The Role of Competition in Determining Corporate Governance Outcomes: Lessons from Australia's Corporate Governance System

Successive waves of corporate collapse in every decade of Australia's history suggest that there is a significant unresolved corporate governance problem in Australia. Corporate collapse has been followed by reform but with little effect on the overall pattern of collapse and reform every decade. This article suggests that one of the elements which entrenches corporate governance problems in Australia is the competitive environment in which companies operate, which currently is not regulating management. It is argued that this anti-competitive environment has two significant effects. First, key shareholders have retained controlling blocks of shares as the benefits of control and the costs of unconstrained management are high in such distorted markets. Secondly, management skills have stagnated, so that bad management and regular management failure have become features of the corporate governance system.