Corporate governance systems as dynamic institutions: Towards a dynamic model of corporate governance systems
AbstractTaking note of the evidence in extant literature that corporate governance systems are designed to incentivise, monitor, and guide agents to achieve firm mission, this paper develops a dynamic model of corporate governance systems that views these systems as artificial realities (Simon 1996) in general, and institutions in particular. The paper suggests that viewing these systems as institutions has theoretical and practical implications for the study and design of these systems, and illuminates how the process of double hermeneutic may explain the link between corporate governance research and policy recommendations to date and the US sub-prime crisis of 2007 onwards.
Anderson, R.C. and Reeb, D.M. (2003). Founding-family ownership and firm performance: Evidence from the SandP 500. The Journal of Finance, 58, 1301-1327.
Becht, M., Bolton, P. and Röell, A. (2003). Corporate governance and control. In G.M. Constantinides, M. Harris and R.M. Stulz (Ed.), Handbook of the economics of finance, Vol. 1A: 1-109. Netherlands; North Holland: Elsevier Science Publishers B.V.
Cardona, P., Lawrence, B.S. and Espejo, A. (2003). The outcome-based theory of work motivation. Working paper No. D / 495. IESE Business School. Barcelona.
Dalton, D.R., Daily, C.M., Certo, S.T. and Roengpitya, R. (2003). Meta-analyses of financial performance and equity: Fusion or confusion? The Academy of Management Journal, 46, 13-26.
Dalton, D.R., Daily, C.M., Ellstrand, A.E. and Johnson, J.L. (1998). Meta-analytic reviews of board composition, leadership structure, and financial performance. Strategic Management Journal, 19, 269-290.
Dalton, D.R., Hitt, M.A., Certo, S.T. and Dalton, C.M. (2007). The fundamental agency problem and its mitigation. The Academy of Management Annals, 1, 1-64.
Davis, J.H., Schoorman, F.D. and Donaldson, L. (1997). Toward a stewardship theory of management. The Academy of Management Review, 22, 20-47.
Davis, G.F. (2005). New directions in corporate governance. Annual Review of Sociology, 31, 143-162.
Demsetz, H. and Villalonga, B. (2001). Ownership structure and corporate performance. Journal of Corporate Finance, 7, 209-233.
Dobbin, F. and Jung, J. (2010). The misapplication of Mr. Michael Jensen: How agency theory brought down the economy and why it might again. In M. Lounsbury (Ed.), Markets on trial: The economic sociology of the U.S. financial crisis: Part B, vol. 30: 29-64. United Kingdom: Emerald Group Publishing Limited.
Economist. (2009). Special report – The future of finance: Finance suffers from reverse natural selection.
Available from http://www.economist.com/specialreports/displaystory. cfm?story_id=12957761 (Accessed on March 2009).
Eisenhardt, K.M. (1989). Agency theory: An assessment and review. The Academy of Management Review, 14 (1), 57-74.
Ferraro, F., Pfeffer, J. and Sutton, R.I. (2005). Economics language and assumptions: How theories can become self-fulfilling. Academy of Management Review, 30, 8-24.
Ferraro, F., Pfeffer, J. and Sutton, R.I. (2009). How and why theories matter: A comment on Felin and Foss (2009). Organization Science, 20, 669-675.
Filatotchev, I. and Boyd, B.K. (2009). Taking stock of corporate governance research while looking to the future. Corporate Governance: An International Review, 17, 257-265.
Finkelstein, S., Cannella, B. and Hambrick, D. C. (2009). Strategic leadership: Theory and research on executives, top management teams, and boards. New York: Oxford University Press.
Fligstein, N. (2002). The architecture of markets: An economic sociology of twenty-first-century capitalist societies (1st paperback edition). Princeton, NJ: Princeton University Press.
Ghoshal, S. (2005). Bad management theories are destroying good management practices. The Academy of Management Learning and Education, 4, 75-91.
Ghoshal, S. and Moran, P. (1996a). Bad for practice: A critique of the transaction cost theory. Academy of Management Review, 21, 13-47.
Ghoshal, S. and Moran, P. (1996b). Theories of economic organization: The case for realism and balance (response to Williamson’s response to: Bad for practice: A critique of the transaction cost theory). Academy of Management Review, 21, 58–72.
Giddens, A. (1986). The constitution of society: Outline of the theory of structuration. Berkeley, CA: University of California Press.
Gimeno, J., Folta, T.B., Cooper, A.C. and Woo, C.Y. (1997). Survival of the fittest? Entrepreneurial human capital and the persistence of underperforming firms. Administrative Science Quarterly, 42, 750-783.
Gomez-Mejia, L., Wiseman, R.M. and Dykes, B.J. (2005). Agency problems in diverse contexts: A global perspective. Journal of Management Studies, 42, 1507-1517.
Gómez-Mejía, L.R., Haynes, K.T., Núñez-Nickel, M., Jacobson, K.J.L. and Moyano-Fuentes, J. (2007). Socioemotional wealth and business risks in family-controlled firms: Evidence from Spanish olive oil mills. Administrative Science Quarterly, 52, 106-137.
Grisez, G., Boyle, J. and Finnis, J. (1987). Practical principles, moral truth, and ultimate ends. The American Journal of Jurisprudence, 32, 99-151.
Hambrick, D.C., Werder, A. and Zajac, E.J. (2008). New directions in
corporate governance research. Organization Science, 19, 381-385.
Hillman, A.J. and Dalziel, T. (2003). Boards of directors and firm performance: Integrating agency and resource dependence perspectives. The Academy of Management Review, 28, 383-396.
