Failed Governance: A Comment on Baker and Griffith's Ensuring Corporate Misconduct

Abstract

This essay evaluates Baker and Griffith's book, Ensuring Corporate Misconduct, as a contribution to the social science literatures on regulation and governance, risk, and insurance. Previous social science work on insurance often took an “insurance on the ground” perspective comparing how insurance actually works with the theory of insurance and scrutinizing the actions of insurers as well as the actions of their policyholders. In line with this perspective, Baker and Griffith find that directors and officers (D&O) insurers do not actually charge premiums that vary with risk or monitor the actions of the officers and directors covered by the insurance. Because insurers and governments share governance tasks (a point Baker makes elsewhere), insurers' failures in fact amount to “failed governance” of the corporate world.