Fundamentals
FUNDAMENTALS OF CORPORATE GOVERNANCE
By Thomas Clarke and Marie dela Rama
SAGE Publications (2008) London; Thousand Oaks CA.
ISBN: 978-1-4129-3589-0
Website: http://www.ccg.uts.edu.au
THE FUNDAMENTAL DIMENSIONS AND DILEMMAS OF CORPORATE
GOVERNANCE
Introduction
As the scale and activity of corporations has increased immeasurably, the governance of these entities has assumed considerable importance. Business corporations have an enduring impact upon societies and economies, and “how corporations are governed their ownership and control, the objectives they pursue, the rights they respect, the responsibilities they recognize, and how they distribute the value they create – has become a matter of the greatest significance, not simply for their directors and shareholders, but for the wider communities they serve” (Clarke and dela Rama
2006:xix). These concerns originated with industrial capitalism, but have become accentuated with the extensive internationalization of corporate activity in recent decades, the global deregulation of financial markets, and a growing awareness of the damaging economic and social consequences when corporate governance failures occur.
Corporate governance has competing definitions, but in Margaret Blair’s estimation encompasses the “the whole set of legal, cultural, and institutional arrangements that
1
determine what publicly traded corporations can do, who controls them, how that control is exercised, and how the risks and returns from the activities they undertake are allocated” (1995:3). These expansive dimensions of corporate governance were narrowly translated in recent decades with the increasing ascendancy of financial markets and intellectual domination of agency theory into an almost obsessive concern for the problems of accountability and control involved in the dispersal of ownership of large listed corporations, and a rigid focus on the mechanisms that orientate managers towards delivering shareholder value (Dore 2000;
By Thomas Clarke and Marie dela Rama
SAGE Publications (2008) London; Thousand Oaks CA.
ISBN: 978-1-4129-3589-0
Website: http://www.ccg.uts.edu.au
THE FUNDAMENTAL DIMENSIONS AND DILEMMAS OF CORPORATE
GOVERNANCE
Introduction
As the scale and activity of corporations has increased immeasurably, the governance of these entities has assumed considerable importance. Business corporations have an enduring impact upon societies and economies, and “how corporations are governed their ownership and control, the objectives they pursue, the rights they respect, the responsibilities they recognize, and how they distribute the value they create – has become a matter of the greatest significance, not simply for their directors and shareholders, but for the wider communities they serve” (Clarke and dela Rama
2006:xix). These concerns originated with industrial capitalism, but have become accentuated with the extensive internationalization of corporate activity in recent decades, the global deregulation of financial markets, and a growing awareness of the damaging economic and social consequences when corporate governance failures occur.
Corporate governance has competing definitions, but in Margaret Blair’s estimation encompasses the “the whole set of legal, cultural, and institutional arrangements that
1
determine what publicly traded corporations can do, who controls them, how that control is exercised, and how the risks and returns from the activities they undertake are allocated” (1995:3). These expansive dimensions of corporate governance were narrowly translated in recent decades with the increasing ascendancy of financial markets and intellectual domination of agency theory into an almost obsessive concern for the problems of accountability and control involved in the dispersal of ownership of large listed corporations, and a rigid focus on the mechanisms that orientate managers towards delivering shareholder value (Dore 2000;
References: Aglietta, M. and A. Rebérioux (2005) Corporate Governance Adrift: A Critique of Shareholder Value, Edward Elgar Aguilera,R. and Cuervo-Cazurra,A. (2004) Codes of Governance Worldwide: What is the Trigger? Organization Studies, 25,415-443 Alchian,A.A. and Demsetz, H. (1972) Production, Information Costs and Economic Organisation, American Economic Review, 62, 777-95 Allouche, J. (2006) Corporate Social Responsibility: Concepts, Accountability and Reporting, Houndmills, Basingstoke: Palgrave Macmillan Apreda, R. The Semantics of Governance pp.10-23 in Clarke, T. and dela Rama, M. (eds) (2008) The Fundamentals of Corporate Governance, Volume 1: Ownership and Control, M. (eds) (2008) The Fundamentals of Corporate Governance, Volume 4: Stakeholders and Sustainability, SAGE Publications: London. Bauer,R. and Guenster,N. (2003) Good Corporate Governance Pays Off: Well Governed Companies Perform Better on the Stock Market, Working Paper, University of Control: Effects on Corporate Strategy pp.66-83 in Clarke, T. and dela Rama, M. (eds) (2008) The Fundamentals of Corporate Governance, Volume 2: Boards and Directors, Bebchuk, L.A & Fried, J.M. Pay without Performance: Overview of the Issues pp.219244 in Clarke, T. and dela Rama, M. (eds) (2008) The Fundamentals of Corporate Governance, Volume 3: Executives and Performance, SAGE Publications: London. Bell, D. (1961) The End of Ideology, New York: Collier 40 Benn, S. and Dunphy,D. (2007 Corporate Governance and Sustainability, London and New York: Routledge Berle, A.A. and Means,G.C. (1933) The Modern Corporation and Private Property, Commerce Clearing House, 1933 dela Rama, M. (eds) (2008) The Fundamentals of Corporate Governance, Volume 3: Executives and Performance, SAGE Publications: London. Bird, A. Power and the Japanese CEO pp.301-317 in Clarke, T. and dela Rama, M. (eds) (2008) The Fundamentals of Corporate Governance, Volume 3: Executives and Blair, M.M. (1995) Ownership and Control: Rethinking Corporate Governance for the 21st Century, Washington DC: Brookings Institute Blair, M.M. and Roe, M.J (1999) Employees and Corporate Governance, Washington: Brookings Institute Boyer, R. (2005). From Shareholder Value to CEO Power: the Paradox of the 1990s. Bradley, M, Schipani C A, Sundaram, A K, & Walsh, J P. (1999) The Purposes and Accountability of the Corporation in Contemporary Society: Corporate Governance at a Brancato, C.K. (1997) Institutional investors and corporate governance : best practices for increasing corporate value, Chicago: Irwin Publishers (eds) (2008a) The Fundamentals of Corporate Governance, Volume 1: Ownership and Control, SAGE Publications: London. Carter, C.C. and Lorsch, J.W. (2004) Back to the Drawing Board: Designing Corporate Boards for a Complex World, Harvard Business School Press Clarke, T. and dela Rama, M. (eds) (2008) The Fundamentals of Corporate Governance, Volume 3: Executives and Performance, SAGE Publications: London. Chandler, A.D. (1977) The Visible Hand: The Managerial Revolution in American Business, Cambridge, Massachusetts Charkham, J. (2005) Keeping Better Company, Oxford University Press Charkham, J