The diffusion of governance standards in public corporate governance codes: Measurement framework and three countries comparison

• Published date: 01 September 2023
• Author: Ulf Papenfuß,Kristin Wagner‐Krechlok
• Date: 01 September 2023
• DOI: http://doi.org/10.1111/corg.12494

ORIGINAL ARTICLE

The diffusion of governance standards in public corporate

governance codes: Measurement framework and three

countries comparison

Ulf Papenfuß | Kristin Wagner-Krechlok

Chair of Public Management & Public Policy,

Zeppelin University, Friedrichshafen, Germany

Correspondence

Ulf Papenfuß, Chair of Public Management &

Public Policy, Zeppelin University, Am

Seemooser Horn 20, D - 88045

Friedrichshafen, Germany.

Email: ulf.papenfuss@zu.de and puma@zu.de

Funding information

No funders available.

Abstract

Research Question/Issue: This study analyzes the diffusion of internationally

recognized governance standards in public corporate governance codes. Local, state,

and federal governments issue very different codes for their state-owned enterprises,

which reflect governments' understanding of corporate governance.

Research Findings/Insights: Developing and applying a comprehensive measurement

framework with 150 criteria to 60 public corporate governance codes in Austria,

Germany, and Switzerland, the study shows that the diffusion varies considerably

between codes and regulatory fields (e.g., directors, auditing). Governments react

very differently to similar governance challenges and show varying degrees of willing-

ness to regulate the corporate governance of their state-owned enterprises.

Theoretical/Academic Implications: This study enhances the understanding of the

diffusion of governance standards in the under-researched context of government

ownership. The findings imply the need for comprehensive measurement approaches

to gain a nuanced theoretical understanding on the diffusion and underlying mecha-

nisms. Future research could use the measurement framework or single regulatory

fields to generate data to investigate different theoretical questions regarding many

areas of corporate governance. Derived from the findings and neo-institutional

theory, the study develops propositions about potential drivers of diffusion

differences, offering avenues for advancing future theory-building.

Practitioner/Policy Implications: This study develops a comprehensive measurement

framework to quantify the diffusion of governance standards in public corporate

governance codes in international comparisons. Governments, standard-setters, and

other actors (e.g., directors, auditors) could use it for condensed overviews,

implementing or revising codes, and reflecting on governance practices. Overall, data

show a severe need to improve the quality of public corporate governance codes.

KEYWORDS

corporate governance, corporate governance codes, government ownership, neo-institutional

theory, state-owned enterprises

Received: 30 November 2020 Revised: 25 August 2022 Accepted: 13 September 2022

DOI: 10.1111/corg.12494

This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium,

provided the original work is properly cited.

© 2022 The Authors. Corporate Governance: An International Review published by John Wiley & Sons Ltd.

Corp Govern Int Rev. 2023;31:697–717. wileyonlinelibrary.com/journal/corg 697

1|INTRODUCTION

The devolution of many public services to state-owned enterprises

(SOEs) at all government levels and the large number of SOEs have

made their corporate governance a crucial issue (Bruton et al., 2015;

Cuomo et al., 2016; Musacchio et al., 2015; OECD, 2015). SOEs are

enterprises that are under the control of local, state, or federal

governments, either by majority ownership of one or more

governments or otherwise by exercising an equivalent degree of

control (European Commission, 2016; OECD, 2015).

While the performance and quality of public services for citizens

can improve from service provision by SOEs, the autonomy and

complex ownership structures of SOEs cause far-reaching

challenges related to their corporate governance (Bruton et al., 2015;

Klausen & Winsvold, 2021; OECD, 2015; van Genugten et al., 2022;

Voorn et al., 2019). It is therefore crucial to identify governance

mechanisms that can enhance responsible and sustainable

corporate governance of SOEs (Klausen & Winsvold, 2021;

Leixnering et al., 2021; OECD, 2015; van Genugten et al., 2022;

Whincop, 2016).

Literature stresses the need for—and potential of—corporate

governance codes as crucial instruments for corporate governance

(Aguilera & Cuervo-Cazurra, 2009; Cuomo et al., 2016; Zattoni &

Cuomo, 2008). Corporate governance codes are also demanded for

SOEs and have been issued by governments worldwide (Cuomo

et al., 2016; OECD, 2015; Papenfuß, 2020; World Bank, 2014,2020).

These so-called public corporate governance codes (PCGCs) prescribe

standards and principles for the supervision and management of SOEs

and contain recognized standards of responsible governance.

