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In this paper, we assess the impact of recent reforms in UK corporate governance, focusing specifically on aspects of the reforms which apply to unit trust managers, a major group of institutional investors, and their investee companies. We canvass the views of UK unit trust managers to shed light on three issues: the extent of shareholder activism by UK unit trusts; the extent to which longer and stronger decision and communication links are being forged between investment institutions and their investee companies, and; the emerging controversy over whether or not these recent reforms represent a help or a hindrance for unit trust managers. The empirical findings indicate that unit trusts: are active shareholders, developing and using written voting policy documents; are encouraging the development of longer and stronger links with their investee companies, and; have welcomed corporate governance reforms.

In this paper we review the growth of socially responsible investment (SRI) in the UK and in Japan. We consider the various factors which have given rise to the growth of SRI in both countries. As SRI is currently more mature in the UK than in Japan, we consider ways in which the UK experience may provide some lessons for the growth of SRI in Japan. Significantly, we consider that the use of corporate governance mechanisms such as engagement and dialogue by large shareholders, to solve social, ethical and environmental (SEE) problems in companies, is a realistic route for the development of SRI in Japan. However, these mechanisms need to be designed so that they may operate more efficiently. Pension funds and other investment institutions need to appreciate the value of engagement over screening as an SRI stra‐tegy. Further, the disclosure of SRI strategies by pension funds in Japan may contribute to enhancing consciousness about the responsibility of shareholders for the SEE outcomes of corporate activities that they invest in indirectly. We acknowledge, however, that this suggestion may be difficult to implement in the near future.

PurposeAn important outcome of the UK Company Law Review (CLR) involved draft regulations for a mandatory operating and financial review (OFR). The unprecedented abandonment of this mandatory OFR in November 2005 threw debate about the genuine motivations underlying the CLR into disarray. This paper seeks to reinterpret the abandonment of a mandatory OFR using interview research.Design/methodology/approachThe authors conducted a series of 24 interviews with companies from the FTSE100 between May and August 2004, prior to the abandonment.FindingsThe interviews showed that the OFR was perceived as an appropriate vehicle for social and environmental reporting (SER). The interviewees considered that a mandatory OFR would provide a means of forcing SER into the mainstream and making it mandatory at a basic level. The interviews revealed that processes for the identification of material SER differ widely between organisations, ranging from embryonic to highly structured. Further, interviewees believed that directors had the final veto on inclusion of information. Despite directors' inclination to hide behind materiality as a means of avoiding SER, interviewees did not view the proposed mandatory OFR as "greenwash" but as a vehicle that would increase stakeholder confidence, as processes underlying the proposed OFR would be audited.Practical implicationsThe research implies that abandoning the mandatory OFR represented a lost opportunity for SER.Originality/valueThe paper provides new evidence on the processes of materiality decision making in the SER area as well as strong endorsement of the mandatory OFR, contrary to the government turn‐around.

South Korea, one of East Asia's most powerful tigers before the 1997 financial crisis, is in the process of extensive corporate governance reform. The excessive debt financing of the chaebol and the lack of accountability prevalent in Korea's corporate governance system have been blamed for the country's economy succumbing to the crisis. The current process of reform is taking place within a global agenda for corporate governance harmonisation, reflected in the publication of internationally acceptable principles for "good" corporate governance by, for example, the OECD and CalPERS. In this paper we present and analyse the findings of a questionnaire survey and a series of interviews conducted in Korea which canvassed the views of fund managers. Our findings indicate that Korea's financial institutions support initiatives to reform the country's corporate governance system. Further, they agree strongly that: investor relations need to be improved; chaebol's accountability to shareholders should be improved; and shareholder activism should be encouraged. They also support the view that the chaebol's activities were chiefly responsible for Korea succumbing to the East Asian crisis.

South Korea is currently undergoing reform of its corporate governance (CG) system, reflecting attempts to harmonise at a global level. Since the financial crisis in 1997, the need for reform has been emphasised and the Government is leading a policy which targets the traditional structure of the chaebol, as well as the system of corporate ownership and control in South Korea. In this paper, we outline the traditional system of CG in South Korea and review the broad agenda for CG reform which is currently taking place. From our review, we develop a conceptual framework which makes the implicit CG reforms in South Korea explicit. The framework comprises two inter–related models which represent the forces driving reform, the need for reform and the specific initiatives instrumental to reform. On the basis of our review and conceptual framework, we conclude by making a number of policy recommendations for the future direction of CG reform in South Korea. Specifically, we suggest a policy of corporate governance awareness involving a more penetrating policy of reform and incorporating the establishment of a CG forum. Our recommended policy should result in the reforms working from within the chaebol and CG system, rather than from without. For reform to have a permanent effect, the policies need to address the business culture, traditions and internal structure of the system. We suggest that this can only be achieved by increasing general awareness of the need for CG and the reasons underlying the current policy as well as by nurturing mutual trust and understanding between the parties involved.

Growing interest in UK corporate governance has engendered research on specific issues of corporate governance reform. However, there seems to be little research on the more general impact of recent reforms in corporate governance. In this paper we employ an extensive postal questionnaire survey to investigate: (i) UK institutional investors' general attitudes towards recent corporate governance reforms; (ii) whether UK institutional investors consider specific corporate governance initiatives to be of equal importance, and; (iii) whether all institutional investors represent a homogeneous group with respect to corporate governance reform. The empirical results indicate that institutional investors: (i) have generally welcomed the recent reforms; (ii) do not consider that specific corporate governance initiatives are equally important but attach more relevance to initiatives aimed at monitoring the principal/agent problem, and; (iii) may be treated as a homogeneous group, except in relation to voting policy, where pension funds appear more pro‐active in their approach than other groups.

In this paper we present empirical evidence on the attitudes of Taiwanese company directors on the role and function of the board of directors in Taiwanese corporate governance. Our findings arise from a questionnaire survey distributed to the directors of a sample of companies listed on the Taiwanese Securities Exchange (TSE). Our findings provide a picture of the current state of corporate governance in Taiwan. The respondents indicate that the board of directors constitutes the most important instrument in Taiwanese corporate governance and our findings endorse the important role played by outside directors in the corporate governance system in Taiwan. Furthermore, the respondents endorsed the agency theory perspective on corporate governance as they considered the presence of outside directors improved corporate accountability to shareholders. There is, however, evidence that few companies have created remuneration and audit committees. We also found that Taiwanese directors are dissatisfied with the influence of families on the corporate governance of listed companies and do not consider that outside directors on boards should be related to founding families. Overall, the directors displayed an awareness of accountability issues and a desire to improve accountability and transparency. They clearly want international harmonisation of corporate governance standards and view corporate governance reform as a means of attracting foreign funds into Taiwan. This is an important finding as it endorses the work of the OECD and other international bodies in harmonising corporate governance at a global level.