Holmstrom, B. (2005). Pay without performance and the managerial power hypothesis: A comment. The Journal of Corporation Law, 30(summer), 702-715.
Jensen, M.C. (1983). Organization theory and methodology. The Accounting Review, 58, 319-339.
Jensen, M.C. and Meckling, W. (1976). Theory of the firm: Managerial behavior, agency costs, and capital structure. Journal of Financial Economics, 3, 305-360.
Keynes, J.M. (1964). General theory of employment, interest and money (First Harbinger Edition). New York and London: Harcourt Brace Jovanovich.
Knight, F.H. (2002). Risk, uncertainty and profit. Washington DC, USA: Beard Books Inc.
La Porta, R., Lopez-de-Silanes, F., Shleifer, A. and Vishny, R. (1999). Corporate ownership around the world. The Journal of Finance, 54, 471-517.
Lane, P.J., Cannella Jr, A.A. and Lubatkin, M.H. (1999). Ownership structure and corporate strategy: One question viewed from two different worlds. Strategic Management Journal, 20, 1077-1086.
Lazonick, W. and O’Sullivan, M. (2000). Maximizing shareholder value: A new ideology for corporate governance. Economy and Society, 29, 13-35.
Levinthal, D. (1988). A survey of agency models of organizations. Journal of Economic Behavior and Organization, 9, 153-185.
Licht, A.N., Goldschmidt, C. and Schwartz, S.H. (2005). Culture, law, and corporate governance. International Review of Law and Economics, 25, 229-255.
Lubatkin, M.H. (2005). A theory of the firm only a microeconomist could love. Journal of Management Inquiry, 14, 213-216.
Lubatkin, M.H., Lane, P.J., Collin, S. and Very, P. (2007). An embeddedness framing of governance and opportunism: Towards a cross-nationally accommodating theory of agency. Journal of Organizational Behavior, 28, 43-58.
Lubatkin, M.H., Lane, P.J., Collin, S.O. and Very, P. (2005). Origins of corporate governance in the USA, Sweden and France. Organization Studies, 26, 867-888.
Mackenzie, D. (2008). An engine, not a camera: How financial models shape markets. Cambridge, MA: The MIT Press.
Melé, D. (2009a). Business ethics in action: Seeking human excellence in organizations (First edition). Hampshire, UK: Palgrave Macmillan Limited.
Melé, D. (2009b). Integrating personalism into virtue-based business ethics: The personalist and the common good principles. Journal of Business Ethics, 88, 227-244.
Melé, D. (2012). Management ethics: Placing ethics at the core of good management (First edition). Hampshire, UK: Palgrave MacMillan Limited.
Menard, C. and Shirley, M.M. (2008). Handbook of new institutional economics (First paperback edition). Verlag Berlin Heidelberg: Springer.
Mintzberg, H. and Waters, J.A. (1985). Of strategies, deliberate and emergent. Strategic Management Journal, 6, 257-272.
North, D.C. (1990). Institutions, institutional change, and economic performance (First edition). New York: Cambridge University Press.
North, D.C. (2005). Understanding the process of economic change. Princeton, NJ: Princeton University Press.
Roberts, J. (2010). Designing incentives in organizations. Journal of Institutional Economics, 6, 125-132.
Santos, F.M. and Eisenhardt, K.M. (2005). Organizational boundaries and theories of organization. Organization Science, 16, 491-508.
Scott, W.R. and Davis, G.F. (2007). Organizations and organizing: Rational, natural, and open system perspectives. New Jersey: Pearson Prentice Hall.
Selznick, P. (1984). Leadership in administration: A sociological interpretation. Berkeley, CA: University of California Press.
Shleifer, A. and Vishny, R.W. (1997). A survey of corporate governance. The Journal of Finance, 52, 737-783.
Simon, H.A. (1991). Organizations and markets. The Journal of Economic Perspectives, 5, 25-44.
Simon, H.A. (1996). The sciences of the artificial. Cambridge, MA: MIT Press.
Simon, H.A. (1997). Administrative behavior: A study of decision-making
processes in administrative organizations (4th edition). New York: Free Press.
Summers, L. (1985). Does the stock market rationally reflect fundamental values? The Journal of Finance, 41, 591-601.
Thornton, P.H. and Ocasio, W. (2008). Institutional logics. In R. Greenwood, C. Oliver, R. Suddaby and K. Sahlin-Andersson (Eds.), The SAGE handbook of organizational institutionalism, vol. first edition: 99-129. London: Sage Publications Ltd.
Tosi, H.L., Werner, S., Katz, J.P. and Gomez-Mejia, L.R. (2000). How much does performance matter? A meta-analysis of CEO pay studies. Journal of Management, 26, 301-339.
Tricker, B. (2009). Corporate governance: Principles, policies and practices. New York: Oxford University Press.
This journal is an open access journal, and the authors and journal should be properly acknowledged, when works are cited.
Authors may use the publisher's version for teaching purposes, in books, theses, dissertations, conferences and conference papers.
A copy of the authors’ publisher's version may also be hosted on the following websites:
- Non-commercial personal homepage or blog.
- Institutional webpage.
- Authors Institutional Repository.
The following notice should accompany such a posting on the website: “This is an electronic version of an article published in the African Journal of Business Ethics, Volume XXX, number XXX, pages XXX–XXX”, DOI. Authors should also supply a hyperlink to the original paper or indicate where the original paper (http://ajobe.journals.ac.za/pub) may be found.
The following Creative Commons license applies:
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.