Corporate governance varieties

Abstract

PurposeCorporate governance is the practice of balancing various stakeholder interests within the legal device of the chartered business. Recent changes in the competitive capitalism including the Great Recession, now entering its second decade, have called for reforms within the defined corporate system. To sketch a wider picture of corporate governance issues and the debate over time, this paper aims to identify two philosophical traditions, a British and liberal tradition and a continental statist tradition, which have bearings for how the legal device of the corporation is understood.Design/methodology/approachThis conceptual paper combines legal philosophy and legal studies, management studies, economics and economic sociology literatures.FindingsIn the former tradition, the firm and its ownership are exclusively associated with irreducibly individual rights. In the latter tradition, property rights remain the core of legal systems, but rather than being an end in itself (as in the liberal tradition), such property rights are merely the starting point for the individual’s wider engagement in social and public affairs. These two traditions enact the firm differently and emphasize specific benefits. In the former tradition, associated with a shareholder primacy model, individual rent-seeking is foregrounded; in the latter tradition, associated with legal and management scholarship, the team production qualities of the firm are emphasized.Originality/valueThis conceptual paper offers an analysis of the roots of differences between Anglo-American and continental corporate governance traditions, a scholarly study that is of great theoretical and practical relevance in the era of the Great Depression.