As touched upon in Chapter 1, contemporary commentary on corporate governance can be divided into two main approaches: stakeholder primacy, and the narrower shareholder primacy. This chapter focuses on the first of these objectives. We commence the chapter by pointing out that an approach that accentuates the differences between a shareholder versus a stakeholder theory of the corporation is probably a contradiction and a false dichotomy. We then deal with the important aspect of corporate social responsibility (‘CSR’) and the related issue of disclosure of and reporting on non-financial matters. As part of this discussion we focus on the controversial and highly topical issue of companies exaggerating their image as environmentally friendly corporations (greenwashing) to please investors and to attract more investments, as well as smartening their image on other issues (greenscreening). This chapter then looks at the ‘social licence to operate’ before shifting to CSR and directors’ duties. The chapter concludes by considering the meaning of ‘stakeholders’ and how all corporate stakeholders have vested interests in the sustainability of corporations.

Legally, development charges are a fee, not a tax. Therefore, jurisdictions should use revenue generated from development charges to provide the infrastructure and services to serve the charge-paying real estate development. That is, the charges must meet the nexus principle, which calls for a direct relationship between the real estate project and the development charges-funded infrastructure and services. Furthermore, they must meet the rough proportionality principle. That is, they should be proportional to the cost of providing the infrastructure and services needed to serve the real estate project. When combined, the nexus and rough proportionality principles are called the rational nexus principle.

Furthermore, development charges can disproportionately burden lower-income households by negatively influencing their ability to pay (ATP), causing vertical inequity. The ATP principle undergirds vertical equity. As per this principle, the higher-income community members should pay more than the lower-income members for the publicly funded infrastructure and services. The need to promote vertical equity is even more critical in developing countries such as India. A large proportion of these nations’ population is low-income, and development charges could overburden them if the design of the charges does not consider ATP.

This chapter describes the aforementioned nexus, rough proportionality, and vertical equity issues. It also discusses other major factors to consider while designing and implementing a development charge program. These factors include the political feasibility of levying development charges and the enabling legal framework required to do so, the ways to enhance revenue yield and ensure its stability, and the institutional capacity required to levy these charges.

Nexus and rough proportionality principles and equity considerations

Two US Supreme Court cases—the Nollan and Dolan cases—form the foundation of the nexus and rough proportionality principles. These casesrequired that exactions must be related to the improvements made to a land parcel (the nexus principle) and must be roughly proportional to the improvements’ monetary impacts (Johnson 2008).

As noted in the previous chapter, in the Nollan v. California Coastal Commission (1987) case, the Nollan family requested permission to expand their house from the Commission. In turn, the Commission asked the Nollans to grant a public easement along the section of their land parcel that faces the beach. The US Supreme Court ruled in favor of the Nollans, noting that the Commission did not establish a connection (nexus) between the house’s expansion and the easement (Altshuler and Gomez-Ibanez 1993).

This chapter opens with a brief discussion of the nature of business ethics, its significance for corporations and the ethical dimensions of a corporation’s stakeholder relationships. The next section is focused on the causes of ethical problems: bad apples, bad cases and bad barrels. In order to examine these it presents the theory related to each before drawing on three case studies: the HIH failure, the LIBOR case and the destruction of Juukan Gorge. The extent to which we attempt to encourage ethical conduct is discussed in the following section. In particular, that section examines corporate accountability, individual accountability and organisation-level approaches that seek to shape the ethical conduct of corporations. The final section is devoted to some concluding remarks.

Several countries worldwide use development charges to fund infrastructure and services. Governments in many of these countries have a long history of negotiating contributions from developers. These contributions could be monetary and non-monetary, and they are referred to by various names. For instance, they are called development exactions in the US, planning obligations in the United Kingdom (UK), and developer contributions in Australia and New Zealand.

As noted in Chapter 1, development charges are an example of monetary contributions, and they are generally levied based on a fixed fee schedule. They are also known by various names. For example, they may be called impact fees, development impact fees, and system development charges in the US; community infrastructure levy (CIL) in the UK; infrastructure charges in Australia; external development charges in India; and capital contributions, engineering service contributions, and bulk infrastructure contribution levies in South Africa.

As non-monetary contributions, governments can require developers to provide infrastructure and services, such as affordable housing, land for parks, and off-site improvements like sidewalks and signalized traffic intersections. The development charge can supplement or complement non-monetary contributions. However, local governments are often prohibited from using non-monetary contributions and development charges for the same project to avoid double-dipping. For example, local governments in the UK generally use CIL to fund neighborhood- or jurisdiction-wide infrastructure and services. They use planning obligation for site-specific requirements for which they cannot use CIL, as per the national law enabling CIL (GoUK 2011). Some of these requirements include landscaping, improving local roads, or funding affordable housing. Similarly, local governments in the US typically do not collect a park impact fee to acquire land for a park if they require a dedication of land for it. However, they can charge a park impact fee to construct the same park because the fee would complement the development exaction. Here, the latter would be used to acquire the land and the former to construct the park.

