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PurposeThis paper aims to investigate the most popular corporate governance rating systems and to scrutinize their usefulness to shareholders and the public at large. It proposes to examine whether the advertised good governance scores reflect corporate performance, fraud, lawsuits, and the like.Design/methodology/approachThe analysis focused on the methodology used by rating agencies to rank corporate governance practices of companies. Analysis of the categories and variables used in the rating systems were also scrutinized and critiqued.FindingsThis research shows that there is a weak relationship between corporate performance and corporate governance rating. Ideas and suggestions have been proposes to remedy the shortfalls of existing rating systems.Research limitations/implicationsMany researchers use corporate governance scores in their studies to investigate the relationship between these single scores and corporate performance. Potential vulnerability and risk are demonstrated using such kind of methodologies. Research should be accomplished with the corporate governance indicators separately.Practical implicationsSeveral corporate governance ratings systems have been developed and implemented. These systems reduce a complex corporate governance process and related performance into a single score. Such outcome does not in any way reflect the real nature of corporate governance or its performance. Ranking, if it is at all needed, should be interpreted carefully and not be used as a simple measurement of good or bad corporate governance practice.Originality/valueThis paper is the first of its kind to critically evaluate corporate governance systems scores launched by different rating agencies.

This empirical paper investigates the relationship between the corporate governance structure of the firm and the probability of voluntary accounting changes in the Netherlands during the period 1990–1998. The paper reports the results of a sample of 194 voluntary accounting changes. The empirical results show that the presence of large outside shareholders significantly decreases the probability of voluntary accounting changes that have a positive effect on reported net income. This result supports the monitoring hypothesis, which indicates that large outside shareholders will monitor voluntary accounting changes more effectively than small shareholders, and will restrict the opportunistic behaviour of managers bent on increasing reported net income. We find that management shareholdings decrease the probability of voluntary accounting changes. These findings are consistent with the alignment hypothesis, which suggests that managers who hold a stake in the firm will be more aligned with outside shareholders. Agency problems may be reduced through management shareholdings. We find no support for the monitoring role of outside members of the supervisory board. Finally, our results show that firm size affects the probability of negative accounting changes, which may support the political cost hypothesis.

This study examines the historical development of corporate governance structures in First Nations communities in British Columbia, where development corporations are employed to assist privately-owned and community-owned entrepreneurial enterprises. First Nations entrepreneurial activity functions in an environment where business must market to a global economy while preserving traditional values, beliefs and other cultural elements. A brief history of First Nations and their enterprise development efforts is presented. Empirical research findings describe the close relationship between local community and corporate goals and identify conflicts of interest between political leaders and management of development corporations. The evidence demonstrates entrepreneurial success and economic development of First Nations communities rely on an independent decision-making process within business development corporations. An alternative business model is developed utilizing the empirical research, social enterprise literature and the unique regional cooperative model of the Mondragon region of Spain. The new model respects the land base and other environmental and social values while providing a framework for economic success. Exploration of this unique enterprise-to-region development model, which incorporates consideration for the natural environment and social and cultural values, offers lessons to other societies and regions that will assist in the movement toward an economic system based on concepts of sustainability.