Manchester Metropolitan University Department of Clothing Design and Technology Where Teaching is Research Lead

Corporate Governance and the Challenge for the Global Fashion Industry by Michael Jeffrey

Corporate Scandals Has always been a turbulent sector Latter part of the 20 th and early 21 st Century saw a series of corporate scandals: BCCI, Poly Peck, Maxwell Media Group, Enron, WorldCom, Ahold, Parmalat et al

Developing Codes of Practice UK – the Combined Code, first version 1998 revised 2003 European Codes of Practice OECD contribution globally USA – Sarbanes-Oxley Act 2002

UK – Combined Code The UK Combined Code essentially addresses FOUR key areas: Boards of Directors Remuneration of Directors Financial Controls Communication with Shareholders

European Codes Variable across Europe though largely quite well developed – still developing in some of the EU entrant countries. The German Code is significant in that it has been used as the model for some new EU countries –Slovenia.

OECD Principles Six guiding principles: Basis for effective corporate governance. The rights of shareholders. The role of stakeholders. Disclosure and transparency. The responsibilities of the Board.

USA – Sarbanes-Oxley A much more rigorous approach. Dwells on Internal Financial Controls, makes the CEO and CFO personally responsible for financial statements, provides more control over external auditors.

Code Ethics The UK Code, the broad European principle and other codes globally have adopted the ethic: Comply or Explain

New Ethic USA in the Sarbanes-Oxley Act adopts a new ethic: Comply or Go to Prison The US legislation introduces serious penalties – large fines and prison terms

Institute of Directors Recent publication categorises countries into FOUR groups, though implicitly there FIVE groups: 1.Developed 2.Developing 3.Transitional 4.Lesser Developed 5.Implicit – No development!

Aim of Paper To examine some of the key issues in corporate governance taking a case study approach to assess levels of compliance.

Methodology (1) Comparative look at the key issues in THREE governance codes: UK – Combined Code USA – Sarbanes-Oxley / NYSE Rules German – New German Corporate Code

Methodology (2) Five mini case studies looking at five apparel/fashion retailers from five different countries: UK, Germany, Slovenia, USA, India

Findings (1) The differences in the three codes (see table 2 in the paper). Points raised: German dual board system More rigorous US approach Internal audit position Disclosure Whistleblowing

Findings (2) Case Studies UK company in breach of the UK Combined Code German company no obvious non-compliance Slovenian company making good progress – website a bit dated and limited financial detail US company fully compliant – no surprise Indian company seemed to show a good degree of disclosure and governance.

Conclusions Opens areas for further study. A well developed code does not mean compliance if there are no serious penalties. From this tiny sample it seems that some developing economies are making progress with corporate governance. The message that ‘good governance is good business’ still needs to be made.