• Selected
• Entire List

Abstract:
This paper provides orientation in understanding the topic of corporate governance to further research, analysis and reform. Limitations in the theories and practices of the dominant Anglo paradigm are identified. Various viewpoints used in analysing corporate governance are described with their cultural specificities. To transcend and subsume other approaches and various institutional contexts, information and control theory is shown to provide a way of grounding corporate governance, theories of the firm, and the analysis of organisations in general in the science of cybernetics. Some research and reform opportunities are considered.

Abstract:
Some of the most successful businesses in the world involve employees, customers and suppliers in their control. This paper describes why this is so and how stakeholder governance could be introduced into English speaking countries. The competitive advantages of establishing co-operative relationships with stakeholders are illustrated by analyzing a Japanese Keiretsu and the stakeholder co-operatives found around the Spanish town of Mondragon. These are shown to share common features in their information and control architecture, which are also shared by all living things, which depend upon obtaining feedback information from their environment to exist. Elements of information theory, which is used to design self-regulating devices, are introduced to indicate how firms could be designed to mimic life forms to become self-regulating. Besides introducing competitive advantages, this would minimize both the internal and external costs of regulation. The paper recommends that governments provide leadership in introducing competitive self-regulation using the strategy proposed by the U.S. Vice President. The result would be to create a "Stakeholder Economy."

Abstract:
This pocketbook was commissioned to identify ways for avoiding the unexpected failure of large publicly traded enterprises and overcoming the shortcomings in government, and/or privatised organisations. It describes the fundamental problems of organisational hierarchies in either the public or private sectors to perform effectively and reliably with the ever-increasing complexity and dynamism in modern societies. Network organisations with multiple control centres or boards are identified as providing requisite variety of information and control channels to flexibly govern complexity. Provided self-governing network organisations are kept to human scale they reduce information overload and bounded rationality. The division of power into a number of centres introduces checks and balances to facilitate self-governance and allows individuals to act in a contrary way that are inhibited in command and control hierarchies. The ability of individuals to be competitive/cooperative, suspicious/trusting, self-interested/altruistic and so on introduces natures' check and balances to efficiently introduce self-regulation. Competition for excellence arises from contestability for control within organisations rather than between organisations through the market place to harness the self-interest of executives to further the public good. Networks of network organisations achieve economies of scale and scope, provided that no higher level network undertakes activities that are better carried out by a lower level self-governing unit. This principle of subsidiary function is illustrated by the nested networks that make up the stakeholder control enterprises around the town of Mondragon in Northern Spain that operate more efficiently that investor owned firms. Like a mutual enterprise the Mondragon firms do not require equity investors.

All viable firms by definition become independent of investors but no firm can exist without employees, customers and suppliers who are described as strategic stakeholders. Tax incentives are proposed for shareholders to agree to change corporate constitutions so that all ownership rights are transferred to citizen stakeholders over a twenty-year period. This eliminates any overpayment of investors after 20 years to democratise the wealth of nations. Firms transferring ownership would sponsor new ownership transfer "offspring" firms to raise the new funds required to expand the size and scope of their operations by establishing network relationship with their offspring. This process would convert multi-national corporations into nested networks of firms owned and control by local citizens who supported their operations by being a strategic stakeholder. While investors are eliminated from the new UK proposals for the running railways and some water supply firms, their governance system is identified as being inconsistent with self-regulation.

The booklet was developed from a working paper with the abbreviated name of "A New Way to Govern" that can be downloaded from http://ssrn.com/abstract_id=310263. The working paper contains academic references, tables and figures not included in this edited version published in hard copy to promote a public policy debate.

Abstract:
This paper identifies a new way to govern the public or private sectors by not limiting the options to markets and hierarchies as considered by economists. Sociologists have identified that associations and clans/communities provide two additional distinct modes of governance. The use of all four modes with inclusive stakeholder participation is identified as a condition for self-governance. Another condition is the separation of power to create interdependent network relationships within and between organisations. Networks creates a new way to govern that changes the role of government by allowing citizens to protect themselves directly with the institutions that affect their lives. The paper identifies how network governance allows economic forces and market competition to be replaced with social forces and political competition to improve the economy, efficiency and effectiveness of the public or private sector. The design rules used to establish stakeholder controlled network organisations such as VISA International and the Mondragon Corporacion Cooperativa are shown to follow deeper criteria identified by the science of governance that is also known as cybernetics. The paper applies the laws of governance found in nature to identify the limitations of markets and organisational hierarchies in either the public or private sectors to explain the unexpected failure of Railtrack, Enron, and other publicly traded companies. The new not-for profit organisations being established in the UK to operate Railtrack and Welsh Water are shown to be inconsistent with the laws of governance.

Corporate Governance, Ecological organisations, Network Governance, Non-profit, Privatisation, Public Sector governance, Science of governance, Self-governance, Self-regulation, Social enterprises, Stakeholder organisations

Abstract:
This paper identifies why US, UK and Australian corporations do not allow directors to avoid conflicts of self-interest, and why corporations lack self-regulation. To avoid conflicts of self-interest, a separation of powers is required to create a compound board. Directors cannot fulfill their duty to monitor and evaluate management with information independent of management unless they obtain advice from advisory councils independently appointed by employees, customers and suppliers. Cybernetic laws show why government regulation cannot be effective, and how compound boards can introduce self-regulation with competitive advantages to simplify the law and reduce the size and costs of government.

