Corporate governance is a central issue for both firms and financial markets in Europe today. A key question is to what extent should there be harmonization or diversity of codes and regulation across Europe? This report relies on theoretical and empirical evidence to analyse the correlation between desired corporate governance arrangements and the nature of economic activity. The authors investigate the way in which a mature institutional environment, like the US, has dealt with these issues. A central lesson from the US is that it permits diversity in governance arrangements, encourages competition between systems and requires transparency in information disclosure. The authors conclude with their own recommendations for achieving the desired objectives of flexibility and transparency.