As a result of a series of high-profile corporate collapses worldwide, along with
regular reporting of shareholder money being spent on corporate jets, executive
golf days and increasingly excessive executive compensation arrangements, the
common perception is that the executives of our largest corporations are driven by
self-interest with little regard for what is best for the corporation. Due to this
negative perception, there has been an exponential increase in the amount of laws,
rules and guidelines setting in place a heightened standard of corporate governance
best practice. Without such regulation, it is believed, another collapse or scandal is
inevitable. In this article, I dispute this reasoning. In my view if we embrace
“positive corporate governance”, in which the positive strengths and virtues of
company executives are emphasised, we can move towards an environment in
which heavy regulation is replaced by positive corporate norms inside the
corporation. I then apply my approach of positive corporate governance to address
one of the most significant issues confronting corporate regulation at present- how
to deal with the rapid increase in executive compensation in our largest
corporations. I suggest that the dominant methodology of pay for performance is
ultimately flawed.