Abstract:
This paper reviews the conflicts of interests introduced by employee participation in the governance of a firm and how these can be constructively resolved by introducing a division of power between investors and employees and/or between management and workers. Case studies reveal that non-trivial sustainable employee control of industrial firms are dependent upon establishing a compound board to separate, mediate and resolve conflicts of interests. Internal competition for control through a compound board is identified as an alternative to external competition for control through the stock market as a way for maintaining firm efficiency. The failure to introduce a compound board is identified as the reason for insider participation in governance reducing rather than increasing investor returns and jeopardising the viability of employee owned firms as demonstrated in transitional economies. The paper concludes that the problem will spread in advanced nations as tax incentives increase employee ownership with unitary boards.

Collective decision making, Compound boards, Cybernetics, Employee participation, Firm architecture, Governance, Ownership, Performance, Self-regulation

Abstract:
Transaction Byte Analysis (TBA) is introduced as a basis to ground corporate governance in the science of information and control described as cybernetics. TBA provides fundamental criteria for evaluating the governance integrity of any type of organisation because all individuals possess physiological and neurological limits to receive, store, manipulate and transmit information measured in bytes. Cybernetics laws of requisite variety in communication channels, decision-making centres and control agents provide strategies for overcoming human variations and their limitations in managing complexity. The paper identifies the cybernetic advantages of compound boards and concludes that a unitary board cannot reliably govern complex firms.

Abstract:
Transaction Byte Analysis (TBA) is introduced as a basis to ground corporate governance in the science of information and control described as cybernetics. TBA provides fundamental criteria for evaluating the governance integrity of any type of organisation because all individuals possess physiological and neurological limits to receive, store, manipulate and transmit information measured in bytes. Cybernetics laws of requisite variety in communication channels, decision making centres and control agents provide strategies for overcoming human variations and their limitations in managing complexity. The paper identifies the cybernetic advantages of compound boards and concludes that a unitary board cannot reliably govern complex firms.

Bytes, Control, Compound board, Cybernetics, Distributed decisions, Firm architecture, Governance, Information, Regulation, Requisite variety, Supplementation, Transaction Byte Analysis, Unitary boards

Abstract:
This paper compares the competitive advantages of stakeholder mutual firms with firms that are publicly traded, family or government owned. A stakeholder mutual is owned and by its employees, customers and suppliers. These strategic stakeholders can have greater knowledge and commitment to the business than investors. The efficiency and effectiveness of competition for control between stakeholders is compared with competition for control through the stock market in making a firm a competitive. The empowerment of stakeholder constituencies to directly participate in corporate governance is identified as a means for reducing the need for detailed prescriptive government regulation to protect stakeholders. The operating advantages, the flexibility and the competitiveness of a stakeholder mutual is compared with government or private ownership. Examples are used to support the analysis that stakeholder governance can provide a superior approach for increasing efficiency and equity while creating a building block to develop a participatory stakeholder democracy.

Abstract:
This paper was presented to generate debate about proposals developed by a 'Corporate Governance Council' set up by the Australian Stock Exchange (ASX) to advise on new guidelines. The paper identifies the invalidity of the assumptions implicit in the Sarbanes-Oxley Act in the US and the recommendations of the Higgs report in the UK into the role of non-executive directors. The paper describes how these assumptions lack validity in regards to the ability of non-executives directors, who meet the highest standards of independence, being able to protect themselves, the company, shareholders, or other stakeholders. Likewise, the invalidity of the assumption that an auditor can be independent when paid by those they audit. Another fundamental flaw in unitary governance is that the information on which directors rely for monitoring and evaluating the business and its management is provided by management. This widespread arrangement is inconsistent with directors performing their fiduciary role with due diligence and vigilance. A contributing factor to the lack of shareholder engagement to control boards is explained by the unethical but legal practice of a director controlling the process of a board being made accountable by chairing shareholder meetings. Lack of shareholder regulation in Australia also arises from corporations having the power to veto pension fund management mandates and a bank based oligarchy of corporate fund management and influence. While Australia leads the world with its requirement that corporations continuously disclose price sensitive information, the identity of share traders and shareholders, that can also be price sensitive information, is not required to be disclosed at the time of a trade, and this protect and so facilitates insider trading. Ways of ameliorating all these problems are suggested in the paper based on the analysis and recommendations presented in A New Way to Govern: Organisations and Society after Enron archived at http://ssrn.com/abstract=319867

conflicts, corporate governance, democracy, directors, disclosure, oligarchy, Plutocracy

Abstract:
This paper considers how auditing practices became muddled in the US and the UK to create muddled corporate governance principles. The US 1933 law that required corporations to appoint an auditor was based on the prospectus provisions in the UK 1929 Companies Act to protect investors from fraud. However, this is not the purpose of UK statutory audits whose legal role is to protect the company and provide shareholders with intelligence for voting on the election and remuneration of directors whether or not the company issues shares or whether it has shares publicly traded. The UK statutory auditor only reports to the shareholders who approve his appointment and remuneration. The US auditor is appointed by the directors and reports to both directors and shareholders to subrogate the reason for having an auditor to identify conflicts between them.

