Corporate Governance | Case/Opinion | Comply and Explain OR Comply or Else?

Do you think corporate governance should be enforced through the “comply and explain” model or the “comply or else” model? Explain your answer.

Student responses will vary. 


The “comply and explain” model gives corporations the benefit of the doubt and allows them to explain why they are not complying. 


The “comply or else” model is a much stricter model in which corporations are, essentially threatened to comply or face stiff financial penalties for not being in compliance.


Please state your opinion .....



Source: Ghillyer_Business Ethics A Real World Approach 2e

Corporate Governance | Explain the difference between “comply or explain” and “comply or else.”

Explain the difference between “comply or explain” and “comply or else.”

The “comply or explain” method is a set of guidelines that require companies to abide by a set of operating standards or explain why they choose not to. 

The “comply or else” method is a set of guidelines that require companies to abide by a set of operating standards or face stiff financial penalties.



Source: Ghillyer_Business Ethics A Real World Approach 2e

Corporate Governance | Key Terms

Key Terms - Corporate Governance

Audit Committee:  An operating committee staffed by members of the board of directors plus independent or outside directors. The committee is responsible for monitoring the financial policies and procedures of the organization—specifically the accounting policies, internal controls, and the hiring of external auditors.

Board of Directors:  A group of individuals hired to oversee governance of an organization. Elected by vote of shareholders at the annual general meeting (AGM), the true power of the board can vary from institution to institution from a powerful unit that closely monitors the management of the organization, to a body that merely rubber-stamps the decisions of the chief executive officer (CEO) and executive team.

Compensation Committee:  An operating committee staffed by members of the board of directors plus independent or outside directors. The committee is responsible for setting the compensation for the CEO and other senior executives. Typically, this compensation will consist of a base salary, performance bonus, stock options, and other perks.

“Comply or Else”:  A set of guidelines that require companies to abide by a set of operating standards or face stiff financial penalties.

“Comply or Explain”:  A set of guidelines that require companies to abide by a set of operating standards or explain why they choose not to.

Corporate Governance:  The system by which business corporations are directed and controlled.

Source: Ghillyer_Business Ethics A Real World Approach 2e