Can Credit Rating Agencies Play a Greater Role in Corporate Governance Disclosure?

Abstract

The European Commission (EC) is currently examining methods to increase the effectiveness of corporate governance disclosures. This article examines whether the Credit Rating Agencies, both on account of their influence within the marketplace and also their methodological approach to rating “Governance”, may have a greater role to play in the European Commission achieving those particular objectives This article is based upon a normative methodology, upon which the issue is contextualised and a proposal is put forward regarding a methodological alteration that can be instituted by the credit rating agencies. The paper finds that the credit rating agencies may have a much greater role to play in meeting the objectives of the EC. Whilst the EC is focusing upon regulatory monitoring, the paper finds that there is a potential for a more efficient model within which the credit rating agencies adapt their methodologies to include ‘corporate governance disclosure’ into their rating processes. In presenting the idea that the “comply or explain” principles put forward by the EC are proving to be somewhat ineffective, the paper contributes to the field by suggesting there are private endeavours which may add a sense of impact to disclosure proceedings, rather than the purely public regime being envisioned.