The establishment of an audit committee with independent directors cannot remove the conflicts. These are exacerbated by the Sarbanes-Oxley Act and the UK Combined Code that require audit committees to provide oversight of the auditor. Some European countries avoid these conflicts by having the auditor controlled by a shareholder committee or "watchdog board". Audit practices were muddled by corporations not establishing a shareholder audit committee as provided in the model constitution attached to the UK 1862 Companies Act. There are compelling arguments to conclude that convergence of audit practices on those found currently in the US or UK are not in the best interest of directors or auditors in reducing their conflicts or safeguarding investors, the proprietary rights of shareholders or self-governance.

Audit Committees, Auditing, Audit Standards, Corporate Governance, Conflicts, Cross border, Shareholder panel, Watchdog boards

Abstract:
This paper considers how auditing practices became muddled in the US and the UK to create muddled corporate governance principles. The US 1933 law that required corporations to appoint an auditor was based on the prospectus provisions in the UK 1929 Companies Act to protect investors from fraud. However, this is not the purpose of UK statutory audits whose legal role is to protect the company and provide shareholders with intelligence for voting on the election and remuneration of directors whether or not the company issues shares or whether it has shares publicly traded. The UK statutory auditor only reports to the shareholders who approve his appointment and remuneration. The US auditor is appointed by the directors and reports to both directors and shareholders to subrogate the reason for having an auditor to identify conflicts between them.

The establishment of an audit committee with independent directors cannot remove the conflicts. These are exacerbated by the Sarbanes-Oxley Act and the UK Combined Code that require audit committees to provide oversight of the auditor. Some European countries avoid these conflicts by having the auditor controlled by a shareholder committee or "watchdog board". Audit practices were muddled by corporations not establishing a shareholder audit committee as provided in the model constitution attached to the UK 1862 Companies Act. There are compelling arguments to conclude that convergence of audit practices on those found currently in the US or UK are not in the best interest of directors or auditors in reducing their conflicts or safeguarding investors, the proprietary rights of shareholders or self-governance.

Audit Committees, Auditing, Audit Standards, Corporate Governance, Conflicts, Cross border, Shareholder panel, Watchdog boards

Abstract:
The paper identifies the manifold conflicts of interest inherent in firms governed by a unitary board and how they exacerbate information overload and bounded rationality while paradoxically not providing sufficient information, independent of management, to direct, monitor, control, and change management. Compound boards introduce a division of power to mediate conflicts, allow access to superior feedback information from stakeholders, and enhance the cybernetic integrity of how a firm is governed. Transaction byte analysis is used to explain bounded rationality and identify how compound boards decompose decision making labour. Compound boards are identified as a necessary condition for reducing the cost of finance and developing (i) holonic architecture, (ii) social tensegrity, (iii) self-regulation and self-governance, (v) sustainable employee and/or other stakeholder participation in governance, and (vi) superior performance. This makes unitary boards inconsistent with convergence and knowledge intensive or network firms seeking to bond human capital with employee ownership.

Compound boards, Cybernetics, Firm architecture, Governance, Holarchy, Holonic organisations, Mondragon, Requisite variety, Performance, Self-regulation, Social tensegrity, Unitary boards

Abstract:
Corporations that are governed on a one-vote per share basis create a plutocracy. This undermines democracy as corporations govern most economic activity in nations. Because of this and unexpected corporate failures, significant political constituencies demand that government increases the scope of corporate regulations. This undermines the dynamism of capitalism. When shareholders do not vote or provide directors with their votes, directors become responsible only to themselves, thus creating autocracy. Dictatorships are created when Chief Executives control the appointment of their directors, as occurs with most public or private corporations around the world. Democracy is also undermined when corporations lobby governments with more resources than citizens.

Plutocratic governance is reinforced by the ability of corporations to overpay investors with surplus profits. This is one of 14 agenda items raised in this paper for considering improvements in the economic operations and social desirability of corporations. The science of governance identifies the need to involve stakeholders to achieve self-governance. Besides reducing government regulation to strengthen capitalism, self-governance enriches democracy.

A tax policy is suggested to provide the incentive for shareholders to voluntary change corporate constitutions to transfer surplus profits to stakeholders to supplement the gap in pension incomes as the population ages. To support the political and social legitimacy of large corporations, controlled by one share one vote, democratically elected shareholder and stakeholder forums are proposed in addition, to privately manage conflicts and improve operations. Improvements in the efficiency and reliability of corporations and the capital markets are envisaged while reducing the cost of government.

Capitalism, Corporate Governance, Democracy, Plutocracy, Surplus profits, Voting

Abstract:
The emerging discipline of social reporting accounting and auditing is compared with its financial counterparts and the need for different institutional arrangements are identified. An element of social accounting is to report on the ethical integrity of operations and governance of the entity. These concerns make it unacceptable for social auditors to be subject to the influence of the directors who are responsible for preparing the accounts. This inherent conflict of interest with financial auditors creates what is described in the accounting literature as an "audit expectation gap". An Audit Advisory Group representing key stakeholders was formed to assist in a pioneering 1994 social audit. This stakeholder council provided both information and verification for the social impact accounts. Because stakeholder councils are appointed and operate independently of management they also introduce a way to minimise the expectation gap of financial audits in either the private or public sector.

