Corporate governance principles and codes have been developed in different countries and issued from stock exchanges, corporations, institutional investors, or associations (institutes) of directors and managers with the support of governments and international organizations. As a rule, compliance with these governance recommendations is not mandated by law, although the codes linked to stock exchange listing requirements may have a coercive effect.
Typically, an authoritative intermediary—either the stock exchange or government—herded issuers together, sometimes with, and sometimes without, investors and other market parties, to craft a national code. Often, the government sought to encourage the process by threatening legislation if appropriate voluntary standards were not agreed upon. Once a code had been written, governments usually moved quickly to endorse it and encourage or require its application to all listed corporations. Sometimes, a few code provisions migrated into law; more often, the purpose of the code was to provide a flexible extension of regulation into areas where it was felt that rules might be too restrictive.
The earliest codes were aimed squarely, and almost exclusively, at corporations. More recently, governance codes have been developed to address the behaviour of other market actors, such as institutional investors and intermediaries via stewardship codes.
Codes for companies: Company oversight boards operate by means of a flotilla of formal governance documents including the articles of incorporation, by-laws, corporate governance guidelines, committee charters, and codes of conduct. Codes of corporate governance are meant to provide flexible standards and best practices for companies to consider alongside this governance framework.
Codes for investors: Best practice standards addressing investors were a small part of early corporate governance codes, such as Cadbury and the OECD. Normally, text-focused not on the institution’s own governance, but on the shareowner’s responsibility to support adherence.