A Review of Corporate Governance Ideas
This chapter reviews some of the different ideas which inform current thoughts about what corporate governance is. Doing this provides the context for the arguments in the book. A distinction is drawn between ideas based on economic theories of the firm, and so-called ‘organizational’ theories. The chapter discusses how economic approaches tend to see the firm principally in contractual terms, are guided by assumptions of utility-maximizing self-interested human behaviour, and tend to posit the protection of investors' capital as the ‘corporate governance problem’. Organizational theories by contrast tend to begin with a more complex concept of the firm, allow for other-oriented behaviour, and can conceive the governance of companies as routinely involving multiple relationships. While economic approaches currently predominate in the burgeoning field of corporate governance research, there are many criticisms of their fundamental assumptions. Organizational approaches, tend to be poorly developed theoretically.
Keywords: corporate theory, economic theory of the firm, organizational approaches, organizational theories, Japanese corporate governance
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