Abstract:
A case study is presented on the irrelevance of corporate governance "best practices" in avoiding: major financial losses, identifying fraud, avoiding interventions by a regulator and the loss of reputation. As a result of a junior whistle blower the National Australia Bank (NAB) announced losses in 2004 from foreign exchange fraud. In 2001 the bank reported the largest loss in Australian corporate history from a 1998 US investment without any officer being held accountable. A Board member whistle blower in 2004 resulted in the staged removal of all directors and the Auditor as a result of the 2004 loss that was only one tenth of 2001 loss. As the securities of the bank were traded in the US, a "financial expert" was appointed to the board in 2003 to meet the requirements of the Sarbanes-Oxley Act. The bank otherwise conformed to the Australian Stock Exchange Corporate Governance Principles of "best practices". It standards of corporate governance were ranked equal first in a 2002 University survey of the largest 250 Australian listed companies. The survey stated that it's "standards could not be faulted". However, when the Australian Banking regulator investigated the 2004 fraud it reported that "internal control systems failed at every level to detect and shut-down the irregular currency options trading activity".

Audit reports, Best practices, Board renewal, Corporate Governance, Fraud, Internal controls, Reporting failures, Sarbanes-Oxley

Abstract:
This paper considers techniques of providing shareholders with superior investor protection in start up firms to reduce the cost of raising equity and/or for maximising the share price after an IPO. Various approaches are considered for embedding into corporate constitutions the separation of powers introduced by a shareholders agreement with a venture capitalist or the Associates of a LBO. Shareholder agreements typically limit changes in ownership, board composition, and the application of cash that also limits strategic direction in a way similar to the conditions found in negative pledge loan covenants that were responsible for the development of audit committees. Audit committees were created to protect directors not shareholders and changing banking practices exacerbate the false comfort that they provide investors.

The paper identifies how superior investor protection can be achieved with appropriate changes in the constitution of firms to create a watchdog board elected in parallel with the operating board. Supervisory boards can also act as watchdogs but they have a vertical relationship to the shareholders, as it is they who appoint the operating board. Described and compared are parallel watchdog boards used by the author for two start-ups, a Corporate Governance Board (CGB) proposed in the Australian Parliament for IPOs and a "Conflict board" described by a US legal scholar. The Corporate Senate established by the author for one start up company provided the role model for the CGB elected on a democratic basis of one vote per shareholder in parallel with the plutocratic election of directors by one vote per share and/or director. Corporate Senates do not need any changes to be made in corporate law or stock exchange listing rules.

An active dominant shareholder acts in effect as a supervisory board as found in Europe. As the majority of publicly traded companies around the world have an active dominant shareholder, publicly traded firms governed by more than one board are a common phenomena however it is a neglected topic of research. Multiple boards can introduce operating advantages in a similar way as achieved by unitary controlled firms decomposing decision making labour by adopting a multi-divisional form.

The paper concludes that the requirement by stock exchanges that audit committees be a condition for a company to be publicly traded be replaced by the establishment of a democratically elected watchdog board along the lines of a Corporate Senate.

Corporate Governance, Corporate Senate, Dual board, IPO, Shareholder protection, Venture capital, Watch dog board

Abstract:
Corporate charters, which vest power in a network of control centres, can offer advantages for directors, shareholders and other stakeholders. The author describes how he reduced the cost of capital through the establishment of a "Senate" as a watchdog board to improve investor and director protection. A cybernetic analysis is used to indicate how the involvement of customers, employees, and suppliers in corporate governance, as found in Europe and Japan, can provide competitive advantages and improve self-regulation. A theory of firms, and organizations, based on economizing information processing by individuals is introduced to provide a common foundation for other theories. Cybernetic laws of requisite variety are presented as a basis for designing self-governing social institutions with operating advantages to minimize the role and cost of government while improving the quality of democracy.

Abstract:
Corporate charters, which vest power in a network of control centers, can offer advantages for directors, shareholders and other stakeholders. The author describes how he reduced the cost of capital through the establishment of a "Senate" as a watchdog board to improve investor and director protection. A cybernetic analysis is used to indicate how the involvement of customers, employees, and suppliers in corporate governance, as found in Europe and Japan, can provide competitive advantages and improve self-regulation. A theory of firms, and organizations, based on economizing information processing by individuals is introduced to provide a common foundation for other theories. Cybernetic laws of requisite variety are presented as a basis for designing self-governing social institutions with operating advantages to minimize the role and cost of government while improving the quality of democracy.

Abstract:
The paper identifies three necessary conditions for investors and other stakeholders to trust companies and how such conditions might be met. First, directors require systemic processes for obtaining information independently of management on the strengths, weaknesses, opportunities and threats in both management and the business. Second, directors require sufficient security of tenure to provide them with the will to act. Third, directors require the capability to act alone, if required, to protect the interests of the company as a whole. The paper outlines how these conditions could be met with corporate constitutions that create a division of power among shareholders with corporate officers being elected in different ways. In addition, shareholders would constitutionally provide employees, customers and suppliers, including the host community, voice to advise directors and themselves on the performance of management and the business independently of management and provide a systemic process for detecting when trust in management might be misplaced.

