Author ORCID Identifier

Clark https://orcid.org/0000-0002-1167-0865

Document Type

Article

Publication Date

9-26-2022

Publication Title

International Journal of Disclosure and Governance

Volume

19

First Page

413

Last Page

429

Abstract

The theory and practice of corporate governance has been in something of an arms race with corporate malefactors—as corporate governance mechanisms have incrementally advance, so too have the strategies of malefactors who skirt those governance practices to engage in costly misconduct. Modern centralized governance approaches appear inapt to filling the gaps caused by agency and knowledge problems. Here, we start afresh using the atypical ‘praxeological’ method to reconstruct governance theory anew from basic foundations. The resultant theory is distinctive from prevailing corporate governance theorizing in several key ways. One of the more important conclusions from our reconstructed theory is that governance may benefit from a more ‘market’ or decentralized approach. In short, the governance holes derived from agency and knowledge problems are, or may be, much smaller when governance is decentralized, where employees police each other. While the implementation of such a radical rethinking of governance practice is left ambiguous in our treatment, the theoretical basis for such an approach is compelling.

Most directors today recognize the importance of robust oversight, but it is unclear whether boards, as they are currently constituted and operate, are up to the task. The increasing size and complexity of companies, the expanding array of risk areas, and the difficulty boards have in getting the information needed to exercise effective oversight all bode poorly for a positive answer to this question.

— Paine and Srinivasan (2019, p. 16)

Comments

This is and Open Access Article published under the Creative Commons Attribution license. DOI https://doi.org/10.1057/s41310-022-00151-7

Creative Commons License

Creative Commons Attribution 4.0 License
This work is licensed under a Creative Commons Attribution 4.0 License.

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