Why Corporate Governance Deserves Serious and Creative Thought

Abstract

In their article, “Learning From Ancient Athens: Demarchy and Corporate Governance” (this issue), Zeitoun, Osterloh, and Frey contribute a useful summary of the debates about corporate governance and suggest a novel way to involve stakeholders in governance. Picking up from their discussion on corporate governance, this paper raises four issues. First, different kinds of corporations should have different kinds of governance policies. In particular, large global corporations are so important and so distinctive that they deserve special thought. Second, humanity must set priorities among goals. Governance policies that enable an individual corporation to operate effectively right now may cause long-term harm to humanity and the earth, and policies that benefit humanity and the earth may harm individual corporations. It is not clear who should set such priorities. Third, ideas about governance should consider technological and social changes that are propelling corporations toward entirely new forms. Much of the debate about corporate governance has focused on issues relating to 20th-century organizations and 20th-century societies, and significant changes in governance will take decades to take effect. Last, boards of directors exercise rather weak governance in comparison with governance by managerial hierarchies. Thus, it is more important to improve managerial governance. As commercially and politically neutral institutions that emphasize open, fact-based discussion, universities could usefully enhance the quality of governance by senior executives as well as outside stakeholders.