Corporate Governance and the Financial Crisis: The New Paradigm of the Rule of Law after the Collapse

Abstract

The aim of this paper is to explain what corporate governance is, what the principles of corporate governance are, what standards are formally valid at a global level (including both American and European rules) and how deviant practice appeared both prior to and during the financial crisis which began in 2007. It also aims to explain the difference between the institutional axiology (written codes used within companies, the state law) and the real axiology (deviance on the part of companies, breaking promises) in companies. My approach is based on Jonathan Macey’s promissory theory of corporate governance and Cornelis de Groot’s legal analysis of corporate governance, and this paper takes a stance against hypocrisy in matters of business and of the state. Axiological analysis of the crisis in the global economy is necessary, since corporate governance, as an element of company law, constitutes an important branch of the law and of both legal and business practice. In conceptual terms, it has a close relationship with business ethics. I maintain that the crisis in corporate governance and business ethics was one of the main factors behind the financial crisis, and that the financial crisis brought about changes in the classical rule of law paradigm. States are now willing to take all available extraordinary measures to curb violations of law by companies, to safeguard good corporate governance and to protect human freedom and rights.