Going political? Towards deliberative corporate governance
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Going political? Towards deliberative corporate governance Fabrizio Ferraro1
© Springer Science+Business Media, LLC, part of Springer Nature 2018
Abstract Current challenges in corporate governance increasingly require a deeper appreciation for the political nature of corporation, and a reflection on the assumptions behind dominant governance practices. This article suggests that the emerging theoretical models in economics and finance, which clearly recognize the role of all stakeholders, are limited by their narrow conception of politics. Building on an historical survey of corporate governance models, and on the literature on deliberative democracy and political corporate social responsibility, I suggest that a deliberative corporate governance approach would help design better governance practices. I illustrate this idea with a case of shareholder engagement and conclude with the implications for other governance practices. Keywords Corporate Governance · Theory of the Firm · Deliberative Democracy · Deliberative Governance · Shareholder Engagement · Corporate Social Responsibility There is widespread agreement that corporate governance needs reforming, as the dominant “financialized” model (Admati 2017) is not working. Yet, despite frequent attempts to address this problem with regulatory changes (only in the US context, Sarbanes–Oxley in 2002, and Dodd-Frank in 2010), numerous problems remain. One problem with regulatory responses is that they tend to be reactive, and the governance challenge evolves as new actors and practices emerge. Another related problem, which I will address in this paper, is that the dominant theories of governance have not provided regulators, corporations, and all the relevant stakeholders and actors in the field, with a conceptualization that would help design better governance institutions and practices. Despite much debate and theoretical ferment around this topic in economics and finance (Hart and Zingales 2017a, b; Magill et al. 2015), most of these attempts * Fabrizio Ferraro [email protected] 1
Department of Strategic Management, IESE Business School, Av. Pearson 21, 08034 Barcelona, Spain
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are primarily concerned with an important problem (control and monitoring) that is already relatively well-understood. But many corporate governance challenges today emerge around complex, ambiguous issues such as globalization, financialization, digitalization, climate change, inequality. These grand challenges (Ferraro et al. 2015) are eminently political, but do not immediately translate into clear, measurable interests for most of the parties involved (shareholders, managers, workers, citizen, NGOs, etc.), and yet corporations need to take key decisions on them which will have consequences for all stakeholders. Existing theories in economic and finance, I argue, fail to offer a solution to the key problem that governance faces today: offering long-term strategic and political guidance for corporations in a context of complexity and ambiguity.
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