1. Introduction

1. Introduction The need for corporate governance to limit conflicts of interest between shareholders and managers, and especially the costs generated by such conflicts, is not a new phenomenon. Berles and Means (1932) had argued that managers must be controlled in order to avoid losses. Financial scandals, as seen at Enron, WorldCom, and Nortel in North America and Parmalat in Europe, and the astronomical costs associated with them, have reinforced this argument. As we have seen, such scandals can cause financial markets to drop sharply, jobs to be lost and pension plan values to plummet. For example, the largest American pension fund lost over one billion dollars through its investments in WorldCom (Reuter, 2002). The Caisse de de´poˆ t et placement du Que´bec, the largest pension fund in Canada, saw the value of its Nortel investments drop by five billion dollars between August 2000 and the end of December 2004 (Girard, 2006).