Hostname: page-component-8448b6f56d-gtxcr Total loading time: 0 Render date: 2024-04-20T03:44:10.979Z Has data issue: false hasContentIssue false
  • English
  • Français

Dangerous frontiers in corporate governance

Published online by Cambridge University Press:  28 August 2014

Thomas Clarke
Thomas Clarke*
Affiliation:
UTS Business School, Centre for Corporate Governance, UTS Sydney, Australia
*
Corresponding author: Thomas.Clarke@uts.edu.au
Get access Rights & Permissions [Opens in a new window]

Abstract

The historical evolution of corporate governance is considered, highlighting the different eras of governance, the dominant theoretical and practical paradigms, the reformulation of paradigms and counter paradigms. Two alternative and sharply contrasting theorizations, one collective and collaborative (the work of Berle and Means), the other individualistic and contractual (agency theory and shareholder value) are focused upon. The explanatory potential of Blair and Stout's team production theory is elaborated, and its conception of the complexity of business enterprise, with a mediating hierarch (the board of directors) securing a balance between the interests of different stakeholders. The potential for reform of corporate purpose, corporate governance and directors’ duties is examined with reference to the UK Modern Company Law Review. The impact of the intensification of the financialization of corporations is analysed, with the increased emphasis upon short-termism. The origins of the global financial crisis in shareholder value orientations and the continuing reverberations of the crisis are explored. Finally, the imperative of the advance of sustainable enterprise is argued, and the critical changes necessitated in corporate purpose and directors’ duties.

