4.1.1 Sample and research setting

After the theoretical framework of this study as outlined in part I, part II encompasses the empirical research and examines the application to corporate governance statements of the comply or explain principles of the five countries under review in practice by means of a comparative legal analysis (chapter 4) and content analysis (chapter 5). The purpose thereof is to be able to analyse the entire theoretical as well as empirical research on the comply or explain principle in chapter 6, and to provide recommendations on how the comply or explain principle should be applied in practice, i.e. the conditions that need to be put in place for it to work properly and as intended. Chapter 4 provides, per EU country investigated, the specifics of the comply or explain principle and its embedding in the national corporate governance system and regulation. Furthermore, the chapter explains why the specific country under review has been chosen in relation to the others, and previous (national) studies on the comply or explain principle will be described. The research question examined in this chapter can be formulated as: What is, based upon comparative legal analysis, the layout of the comply or explain principle as embedded in the corporate governance systems of five Member States and does a common understanding ofthe principle s scope and its most effective form currently exist within the EU?

This chapter reviews the theoretical aspects of the comply or explain principles for the five countries under research (Belgium, Italy, Germany, the Netherlands and the UK). As a consequence, it is not intended to give a full overview of the national corporate governance systems, or to analyse and subsequently compare the contents of the national corporate governance codes. The focus of this study is the comply or explain principle and its embedding in the national corporate governance systems under review. However, when discussing the comply or explain principle certain basic information on a country's corporate governance system and national code has to be provided as long as it contributes to the answering of the research question.

The five countries under research have been selected since they reflect different judicial corporate governance arrangements (see table 4.1.1a and section 3.2.2).

Moreover, the countries selected include example countries and front-runners (UK and the Netherlands), countries with an assumed underdeveloped corporate governance system (Italy), countries that copied from the example countries as they wanted to improve their competitive position, different origins of the law system (UK common law, the others civil law), different corporate governance systems (UK enlightened shareholder model, the others stakeholder model) and very different scores on Hofstede's cultural dimensions (see section 3.3.2) (see table 4.1.1b for a preliminary categorisation). Besides differences in culture, judicial corporate governance arrangements, and front-running or copying behaviour, the 'national playing fields' also differ. The 'national playing fields' involve the companies subject to the corporate governance codes and the comply or explain principle, i.e. the listed companies. The importance of this sector differs per country which is possibly reflected in the amount of attention given to code compliance and the speed of developments and improvements (see also section 5.4.5 on the number of listed companies to select the sample from). Hence a set of five countries that represents a diverse image of corporate governance in the EU to elaborate on further.