A social norm perspective on corporate governance soft law

Anne Galander (School of Economics and Business Administration, Friedrich Schiller University of Jena, Jena, Germany)
Peter Walgenbach (School of Economics and Business Administration, Friedrich Schiller University of Jena, Jena, Germany)
Katja Rost (Institute of Sociology, University Zurich, Zurich , Switzerland)

Corporate Governance

ISSN: 1472-0701

Publication date: 2 February 2015

Abstract

Purpose

The aim of this study is to apply the concept of social norm dynamics to explain how corporate governance soft law is enforced.

Design/methodology/approach

Using data of German listed stock companies and of economic media coverage between 2001 and 2010, the authors observe the complex relationship between sanctions and behavior in the social context of corporate governance soft law.

Findings

The authors find the public discussion of normative demands related to corporate governance issues increases if firms do not comply with the German Corporate Governance Code. The authors show that groups of actors, such as DAX companies, represent the addressees of normative demands, i.e. targets of expectations about what is appropriate and what is not. The authors also find that normative demands tend to be personalized, as public discussion is greater when initiated by a specific individual or firm. Finally, the authors demonstrate that social control in terms of public sanctioning positively influences a firm’s compliance with the soft law whereby negative statements (disapproval) outweigh the effects of positive statements (approval).

Originality/value

We corroborate the social character of normative demands in the context of corporate governance soft law, and contribute to a better understanding of why soft law can work, despite it having no legally binding force. The results of our study suggest that sanction mechanisms in the context of social norms underpin the strength of soft law as an alternative to, or extension of, hard law.

Keywords

Citation

Galander, A., Walgenbach, P. and Rost, K. (2015), "A social norm perspective on corporate governance soft law", Corporate Governance, Vol. 15 No. 1, pp. 31-51. https://doi.org/10.1108/CG-07-2013-0096

Publisher

:

Emerald Group Publishing Limited

Copyright © 2015, Emerald Group Publishing Limited

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