Keywords

directors's dutiesagency theory and shareholder valueteam production theoryfinancializationshort-termismsustainability
Type
Invited Article
Information
Journal of Management & Organization , Volume 20 , Issue 3 , May 2014 , pp. 268 - 286
Copyright
Copyright © Cambridge University Press and Australian and New Zealand Academy of Management 2014 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Aglietta, M., Reberioux, A. (2005). Corporate governance adrift: A critique of shareholder value. Cheltenham: Edward Elgar.Google Scholar
Akerlof, G., Shiller, R. J. (2009). Animal spirits: How human psychology drives the economy, and why it matters for global capitalism. Princeton University Press.Google Scholar
Alchian, A. A. (1987). Property rights. In J. Eatwell, M. Milgate & P. Newman (Eds.), The new Palgrave: A dictionary of economics (Reprints in, The new Palgrave. The visible hand, 1989) London and Basingstoke: The Macmillan Press.Google Scholar
Alchian, A. A., Demsetz, H. (1973). The property right paradigm. The Journal of Economic History, 33(1), 16–27.Google Scholar
Becker, J., Jager, J., Leubolt, B., Weissenbacher, R. (2010). Peripheral financialization and vulnerability to crisis: A regulationalist perspective. Competition & Change, 14, 225–247.Google Scholar
Berle, A. A. Jr. (1932). For whom corporate managers are trustees: A note. Harvard Law Review, 45(8), 1365–1372 (reproduced in T. Clarke (ed.), Corporate governance: Critical perspectives in business and management, vol. 1, The genesis of corporate governance (pp. 76–83). London: Routledge).Google Scholar
Berle, A. A. Jr., Means, G. (1932). The modern corporation and private property New edition, Brunswick, USA and London, UK: Transaction Publishers.Google Scholar
Blair, M. M. (2005) Ownership and control. Washington DC: Brookings Institute.Google Scholar
Blair, M. M. (2012). In the best interests of the corporation: Directors duties in the wake of the global financial crisis. In T. Clarke & D. Branson (Eds.), The Sage handbook of corporate governance (pp. 62–80). London: Sage.Google Scholar
Blair, M. M., Stout, L. (1999). A team production theory of corporate law. Virginia Law Review, 85, 247–328.Google Scholar
Blair, M. M., Stout, L. (2001). Director accountability and the mediating role of the corporate board. Washington University Law Quarterly, 79, 403–449.Google Scholar
Bratton, W. W., Wachter, M. L. (2008). Shareholder primacy's corporatist origins: Adolf Berle and ‘The Modern Corporation’. Journal of Corporation Law, 34, 99–152. Retrieved from http://ssrn.com/abstract=1021273Google Scholar
Bratton, W., Wachter, M. (2010). The case against shareholder empowerment. University of Pennsylvania Law Review, 158, 653.Google Scholar
Chandler, A. D. Jr. (1977). The visible hand, managerial revolution in American business. Cambridge, MA: The Belknap Press of Havard University Press.Google Scholar
Cioffi, J. W. (2011). Fiduciaries, federalization, and finance capitalism: Berle's ambiguous legacy and the collapse of countervailing power. Seattle University Law Review, 34, 1081–1120.Google Scholar
Clarke, T. (1998). The stakeholder corporation: A business philosophy for the information age. Long Range Planning – International Journal of Strategic Management, 31(2), 182–194.CrossRefGoogle Scholar
Clarke, T. (2009). European corporate governance. London: Routledge.Google Scholar
Clarke, T. (2010). Recurring crises in Anglo-American corporate governance. Contributions to Political Economy, 29(1), 9–32.Google Scholar
Clarke, T. (2014). The impact of financialisation on international corporate governance: The role of agency theory and maximising shareholder value. Law and Financial Markets Review March.CrossRefGoogle Scholar
Clarke, T. (2015). International corporate governance 2nd ed. London: Routledge.Google Scholar
Clarke, T., Branson, D. (2012). Sage handbook of corporate governance. London: Sage.CrossRefGoogle Scholar
Clarke, T., Clegg, S. (2000). Changing paradigms: The transformation of management knowledge for the 21st century. London: Harper Collins.Google Scholar
Coase, R. H. (1960). The problem of social cost. Journal of Law and Economics, 3, 1–44.Google Scholar
Cohan, W. D. (2009). House of cards: How Wall Street gamblers broke capitalism. London: Allen Lane.Google Scholar
Corporations and Markets Advisory Board (CAMAC) (2006). The social responsibility of corporations report, Canberra: Australian Government, CAMAC.Google Scholar
Das, S. (2011). Extreme money: The masters of the universe and the cult of risk. London: Portfolio.Google Scholar
Davies, P. L. (2008). Gower and Davies' Principles of Company Law (8th ed., p. 740). London: Sweet and Maxwell.Google Scholar
Davis, G. F. (2009). Managed by the markets: How finance re-shaped America. Oxford University Press.Google Scholar
Dodd, E. M. Jr. (1932). For whom are corporate managers trustees? Harvard Law Review, 45(7), 1145–1163 (reproduced in T. Clarke (ed.), Corporate governance: Critical perspectives in business and management, vol. 1, The genesis of corporate governance (pp. 61–75). London: Routledge).CrossRefGoogle Scholar
Dore, R. (2008). Financialization of the global economy. Industrial and Corporate Change, 17, 1097–1112.CrossRefGoogle Scholar
Dunbar, N. (2011). The devil's derivatives. Cambridge: Harvard Business Review Press.Google Scholar
Epstein, G. A. (2005). Financialization and the world economy. Northampton, MA: Edward Elgar.Google Scholar
Fligstein, N. (1990). The transformation of corporate control. Cambridge, MA: Harvard University Press.Google Scholar
Fox, J., Lorsch, J. A. (2012). What good are shareholders? Harvard Business Review, 90, 49–57.Google Scholar
Galbraith, J. K. (1952). American capitalism: The concept of countervailing power. Boston, MA: Houghton Mifflin Company.Google Scholar
Galbraith, J. K. (1967). The new industrial state. Princeton and Oxford: Princeton University Press.Google Scholar
Ghoshal, S. (2005). Bad management theories are destroying good management practices. Academy of Management Learning and Education, 4(1), 75–91.Google Scholar
Haldane, G. (2011) ‘The short long’, Speech at the 29th Société Universitaire Européene de Recherches Financières Colloquium ‘New Paradigms in Money and Finance?’, Brussels, May 2011.Google Scholar
