Globalisation, corporate governance and the construction industry

Abstract

A defining characteristic of globalisation is the ease of trade. This characteristic has exposed a high degree of diversity and inconsistency in global business practices. As these inconsistencies increase risk, investors are identifying mechanisms to standardise business practices. A key mechanism is the application of good corporate governance practices. Good corporate governance practices include the corporation’s business behaviour in its operational environment. Investors are therefore guided as much by the financial statements as they are by the enterprise’s business behaviour. The construction industry has thus far escaped such scrutiny: however, many of its participants are being subjected to good corporate governance requirements. Governments and consumers too have due diligence expectations, much of which is being translated into statutory regulation. Regrettably, there has thus far not been a global holistic and proactive response from the construction industry as a whole. This paper examines emerging good corporate governance expectations generally. It reviews the development of globalisation with particular reference to the establishment of a common code of conduct, undertakes a review of the definition and evolution of good corporate governance and determines its current status, assesses construction industry practices against international good corporate governance standards, and proposes an enabling framework for the industry.