Question

Q4: What are the arguments for having corporate governance issues regulated at the federal rather then state level? Do you support these arguments?

The book is Strategic Corporate Social Responsibility chapter#5

Answer 1

Arguments in favor of the corporate governance issues being regulated at Federal level refer to the instances when companies have gone bankrupt and filed for so due to their recklessness of governance. Usually the bailout is done by the federal government. So it is rational for the regulations of governance to be handled by them. However the state level regulations can offer more flexibility to the governance and the state is usually at a more convenient position to bear the cost of setting up legislative bodies for settling corporate legal cases. At federal level all these courts and bodies cannot be maintained without entailing huge cost. So to me it sounds rationale to have a mix of the say of both federal and state governments in deciding the corporate governance regulations such that the federal government could have access to the accountability of the corporate houses before going bankrupt or taking any poor decisions.