The remainder of the chapter takes a closer look at how development charges are used in Australia, South Africa, and the US. I chose these three countries based on their geographical spread (spread across three continents) and levels of economic development (two developed and one developing country). I also considered the maturity of their development charge programs (more mature programs in the US than in Australia and South Africa), enabling environments, and the availability of information.

Since at least 2018 there has been a major shift within ‘Business America’ away from ‘shareholder capitalism’ towards ‘stakeholder capitalism’, a move which has already had some global impact. Our approach is, however, realistic and we also make the reader aware of the challenges for countries, particularly where shareholder primacy is deeply embedded in statutory law and case law, to move from shareholder primacy to an all-inclusive stakeholder model of corporate law and corporate governance. In this chapter we extract some of the ‘essential’ principles of corporate governance and illustrate that there is a ‘business case’ for good corporate governance. We conclude the chapter by discussing broader trends and debates with a present and likely future impact on corporate governance. These include what can be described as the ‘Fourth Industrial Revolution’; the widening gap between the ‘rich’ and the ‘poor’, or, put differently, ‘the price of inequality’; the growing problem regarding profit-sharing or capital distribution in large public corporations; and a short discussion of the so-called ‘Great Reset’.

The last few years have seen an increased global focus on local government finance. This focus turned into a shared commitment at the UN-HABITAT III Conference held in Quito, Ecuador, where the New Urban Agenda (NUA) was adopted. NUA resulted from an extensive collaborative effort that included nearly 200 national and thousands of state, regional, and local governments; scores of UN agencies; and several thousand other organizations, policy experts, and networks. The agenda notes the significant urbanization occurring globally and recognizes the urgency of lifting millions of urban poor out of poverty and improving urban QOL in an environmentally sustainable way. NUA explicitly acknowledges municipal finance as one of the five main pillars for implementing the agenda and highlights the need to strengthen it to sustainably create, generate, and share the value gains due to urban development. Furthermore, NUA calls for developing transparent and accountable financing tools and stresses the need to link fiscal and urban planning systems and promote LVC tools (HABITAT III 2016). Development charges are a valuable tool to fulfill the NUA.

Development charges are widely used across the world. A recently published compendium of LVC tools surveyed 60 countries around the globe and found that development exactions (both cash/monetary and in-kind/non-monetary) are the most-used LVC tool among the five studied in the compendium (OECD and Lincoln Institute of Land Policy 2022). Moreover, 43 countries use development exactions; of them, approximately 85 percent (around 37 countries) use monetary development exactions, that is, development charges. The use of these charges is likely to continue to increase as countries worldwide adopt neoclassical public finance tools that adhere to the BTP principle.

However, development charges are used unevenly, even within a country, state, and region. Examples from Australia, South Africa, and the US show that some jurisdictions fund a large proportion of their fundingneeds through this tool, whereas others a mere fraction of them. Moreover, due to the multilayered opacity around the design and use of development charges, it is impossible to get an accurate and comprehensive picture of their use. The US arguably has the best data on these charges, but even that comes from national surveys that rely on readily available data rather than scientific survey techniques. The utility of this book should be considered in this larger context of sparse knowledge about this critical urban development finance tool.

Historically, the power to manage the business of all companies and corporations was conferred upon the board of directors. The fact that it was impossible for a board of directors to manage the day-to-day business of large public corporations was only openly acknowledged in the past three decades. This chapter focuses on the organs of a company and then discusses the main functions of a board of directors. It is clear that there is an important distinction between managing the business of the company and directing, supervising and overseeing the management of the business of corporations in large public companies. The board is responsible for directing, supervising and overseeing the management of the business of corporations. Managing the business of large public corporations is normally left to management, but under control of the board.

No matter which corporate code of conduct or corporate governance framework is used, the issue of ‘transparency’ is referred to, either directly or by implication. The application of ‘transparency’ to corporate reporting practices, covering both financial and non-financial conduct and performance, has come under increasing scrutiny from various stakeholder groups. The single most significant reform, to date, in this area in Australia came in response to the high-profile corporate collapses of the early 2000s. On 1 July 2004, the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (Cth) came into effect. This Act is commonly referred to as ‘CLERP 9’, as it was the ninth instalment under the government’s Corporate Law Economic Reform Program (‘CLERP’). CLERP 9 is broadly consistent with, and a complement to, the ASX Corporate Governance Principles and Recommendations, now in its fourth edition (2019). The aim was for the two documents together to promote good corporate governance practices within Australian listed companies and achieve effective regulation.

