WHY CORPORATE GOVERNANCE IS SO PROMINENT TODAY There is nowadays a voluminous literature on corporate governance.On many key issues our understanding has improved enormously since the 1930s.Remarkably though,some of the main issues over which the early writers have been debating remain central today. 3 WHY CORPORATE GOVERNANCE IS SO PROMINENT TODAY Why has corporate governance become such a prominent topic in the past two decades or so and not before?We have identified,in no particular order,the following reasons:i) the world-wide wave of privatisation of the past two decades,ii)pension fund reform and the growth of private savings,ii)the takeover wave of the 1980s,iv)deregulation and the integration of capital markets,v)the 1998 East Asia crisis,which has put the spotlight on corporate governance in emerging markets vi)a series of recent U.S. scandals and corporate failures that built up but did not surface during the bull market of the late 1990s 3.1 The World-wide Privatisation wave Privatisation has been an important phenomenon in Latin America,Western Europe, Asia and (obviously)the former Soviet block,but not in the U.S.where state ownership of enterprises has always been very small(see Figure 1).On average,since 1990 OECD privatisation programmes have generated proceeds equivalent to 2.7%of total GDP,and in some cases up to 27%of country GDP.The privatisation wave started in the U.K., which was responsible for 58%of OECD and 90%of European Community privatisation proceeds in 1991.Since 1995 Australia,Italy,France,Japan and Spain alone have generated 60%of total privatisation revenues. see Weiner(1964)and for additional papers arguing both points of view Mason(1959).Galbraith (1967in his influential "The New Industrial State"took Dodd's position. 10/168WHY CORPORATE GOVERNANCE IS SO PROMINENT TODAY There is nowadays a voluminous literature on corporate governance. On many key issues our understanding has improved enormously since the 1930s. Remarkably though, some of the main issues over which the early writers have been debating remain central today. 3 WHY CORPORATE GOVERNANCE IS SO PROMINENT TODAY Why has corporate governance become such a prominent topic in the past two decades or so and not before? We have identified, in no particular order, the following reasons: i) the world-wide wave of privatisation of the past two decades, ii) pension fund reform and the growth of private savings, iii) the takeover wave of the 1980s, iv) deregulation and the integration of capital markets, v) the 1998 East Asia crisis, which has put the spotlight on corporate governance in emerging markets vi) a series of recent U.S. scandals and corporate failures that built up but did not surface during the bull market of the late 1990s 3.1 The World-wide Privatisation wave Privatisation has been an important phenomenon in Latin America, Western Europe, Asia and (obviously) the former Soviet block, but not in the U.S. where state ownership of enterprises has always been very small (see Figure 1). On average, since 1990 OECD privatisation programmes have generated proceeds equivalent to 2.7% of total GDP, and in some cases up to 27% of country GDP. The privatisation wave started in the U.K., which was responsible for 58% of OECD and 90% of European Community privatisation proceeds in 1991. Since 1995 Australia, Italy, France, Japan and Spain alone have generated 60% of total privatisation revenues. see Weiner (1964) and for additional papers arguing both points of view Mason (1959). Galbraith (1967) in his influential “The New Industrial State” took Dodd’s position. 10/168