Conflicts, Cumulative voting, Directors, Governance, Multiple boards, Power, Shareholders, Stakeholders, Trust

Abstract:
This paper explains why so called "world best practices" in corporate governance developed in the US and the UK represent the problem not the solution for the crisis in capitalism that has reduced share values by trillions of dollars. One reason is that a unitary board has absolute power to manage its own conflicts of interest to allow absolute corruption. Another reason is that directors have no systemic process to obtain independently of management, the information, will and capability to act to protect themselves, shareholders and stakeholders. Nor do directors have a systemic process to discover if their trust in management might be misplaced. Shareholders have the power to correct these problems by changing corporate constitutions to introduce stakeholder communications networks to minimise the control of information by management. Also, to separate the power to manage from the power to govern to provide checks and balances to minimise and/or manage conflict of interests.

Directors, Division of powers, Governance, Networks, Stakeholder Councils, Trust, Watchdog boards

Abstract:
This paper investigates the utility of all intellectual property rights being time limited with no limits required for real assets and corporate shares. Ownership rights evolved from hereditary rulers seeking to maintain political power and wealth in perpetuity. This objective is no longer relevant with rulers elected for a fixed time. Neither are perpetual rights consistent with economic justice, efficiency and sustainability. A review of modern techniques of investment analysis reveals that unlimited life property rights are not required and that they can result in investors obtaining benefits in excess of the incentive required to bring forth their investment. Tax incentives provide a voluntary way to introduce time limited property rights to improve equity and efficiency by transferring the ownership of realty or firms to their operational/strategic stakeholders. In this way the wealth of nations could be both democratized and localized to build a more sustainable and just society.

Abstract:
This paper investigates the utility of all intellectual property rights being time limited with no limits required for real assets and corporate shares. Ownership rights evolved from hereditary rulers seeking to maintain political power and wealth in perpetuity. This objective is no longer relevant with rulers elected for a fixed time. Neither are perpetual rights consistent with economic justice, efficiency and sustainability. A review of modern techniques of investment analysis reveals that unlimited life property rights are not required and that they can result in investors obtaining benefits in excess of the incentive required to bring forth their investment. Tax incentives provide a voluntary way to introduce time limited property rights to improve equity and efficiency by transferring the ownership of realty or firms to their operational/strategic stakeholders. In this way the wealth of nations could be both democratized and localized to build a more sustainable and just society.

Abstract:
This paper uses data rather than costs as the unit of analysis to answer questions raised by Luigi Zingales (2000) searching for "new foundations" in The Theory of the Firm. Any co-ordination between individuals requires communication of data to share information, knowledge and wisdom. Individuals have physiological and neurological limits in transacting data that can be measured in bytes. Transaction Byte Analysis creates a framework for subsuming transaction costs when costs represent a proxy for information. The paper posits that network firms exist and are sustained in "the new economy" by their ability to economize the bytes transacted by individuals.

Communication, Control, Coordination, Governance, Information, Regulation, Theory of the firm, Transaction costs.

Abstract:
The paper identified ways in which corporate governance reforms are failing and how this situation can be corrected. A basic problem is that corporate governance is not described in outcomes that can be measured but in unmeasurable terms of principles, practices and processes. This means that there are no accepted criteria for identifying good or higher standards. A more fundamental problem is that law makers, regulators, and corporate governance experts lack knowledge of the natural science of governance identified only 59 years ago. The natural laws of regulation are outlined to identify why the current top down approach to governance is incompatible with the bottom up approach found in nature to regulate biota in the most efficient and effective manner to sustain their existence. A bottom up approach allows investors and stakeholders to become co-regulators. As the mission of regulators is to protect citizens, their involvement as co-regulators richly increases the ability of both firms and regulators to control business activities to improve the efficiency and effectiveness of both. The paper concludes that constructive governance reform requires Regulators; advisors to law makers and company boards to acquire the knowledge of how to apply the science of governance to firms.

Communication, Control, Co-regulation, Governance, Regulation, Regulators, Requisite variety, Self-governance

Abstract:
This paper identifies why US, UK and Australian corporations do not allow directors to avoid conflicts of self-interest, and why corporations lack self-regulation. To avoid conflicts of self-interest, a separation of powers is required to create a compound board. Directors cannot fulfil their duty to monitor and evaluate management with information independent of management unless they obtain advice from advisory councils independently appointed by employees, customers and suppliers. Cybernetic laws show why government regulation cannot be effective, and how compound boards can introduce self-regulation with competitive advantages to simplify the law and reduce the size and costs of government.

Abstract:
The objective of this paper is describe how the nature of corporations can and should be reformed to make them an explicit instrument for building an efficient, equitable and sustainable society that is locally controlled. The paper traces how the current concerns over the role of the modern corporation arose from their origin as an explicit instrument of political and economic colonisation. While rights of perpetual succession were consistent with the political origins of corporations, this allows investors to get overpaid with "surplus profits" that exacerbates global inequality in income and wealth. Another problem arises from democracy being undermined by family ownership and/or through what Peter Drucker describes as "pension fund socialism". Tax incentives are proposed to provide shareholders a bigger, quicker less risky short term profit in return for changing corporate constitutions to transfer their property rights to stakeholders over 20 years. The competing interests arising from stakeholder governance introduces self-governance, sustainable competitive advantages and enriches democracy. A Global Community Investment Code to promote the adoption of incentives to create stakeholder corporations is suggested in multi-national forums to counter concerns over globalisation.