Henwood, D. (1998). Wall Street. London and New York, NY: Verso.Google Scholar
Hilferding, R. ([1910]1981). In M. Watnick & S. Gordon (Eds.), Finance capital, a study of the latest phase of capitalist development. London: RKP.Google Scholar
Hilmer, F., Tricker, R. I. (1991). An effective board, company director's manual. Sydney: Athol Yeomans, Pearson/Prentice Hall.Google Scholar
Ireland, P. (2005). Shareholder primacy and the distribution of wealth. Modern Law Review, 68(1), 49–81.Google Scholar
Ireland, P. (2008). Financialization and corporate governance. Northern Ireland Legal Quarterly, 60(1), 1–34.Google Scholar
Jensen, M. C., Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and capital structure. Journal of Financial Economics, 3, 305–360. Retrieved from http://ssrn.com/abstract=94043CrossRefGoogle Scholar
Jensen, M. C., Meckling, W. H. (1978). Can the corporation survive? Financial Analysts Journal, 31(1), 31–37. Retrieved from http://ssrn.com/abstract=244155Google Scholar
Johnson, S., Kwak, J. (2010). 13 bankers: The Wall Street takeover and the next financial meltdown. New York: Pantheon Books.Google Scholar
Kay, J. (2012) The Kay Review of UK equity markets and long-term decision making, Interim Report. UK Government.Google Scholar
Keay, A. R. (2011). Risk, shareholder pressure and short-termism in financial institutions. Does enlightened shareholder value offer a panacea? Law and Financial Markets Review, 5(6), 435–448.CrossRefGoogle Scholar
Keeley, L., Walters, H., Pikkel, R., Quinn, B. (2013). Ten types of innovation: The discipline of building breakthroughs. Hoboken, NJ: Wiley.Google Scholar
Krippner, G. R. (2005). The financialization of the American economy. Socio-Economic Review, 3(2), 173–208.Google Scholar
Krippner, G. (2012). Capitalizing on crisis: The political origins of the rise of finance. Harvard University Press.Google Scholar
Lan, L. L., Heracleous, L. (2010). Rethinking agency theory: The view from law. Academy of Management Review, 35, 2294–314.Google Scholar
Langlois, R. (2004). Chandler in a larger frame: Market, transaction costs and organizational form in history. Enterprise and Society N°5.CrossRefGoogle Scholar
Lazonick, W. (1991). Business organisation and the myth of the market economy. Cambridge University Press.Google Scholar
Lazonick, W. (2009). Sustainable prosperity in the new economy? Business organisation and high-tech employment in the United States. Kalamazoo: Upjohn Institute.Google Scholar
Lazonick, W. (2012). In the name of shareholder value: How executive pay and stock buy-backs are damaging the US economy. In T. Clarke & D. Branson (Eds.), The Sage handbook of corporate governance (pp. 476–495). London: Sage.Google Scholar
Lipton, M.,, Mirvis, T.,, Lorsch, J. (2009). The Proposed ‘Share-holder Bill of Rights Act of 2009’, Harvard Law School Forum on Corporate Governance & Financial Regulation, 12 May. Retrieved from http://blogs.law.harvard.edu/ corpgov/2009/05/12/the-proposed-%e2%80%9cshareholder-bill-of-rights-act-of-2009%e2%80%9dGoogle Scholar
Loughrey, J., Keay, A., Cerioni, L. (2008). Legal practitioners, enlightened shareholder value and the shaping of corporate governance. Journal of Corporate Law Studies, 8, 79–111.Google Scholar
Marshall, S., Ramsay, I. (2013). Stakeholders and directors duties: Law, theory and evidence. UNSW Law Journal Forum 18(1), 291–316.Google Scholar
Mitchell, R., O'Donnell, A., Ramsay, I. (2005). Shareholder value and employee interests: Intersections of corporate governance, corporate law and labor law. Wisconsin International Law Journal, 23, 417–476.Google Scholar
O'Brien, J. (2014). Culture wars: Rate manipulation, institutional corruption, and the lost normative foundations of market conduct regulation. Seattle University Law Review, 37, 375–421.Google Scholar
Parkinson, J. (1993). Corporate power and responsibility: Issues in the theory of company law. Oxford University Press.Google Scholar
Paulson, H. (2014). We US conservatives need to recognise climate change and find market solutions. The Observer 29 June.Google Scholar
Phillips, K. (2009) Bad money: Reckless finance , failed politics and the global crisis of American capitalism. London: Penguin.Google Scholar
Porter, M. (1992). Capital disadvantage: America's failing capital investment system. Harvard Business Review, 70, 65–82.Google Scholar
Pye, A., Pettigrew, A. (2005). Studying board context, process and dynamics: Some challenges for the future. British Journal of Management, 16, S27–S38.Google Scholar
Rajan, R. R. (2010). Hidden fractures still threaten the world economy. Princeton University Press.Google Scholar
Redmond, P. (2013). Directors duties and corporate social responsiveness. UNSW Law Journal Forum, 18(1), 312–340.Google Scholar
Salz, M. (2013). An independent review of Barclay's business practices. London: Salz.Google Scholar
Segrestin, B., Hatchuel, A. (2011). Beyond agency theory, a post-crisis view of corporate law. British Journal of Management, 22, 484–499.Google Scholar
Sorkin, A. R. (2009). Too big to fail. London: Allen Lane.Google Scholar
Stout, L. (2012a). New thinking on ‘Shareholder Primacy’. Accounting, Economics and Law: A Convivium, 2(2), 1–15 Retrieved from http://dx.doi.org/10.1515/2152-2820.1037Google Scholar
Stout, L. (2012b). The shareholder value myth. San Francisco: Berrett–Koehler.Google Scholar
UK Department of Business, Enterprise and Regulatory Reform (BERR) (2006). Company law review 1998–2000. Retrieved from http://webarchive.nationalarchives.gov.uk/+/http://www.dti.gov.uk/bbf/co-act-2006/clr-review/page22794.htmlGoogle Scholar
United Nations Environment Programme (UNEP) (2014). Integrated governance: A new model of governance for sustainability, UNEP Financial Initiative. Geneva: UNEP, United Nations.Google Scholar
US Financial Stability Oversight Council (2013). Annual report 2013. Washington: US Department of Treasury.Google Scholar
van der Zwan, N. (2013). Making sense of financialization. Socio-Economic Review, 12, 99–129.Google Scholar
Weinstein, O. (2012). Firm, property and governance: From Berle and Means to the agency theory, and beyond. Accounting, Economics and Law: A Convivium, 2(2). Retrieved from http://dx.doi.org/10.1515/2152-2820.1061Google Scholar