Firm's Governance Regulation: from Self-Regulation to Co-regulation?

Economic analysis widely considers conventional legal production technologies (hard law), including governmental regulations, statutes, or judge-made law, as ill-suited to the legal needs of heterogenous firms and investors in the field of corporate governance regulation. By contrast, codes of corporate governance can be considered to fall within the scope of soft law. As most of them rely on self-regulation, thus ensuring that the agents to whom codes will apply are also those who have participated in their writing, they are often regarded as providing economic agents with adaptive, flexible rules of corporate governance. Another reason behind their alleged superiority is their reliance on firms' voluntary and optional compliance, based on the comply-or-explain approach. This article aims at challenging this dominant view of codes' superior efficiency to regulate corporate governance. Building on a joint approach by the legal and economic disciplines, it shows that codes imply both a risk of low quality of governance and conformist compliance by firms. Drawing on French recent regulatory reforms in the field of CSR, it argues that co-regulation may provide a promising solution to overcome both the drawbacks associated with self-regulation and regulation by external authorities in the field of corporate governance.