Community Investment Code, Corporations, Democracy, Globalisation, Ownership transfer, Stakeholders, Surplus profits

Abstract:
This paper identifies how replaceable rules in corporate constitutions could enhance their operations and social accountability on a self-enforcing basis. The introduction of self-enforcing provisions in organizations creates a strategy for reducing the role and cost of government by exempting complying corporations from the laws made redundant. Self-enforcement is achieved by corporate constitutions sharing powers with those citizens and communities that the government makes laws to protect. To achieve this objective each stakeholder constituency needs to establish separate advisory councils. Each council would advise directors on concerns of their constituencies as well as advice on the strengths, weaknesses, opportunities and threats of management and the business. Only concerns not resolved privately would be publicly reported to reduce the disclosure burden of companies and their directors. While the scope of public disclosure would increase, its volume would be reduced to a need to know basis to those parties that have the ability to take corrective action. To empower dispersed shareholders to protect themselves against dominant management and/or other shareholders, their advisory council would be elected by one vote per investor instead of one vote per share a basis that would also enrich democracy.

Audit committees, Co-regulation, Corporate Governance, Corporate Responsibility, CSR Reporting, Democracy, Self-enforcing regulation, Stakeholder Councils, Watchdog board

Abstract:
This paper provides a framework for evaluating the strengths and weaknesses of public assets owned by: (i) The State, (ii) A State owned corporatized body, (iii) Private investors or (iv) By a network of constituents. A basis is presented for analysing these four governance architectures based on their (i) Accountability, (ii) Quality of service, (iii) Operating costs, (iv) Funding (v) Cost of finance, and (vi) Political outcomes. Network governance augments and/or replaces the centralized communication and control of the other three alternatives with distributed: communications, intelligence, decision making, and control to prodigiously reduce information overload and bounded rationality that can facilitate more dynamic, efficient and effective operations. At the same time, network governance can improve the volume and integrity of information and control for detecting and correcting errors to improve economy, efficiency and effectiveness while enhancing self-regulation to minimize the dead weight cost of regulation and compliance.

Other attractions of governance by a network of private sector constituents arises from: (i) No increase in government debt; (ii) Replacing Ministerial accountability with accountability by constituents to constituents; (iii) Enriching democracy by direct citizen participation; (iv) Changing the role of government from direct intervention to establishing the rules of the game for self-governance; (v) Increasing economy, efficiency and effectiveness by replacing private sector competition for control through markets and regulation with internal organizational competition for control among constituents with competing interests; (vi) Avoiding autocratic or plutocratic control of public assets by investors that undermines democracy and creates resentment. In these ways, network governance can reduce cynicism of politicians and government that can generate social alienation and disengagement.

Accountability, constituents, democracy, network governance, privatisation, public private partnerships, stakeholders

Abstract:
Audit committees have not worked and cannot be relied upon to protect investors unless they become a separate board elected by investors on a democratic rather than a plutocratic basis. A separate "watchdog" board elected by minority investors provides superior protection for investors. It also reduces board costs while protecting the reputation and integrity of directors and any dominant shareholder, reduces the need for prescriptive stock exchange rules on board composition and structure or prescriptive legislation on audit processes.

This article reviews the origins of audit committees and how they are now expected to carry out functions for which they were not designed. The reasons why a board audit sub-committee have not and cannot work are considered. The use of separated elected officers to carry out the functions of an audit committee in various non-Anglophone countries is reviewed. Detailed consideration of a form developed by the author in Australia is provided with a variant proposed in the Australian Parliament.

Audit committee, corporate governance, watchdog board

Abstract:
The objective of this paper is to establish design criteria for developing a global brain that is integrated with humanity to govern life on the planet in a satisfactory environment. Three sources of design criteria are identified. (i) The limited ability of humans to: receive, manipulate, store, and transmit information, or form trusting relations with others. (ii) The laws of information and control identified by the science of governance described as cybernetics. (iii) The design strategies found in nature for creating and managing complexity with unreliable components. Transaction Byte Analysis is used as a framework to ground elements of the social sciences in the natural sciences and integrate the limited capacity of humans to transact bytes with that of technology. Strategies to promote organisational learning and reduce information overload and bounded rationality are identified and illustrated by the stakeholder firms located around the town of Mondragon in Northern Spain.

Bounded rationality, Bytes, Cybernetics, Governance, Information science, Holarchies, Holons, Organisational architecture, Requisite variety, Mondragon

Abstract:
This paper shows that the way nature governs the management of complexity has application to organisations and global society by using Transaction Byte Analysis (TBA). TBA fills a gap in organisational theory in providing a way to compare hierarchical organisations with complex ones with multiple decision making centres, communication channels and control agents, such as found in the Mondragon Corporacion Cooperativa (MCC) and in biota. Like any other biota, humans have limited ability to receive, store, and reliably process bytes to manage complex activities. The science of governance, also described as system science or cybernetics, explicates the strategies found in nature to minimise the transaction of bytes to reliably sustain self-regulation in animals, machines, devices, software programs or organisations. TBA subsumes Transaction Cost Economics, when costs become a proxy for data, and higher order constructs like information, knowledge and wisdom that can be represented in bytes.

