Australia's corporate governance: Balancing historic, regional and free trade paradigms

On 1 January 2005, the Australia-United States Free Trade Agreement (AUSFTA) came into force. While AUSFTA will, it would appear, tend to further embed US-style corporate governance practice and methodology in Australia, initially at least, the conundrum is that at this same time, greater regard needs to be given to alternative, regionally located models of corporate governance. This pits US shareholder, contractarian governance (based on the UK company invention) against communitarian or 'stakeholder' governance, the best known example of which, in the Association of Southeast Asian Nations (ASEAN) region at least, arises in Japan. In this sense, the Free Trade influence exerted by the United States will compete with regional, trade-based governance practices promoted by countries such as Japan. For Australia this will involve navigating a path between automatically adopting Anglo-US values, on the one hand, or exerting greater geographic and regional influence, on the other. The thesis of this article is that while the United Kingdom and United States historical influence (in its modern guise, the AUSFTA effect) is clearly discernible, the Asian or geographic imperative needs greater reflection. This lack of engagement is important for three reasons. First, there is evidence that Australia's system of corporate governance is not working well. Second, in an increasingly complex international trade environment, claims of the 'natural' supremacy of one model of governance over another may be premature and misleading. Third, and more positively, a more inclusive approach to governance heralded by a critical, reflective methodology can bring about economic improvement. In particular, an open approach to corporate governance modeling allows the concept of the firm to be re-imagined and for its possibilities to be expanded. This can lead to greater wealth building and greater consideration of the equity and fairness principles associated with firms.