Conceiving Corporate Governance for an Asian Environment

Abstract

Most Asian corporations are vehicles used by a separate system or social network – such as a family, a state or a political party. The challenges presented by the corporation operating as a system within a system are in most instances ignored. The dominant model of corporate governance understands the company as a collection of otherwise unrelated individuals united for the sole purpose of profit. It recognizes the systematic environments in which corporations exist only to the minimal extent necessary to check and punish conflicts of interests, assess compliance with duties or determine whether dominant behavior is unfair. At most, social networks like families are recognized as potential sources of power and information asymmetries that exploit other corporate constituencies. This ignores a deep body of empirical scholarship demonstrating the advantages enjoyed by family enterprises – from profitability and longevity to lower executive compensation and transaction costs. This paper uses institutional and systems theory tools to begin development of a model of corporate governance dynamics that takes real account of the systems that coexist with the corporate vehicle, using the initial examples of the family and the political party. The paper formulates “structural couplings” (Luhmann) through which value systems can meaningfully communicate with the governance systems of the corporation.