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encourage more proactive involvement
of owners/members in the effective management of 
the organisation through recognising their responsibilities of oversight and input to decision-
making processes via voting or other mechanisms. 
(h) 
To promote integrity; that is, straightforward dealing and completeness.
1.5 Principles vs rules 
A continuing debate on corporate governance is over whether the guidance should predominantly be in 
the form of principles, or whether there is a need for detailed laws or regulations. 
The UK came out very firmly in favour of a principles-based approach in the FRC’s UK Corporate 
Governance Code (2018). The FRC preferred relaxing the regulatory burden on companies and was 
against treating the corporate governance codes as sets of prescriptive rules. The Code contains 
guidelines
which will normally be appropriate but the differing circumstances of companies meant that 
sometimes there are valid reasons for exceptions.
Some critics believe that the principles set out in the Code are so broad that they are of very little use as 
a guide to best corporate governance practice.
In the US, the emphasis is on a rules-based approach and this is typified by the Sarbanes-Oxley Act 
(2002), see Section 2.4.1 of this chapter. 
 
2
Developments in corporate governance
Good corporate governance involves 
risk management
and 
internal control, accountability 
to 
stakeholders and other shareholders and conducting business in an 
ethical and effective way.
2.1 The driving forces of governance development 
Corporate governance issues came to prominence in the UK and Europe in the late 1980s. The main, 
but not the only, drivers associated with the increasing demand for the development of governance were 
as follows.