As a general rule, directors owe their duties to the company as a whole, not to individual shareholders. Historically, directors’ duties and liability were discussed under general law duties (duties at common law or in equity); subsequently, they were added to under statutory duties. Under general law duties, most courts and commentators usually draw a distinction between equitable duties based on loyalty and good faith, with a particular focus on fiduciary duties, and the duty to act with due care and diligence (the duty of care). The duty of care may arise under principles of equity and at common law, in both contract and tort. Fiduciary duties in Australian law are proscriptive, not prescriptive. That is, the duties prohibit the fiduciary from engaging in particular conduct rather than prescribing what the fiduciary must do in particular situations. The failure to act in a reasonable manner has traditionally fallen within the domain of the duty of care, whereas behavior which falls foul of principles of loyalty is addressed more clearly in equity.

Introduction

Globally, governments at all levels—national to local—are fiscally constrained, particularly in India and other developing countries of the Global South. Specifically, local and state governments are more fiscally limited because a large proportion of tax and fee revenue typically accrues to the national government. This issue is further exacerbated due to several reasons. First, local and state governments have very little authority to levy new taxes. Second, the national government, being severely indebted externally and internally, is unable to extend funds to local and state governments for urban development. Third, the municipal bond markets are either underdeveloped or nonexistent in such countries, limiting their ability to access private capital markets to generate funding. Finally, residents resist traditional tax-based revenue sources, such as property and income taxes. In such a scenario, the countries require additional sources of revenue to fund urban development, especially due to their rapid rate of urbanization. For example, the increase in India’s urban population will be the largest in the world, surging by 404 million from 2014 to 2050, and China will follow suit with 292 million (UN 2014). Therefore, development charges can be a significant source of revenue for funding urban development in India.

Property owners pay these charges when seeking the government’s approval to change or institute the use of their land parcels or to improve them. They pay the charges to public agencies, which, in turn, use this revenue to mitigate the negative impacts of the charges-paying development, for example, providing the infrastructure needed to serve the development. In India, these charges are often meager, and they are not tied to the cost of providing infrastructure and services that serve the development, such as roads, parks, and schools. In many cases, the charges have not been updated for decades. Therefore, they have not kept pace with the cost of developing urban infrastructure and services.

Development charges fall under the larger umbrella of development exaction. Jurisdictions require that real estate developers pay development exactions at the stage of building permit approval. Jurisdictions levy the exactions to mitigate the impact of the proposed real estate development on public infrastructure and services (Mathur 2016). The developer exactions could be financial or in kind. For example, as a condition for permitting a 500-unit apartment complex, a city government can levy development exactions on the real estate developer.

Urban finance is becoming one of the most important issues in international development. The globally negotiated Agenda 2030 commits the international community to realizing an ambitious set of Sustainable Development Goals (SDGs) around the world in less than a decade. If this is to occur or even to make credible progress, countries and their constituent subnational governments will need to work in new ways and with new partners, and they must effectively use all the governance, fiscal, and managerial mechanisms at their disposal and develop new ones. Finding and properly targeting the resources to take on this ambitious agenda is a particular challenge.

The UN Secretary General’s Synthesis Report on the SDGs states that “many of the investments to achieve the sustainable development goals will take place at the subnational level and be led by local authorities” (UN General Assembly 2014, 22, para. 94).The High-Level Panel on the Post-2015 Agenda claims that “cities are where the battle for sustainable development will be won or lost” (UN 2013, 17). The call for action in the New Urban Agenda (Habitat III) points to the need for particular attention to “addressing the unique and emerging urban development challenges facing all countries, in particular developing countries” (UN-HABITAT 2017, 9, para. 19). The Addis Ababa Action Agenda on Financing for Development highlights the subnational role in financing sustainable development and commits to scaling up international cooperation to support local and regional governments (UNDESA 2015).

The growing recognition of the role of subnational governments in sustainable development is occurring in part because of the rise of decentralization in many countries around the world. High-income countries—and increasingly low and middle-income countries—expect subnational governments to perform an expanding range of public functions. In a large global sample, subnational governments in high-income countries on average accounted in 2020 for 28 percent of total public spending (nearly 14 percent of GDP). Fiscal decentralization is more recent and uneven in many middle- and low-income countries, so subnational spending is typically less significant (except in a group of large or federal countries), on average 11 percent of public spending (around 2 percent of GDP) in the latter group. The difference in the role of subnational governments in public investment is similarly unbalanced—44 percent of total public investment in high-income countries compared to 18 percent in low-income countries (OECD and UCLG 2022).