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Applying 'Comply-or-Explain': Conformance with Codes of Corporate Governance in the UK and Germany


  • David Seidl
  • Paul Sanderson
  • John Roberts


The comply-or-explain principle is a central element of most codes of corporate governance. Originally put forward by the Cadbury Committee in the UK as a practical means of establishing a code of corporate governance whilst avoiding an inflexible ‘one size fits all’ approach, it has since been incorporated into code regimes around the world. Despite its wide application very little is known about the ways in which managers apply the principle – in particular, how they make use of the option to ‘explain’ deviations. To address this we analysed the compliance statements and reports of 257 listed companies in the UK and Germany, producing some 708 records of deviations, which we used to generate our empirically derived taxonomy of forms of ‘explanation’. We find these varied forms of ‘explanation’ are based in part on different logics of argumentation. This leads to a broader use of the option to ‘explain’ than envisaged by the Cadbury Committee. In addition our country comparison shows significant divergence in compliance patterns in the UK and Germany which may be explained by differences in experience, culture and legal system.

Suggested Citation

  • David Seidl & Paul Sanderson & John Roberts, 2009. "Applying 'Comply-or-Explain': Conformance with Codes of Corporate Governance in the UK and Germany," Working Papers wp389, Centre for Business Research, University of Cambridge.
  • Handle: RePEc:cbr:cbrwps:wp389
    Note: PRO-2

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    References listed on IDEAS

    1. Wolfgang Drobetz & Andreas Schillhofer & Heinz Zimmermann, 2004. "Corporate Governance and Expected Stock Returns: Evidence from Germany," European Financial Management, European Financial Management Association, vol. 10(2), pages 267-293.
    2. Cadbury, Adrian, 2002. "Corporate Governance and Chairmanship: A Personal View," OUP Catalogue, Oxford University Press, number 9780199252008.
    3. Igor Goncharov & Joerg Richard Werner & Jochen Zimmermann, 2006. "Does Compliance with the German Corporate Governance Code Have an Impact on Stock Valuation? An empirical analysis," Corporate Governance: An International Review, Wiley Blackwell, vol. 14(5), pages 432-445, September.
    4. David Seidl, 2006. "Regulating organizations through codes of corporate governance," Working Papers wp338, Centre for Business Research, University of Cambridge.
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    Cited by:

    1. Sergakis Konstantinos, 2015. "Deconstruction and Reconstruction of the “Comply or Explain” Principle in EU Capital Markets," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 5(3), pages 233-288, November.
    2. Sorana Mihaela Manoiu & Maria Ionela Damian & Jiri Strouhal, 2015. "Corporate Governance Quality On Specific Case Of Romanian Listed Companies," International Journal of Entrepreneurial Knowledge, VSP Ostrava, a. s., vol. 3(2), pages 40-58, December.
    3. David Seidl & Paul Sanderson & John Roberts, 2013. "Applying the ‘comply-or-explain’ principle: discursive legitimacy tactics with regard to codes of corporate governance," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 17(3), pages 791-826, August.

    More about this item


    Corporate Governance; Corporate Governance Codes; Comply-or-explain; Compliance; Compliance Reporting; Compliance Monitoring;

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation


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