Bounded rationality, Cybernetics, Governance, Information, Holons, Mondragon, Organisational architecture, Transaction Byte Analysis, Transaction Cost Economics

Abstract:
This article describes how directors subject to Anglophile corporate law can make themselves unaccountable to shareholders through their power to control shareholder meetings. The case study illustrates why extensive corporate law reform in Australia and the reforms being considered in the UK and Hong Kong will be an exercise in futility in making directors accountable to investors to improve either corporate performance or investor protection while permitting public companies to be controlled by a unitary board. The articles describes how Anglo corporate law allows corporations to adopt unethical constitutions and how a prominent director appointed by the Australian government to chair a committee to advise on reform of the financial system acted unethically in his role as chair of the largest financial institution in the country. These problems suggest why failures also arise in developing and transitional economies that adopt the Anglo governance system. The Peoples Republic of China could also become infected through Hong Kong with the defects of contemporary Anglophile law and listing rules.

AMP Limited, Conduct of meetings, Corporate governance, Director accountability, Ethics, Law reform failure, Shareholder activism

Abstract:
This paper considers how auditing practices became muddled in the US and the UK to create muddled corporate governance principles. The US 1933 law that required corporations to appoint an auditor was based on the prospectus provisions in the UK 1929 Companies Act to protect investors from fraud. However, this is not the purpose of UK statutory audits whose legal role is to protect the company and provide shareholders with intelligence for voting on the election and remuneration of directors whether or not the company issues shares or whether it has shares publicly traded. The UK statutory auditor only reports to the shareholders who approve his appointment and remuneration. The US auditor is appointed by the directors and reports to both directors and shareholders to subrogate the reason for having an auditor to identify conflicts between them.

The establishment of audit committees with independent directors cannot remove the conflicts. These are exacerbated by the Sarbanes-Oxley Act and the UK Combined Code that require audit committees to provide oversight of the auditor. Some European countries avoid these conflicts by the auditor being controlled by a shareholder committee or watchdog board. Audit practices got muddled by corporations not establishing a shareholder audit committee as provided in the model constitution attached to the UK 1862 Companies Act. Compelling arguments are presented to conclude that convergence of audit practices on those found in the US or UK is not in the best interest of directors or auditors in reducing their conflicts or safeguarding: investors, the proprietary rights of shareholders or self-governance.

Audit committees, auditing, audit standards, corporate governance, conflicts, cross border, shareholder panel, watchdog boards

Abstract:
The paper identifies the manifold conflicts of interest inherent in firms governed by a single board and how a unitary board exacerbates information overload and bounded rationality while paradoxically not providing sufficient information, independent of management, to direct, monitor, control, and change management. Firms governed by a multiple boards, described as a compound board, introduce a division of power to mediate conflicts, allow access to superior feedback information from stakeholders, and enhance the cybernetic integrity of how a firm is governed. Compound boards are identified as a necessary condition for reducing the cost of finance and developing (i) self-regulation and self-governance, (ii) sustainable employee and/or other stakeholder participation in governance, and (iii) superior performance. This makes unitary boards inconsistent with knowledge intensive or network firms seeking to bond "human capital" through employee ownership or for firms with a large degree of employee ownership.
Performance, Self-governance, Self-regulation, Social tensegrity, Unitary boards

Compound board, Cybernetics, Employee ownership, Firm architecture, Governance, Mondragon, Requisite variety,

Abstract:
This paper was presented to generate debate about proposals developed by a 'Corporate Governance Council' set up by the Australian Stock Exchange (ASX) to advise on new guidelines. The paper identifies the invalidity of the assumptions implicit in the Sarbanes-Oxley Act in the US and the recommendations of the Higgs report in the UK into the role of non-executive directors. The paper describes how these assumptions lack validity in regards to the ability of non-executives directors, who meet the highest standards of independence, being able to protect themselves, the company, shareholders, or other stakeholders. Likewise, the invalidity of the assumption that an auditor can be independent when paid by those they audit. Another fundamental flaw in unitary governance is that the information on which directors rely for monitoring and evaluating the business and its management is provided by management. This widespread arrangement is inconsistent with directors performing their fiduciary role with due diligence and vigilance. A contributing factor to the lack of shareholder engagement to control boards is explained by the unethical but legal practice of a director controlling the process of a board being made accountable by chairing shareholder meetings. Lack of shareholder regulation in Australia also arises from corporations having the power to veto pension fund management mandates and a bank based oligarchy of corporate fund management and influence. While Australia leads the world with its requirement that corporations continuously disclose price sensitive information, the identity of share traders and shareholders, that can also be price sensitive information, is not required to be disclosed at the time of a trade, and this protect and so facilitates insider trading. Ways of ameliorating all these problems are suggested in the paper based on the analysis and recommendations presented in A New Way to Govern: Organisations and Society after Enron archived at: http://ssrn.com/abstract=319867

Conflicts, corporate governance, democracy, directors, disclosure, oligarchy, plutocracy

Abstract:
Information technology reveals why self-regulation has not worked in many social institutions and how this can be corrected. Conditions precedent for self-regulation and self-governance are identified as being: a division of power within organisations, stakeholder participation, and requisite variety in their information and control architecture. Case studies provide evidence to support the hypotheses that: (1) the conditions for self-regulation create competitive advantages in firms, and operating advantages for other types of organisations; and (2) self-regulation provides advantages over government or market regulation. Information theory is used to identify the opportunities for partially privatising state regulation to reduce the role of markets and the size, scope, burden and cost of government to improve the quality of democracy.

