Abstract:
The study appraises the current state of corporate governance development in
Sri Lanka in relation to the publicly traded (listed) companies to identify the
prospects and the associated problems in the socio-economic context of the
country. The study finds that corporate governance best practices have evolved
in Sri Lanka over a period of time from a voluntary code of compliance to the
present mandatory rules. Accordingly, the study derives the existing corporate
governance model for Sri Lankan listed companies, which is a mixture of both
mandatory and voluntary rules on corporate governance and it has been
developed in line with the Anglo-Saxon model of corporate governance due to
both historical and economic reasons. Although the Anglo-Saxon model has
instilled some good corporate governance practices in these companies, the
institutional conditions necessary for its successful application are lacking in Sri
Lanka mainly owing to the concentrated corporate ownership structure in the
country. This raises serious concerns as to the implementation of an independent
director system and the protection of minority shareholder rights in Sri Lanka.
However, the ownership concentration is a distinguishing feature of the insiderbased
corporate governance model of Continental European and Asian
countries. Thus, a hybrid system of corporate governance is practised presently
in Sri Lanka, which in turn indicates that the traditional dichotomy of insider
and outsider models of corporate governance is not suitable in the Sri Lankan
context. Hence, the best model of corporate governance for Sri Lanka is one that
could address effectively the critical corporate governance issues of the country.
