precipitating jolts, theorization, diffusion, and reinstitutionalization. This description invites thorough investigation of the content of codes of governance and the likelihood adopting such codes in a given country.