Literature has stressed the potential of PCGCs to contribute to better

corporate governance of SOEs and to the achievement of various

political objectives, such as sustainability, equality, and accountability

(Expert Commission G-PCGM, 2022; Mensi-Klarbach et al., 2021;

OECD, 2015; Papenfuß, 2022; Papenfuß & Schmidt, 2021; World

Bank, 2020).

In the literature, there is a debate on the extent to which corpo-

rate governance standards and practices are diffused worldwide

(Aguilera & Cuervo-Cazurra, 2004,2009; Cuomo et al., 2016; Haxhi &

Van Ees, 2010; Zattoni et al., 2020; Zattoni & Cuomo, 2008).

Researchers have also explored the diffusion of governance standards

in corporate governance codes for private sector companies (Cicon

et al., 2012; Collier & Zaman, 2005; Haxhi & Aguilera, 2017; Terjesen

et al., 2015).

However, there remain three gaps in the literature that this study

addresses. First, literature highlights a gap regarding the diffusion of

governance standards in general and their diffusion in corporate

governance codes in particular (Cicon et al., 2012; Collier &

Zaman, 2005; Haxhi & Aguilera, 2017; Terjesen et al., 2015). This gap

limits scientific knowledge about how code issuers “substitute for

(or have complementarities with) the weaknesses (strengths) in

property rights, informational flows, and contractual efficiency and

enforcement”(Kumar & Zattoni, 2019, p. 5). Therefore, researchers

call for a comparative “empirical analysis of the CG [corporate

governance] codes adopted in different countries”(Haxhi &

Aguilera, 2017, p. 263) and for developing “empirical granularity”

(Kumar & Zattoni, 2019, p. 5) in this regard.

Second, there is a gap concerning the effects of code issuers on

the diffusion of governance standards (Cicon et al., 2012; Haxhi &

Aguilera, 2017). Therefore, researchers call for more research on how

the characteristics of code issuers affect the content of corporate

governance codes (Cicon et al., 2012; Haxhi & Aguilera, 2017; Haxhi &

Van Ees, 2010).

Third, because there is currently no empirical study in this

context, scientific knowledge about the diffusion of governance

standards in the context of SOEs and the effect of local, state, and

federal governments on the diffusion is very limited. This is an

important gap because ownership influences both corporate

governance regulation and practices and governments are important

owners (Bernier et al., 2020; Borisova et al., 2019; Boyd &

Solarino, 2016; Bruton et al., 2015; Connelly et al., 2010; Musacchio

et al., 2015; Zattoni et al., 2020).

The research goal of this study is to assess to what extent

internationally recognized governance standards diffuse in PCGCs of

local, state, and federal governments in a cross-national comparison

and derived from the findings, to develop propositions about potential

drivers of diffusion differences to provide avenues for advancing

future theory-building.

To achieve this goal, this study develops a comprehensive

measurement framework with 150 criteria that enables the

quantification of the diffusion of governance standards for SOEs in

international comparisons. The measurement framework is used to

assess all PCGCs currently issued by German-speaking local, state,

and federal governments in Austria, Germany, and Switzerland.

The study makes the following contributions. First, it enhances

the overall understanding of the diffusion of corporate governance

standards (Aguilera & Cuervo-Cazurra, 2004; Cuomo et al., 2016;

Zattoni et al., 2020) by providing new empirical insights on the

diffusion in the under-researched context of government ownership.

The findings show that the diffusion extent of governance standards

strongly diverges between PCGCs of governments on different

government levels and on the same government level. The results

provide a helpful basis to open the relevant field of PCGCs for future

research and invite corporate governance scholars to enhance the

theoretical understanding of corporate governance codes and related

issues through exploration and comparison of corporate governance

codes in different ownership contexts.

Second, responding to calls in the literature to enhance the

theoretical understanding of the effect of code issuers on the content

of codes (Aguilera & Cuervo-Cazurra, 2009; Cuomo et al., 2016;

Haxhi & Van Ees, 2010), the study develops propositions about

potential drivers of differences in the diffusion of governance

standards in PCGCs. The propositions are derived from the

diffusion differences identified in this study and neo-institutional

theory (Böhm et al., 2013; Haxhi & Van Ees, 2010; Judge et al., 2010).

The study provides avenues for advancing future theory-building

regarding a more nuanced theoretical understanding of coercive,

698 PAPENFUß AND WAGNER-KRECHLOK