Abstract
Over four decades, research and policy have created layers of understandings in the quest for “good” corporate governance. The corporate excesses of the 1970s sparked a search for market mechanisms and disclosure to empower shareholders. The UK-focused problems of the 1990s prompted board-centric, structural approaches, while the fall of Enron and many other companies in the early 2000s heightened emphasis on director independence and professionalism. With the financial crisis of 2007–09, however, came a turn in some policy approaches and in academic literature seeking a different way forward. This paper explores those four phases and the discourse each develops and then links each to assumptions about accountability and cognition. After the financial crisis came pointers n policy and practice away from narrow, rationalist prescriptions and toward what the philosopher Stephen Toulmin calls “reasonableness”. Acknowledging that heightens awareness of complexity and interdependence in corporate governance practice. The paper then articulates a research agenda concerning what “reasonably” good corporate governance might entail.
Highlights
Four decades have passed since the seminal paper by Jensen and Meckling (1976) established the field we know as corporate governance
The explosion of research and policymaking that took developed during that period has provided a wealth of insights about boards of directors, institutional investors, and the roles that codes of conduct, corporate disclosure and transparency play in the functioning of equity capital markets and strategic leadership
Examination of the version of the UK Corporate Governance Code as reformulated after the financial crisis shows each discourse layered upon the (Nordberg and McNulty 2013). These four, overlapping phases seem to be based on different understandings of accountability and different assumptions about director and investor cognition, which point toward different philosophical stances of what constitutes Bgood^ governance, which creates a framework for understanding the literature and formulating research directions and informing policy
Summary
Four decades have passed since the seminal paper by Jensen and Meckling (1976) established the field we know as corporate governance. Ahrens et al (2011) go on to recommend refocusing research in several different directions: a) new measures of corporate performance, b) understanding the impact of large events, c) economic competence of key actors on boards and among investors, d) how governance is practiced, e) differing national contexts and institutional systems, and f) attention to the multiplicity of problematic agency relationships in the investment supply chain, not just in the shareholder-manager dyad. Examination of the version of the UK Corporate Governance Code as reformulated after the financial crisis shows each discourse layered upon the (Nordberg and McNulty 2013) These four, overlapping phases seem to be based on different understandings of accountability and different assumptions about director and investor cognition, which point toward different philosophical stances of what constitutes Bgood^ governance, which creates a framework for understanding the literature and formulating research directions and informing policy. Among management theorists, Sandberg and Tsoukas (2011) invoke Toulmin’s doubts about the rational in arguing for what they term Bpractical^ rather than Bscientific^ rationality
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