Control, Competitive advantages, Compound board, Corporations, Cybernetics, Firm, Government, Information theory, Institutions, Power, Self-governance, Self-regulation, Separation of powers, Shareholders, Stakeholders

Abstract:
This paper reviews past, present and proposed practices for protecting investors from self-dealing by a dominant shareholder and/or management. The origin of audit committees is reviewed and their efficacy analyzed when a dominant shareholder and/or management can control the composition of the board and the appointment of the auditor. Sliding scale voting and various approaches are considered for embedding into corporate constitutions the separation of powers introduced by a negative pledge lender, a shareholders agreement with a venture capitalist or the Associates of a LBO. These agreements typically perform some or all of the roles of supervisory board, watchdog board and/or a dominant shareholder. The proposal of the Auditing Practices Board in the UK for a "Shareholder Panel" and those of a US legal scholar for a "Conflicts Board" are considered. The paper concludes that a Watchdog board, separately elected on a democratic basis by shareholders, provides superior investor protection than a committee of directors to counter self-dealing by directors elected or appointed on a plutocratic basis.

Audit committees, corporate governance, corporate senate, dual board, IPO, venture capital, voting, watchdog board

Abstract:
This paper identifies eight reasons why it is rational not to trust large complex Anglo corporations and how these reasons could be removed. Two reasons are that directors are overloaded with information but also lack information independent of management to evaluate management and the business. A third reason is that directors do not have systemic processes to discover if their trust in management is misplaced. A fourth and fifth reason is that directors have absolute power to manage their own conflicts of interest and a dominant shareholder can enter into related party transactions that can unfairly extract value. The sixth and seventh reasons are the incentive for directors not to blow the whistle on their colleagues and the impotence of a director to act alone. The eighth reason is that shares can be manipulated and traded covertly. Four changes in corporate constitutions are identified that could remove these concerns. These are to establish a watchdog board, introduce cumulative voting for directors, establish stakeholder councils and introducing sunlight share trading.

Conflicts, cumulative voting, directors, governance, power, shareholders, stakeholders councils, sunlight trading, trust, watchdog board

Abstract:
This paper indicates why the integrity of financial institutions cannot be assured with a unitary board with its manifold conflicts of self-interest that can jeopardise the financial integrity of the institution. While block holders can mediate conflicts of director self interest they may introduce their own from related party dealings. Unitary boards exacerbate information overload and bounded rationality while paradoxically not providing sufficient information, independent of management, to monitor and control management. Examples of watchdog boards mandated in Europe are presented. The laws of information and control science are introduced to indicate the impossibility of regulation being assured without supplementary boards representing the interest of shareholders, creditors and other stakeholders. Conditions for self-regulation are identified and recommendations made that the licence condition for the operation of financial institutions require the introduction of governance and operating watchdog boards to supplement the role of regulators and provide competitive advantages to the institution.

Abstract:
This paper considers how appropriately designed financial institutions can allow economic development to become self-financing, and improve the management of the currency and the economy. The business concept of self-financing, not found in leading economic text books, is described. Related novel concepts are introduced to explain how economic development or underdevelopment arises. The need for maintaining a balance between the formation of wealth generating and wealth consuming activities, or earning and spending foreign exchange is identified. Selective monetary policies are proposed to balance self-financing development and to establish a market in loan insurance premiums. Markets then allocate new credit to self-financing activities with monetary contraction guaranteed. Selective policies provide a more precise and flexible policy instrument than relying only on interest rates in advanced or developing economies. The paper recommends that institutions like the World Bank change their role from distributing credit to distributing the technology of self-financing development.

Central banks, Consumption assets, Degenerate assets, Development, Loan insurance, Monetary policy, Procreative assets, Self-financing, Surplus value

Abstract:
Renewable energy can become a fraction of the cost of burning carbon to generate electricity in communities that use money that has a usage charge described as "demurrage". As with Islamic banking, demurrage money eliminates discounting future values from the ability of earning interest today. Investments to sustain humanity on the planet are not disadvantaged. A demurrage charge limits the life of money not used to terminate its existence like all living things to acquire an ecological characteristic. As interest charges typically double the cost of urban infrastructure, ecological money could half the cost of water, housing, education, health and transport facilities. Ecological money facilitates the ability of towns and city precincts to become self-financing self-governing political units. Electricity generated from sun, wind, waves, tide, geothermal; bacteria produced hydrogen provide ways for urban precincts to create a global unit of value but whose value is defined in terms of the local cost of renewable energy. As over 80% of the costs of sustainable energy are interests charges compared with around 20% for carbon fueled generators, ecological energy dollars make renewable energy around four times more competitive. The paper describes how ecological property rights to money, land, buildings and firms maximises the ability of urban precincts to become self-financing on a sustainable basis. Ecological capitalism increases the efficiency, equity, and the richness of democracy in market economies. It also improves the ability of the environment to govern society to assist in making both sustainable.

capitalism, community banking, ecology, energy dollars, demurrage, governance, property rights, renewable energy, self-financing, urban precincts

Abstract:
This paper uses Transaction Byte Analysis (TBA) as developed by the author to ground sociology in cybernetics. Bytes provide a universal unit of social analysis. No relationship or organisation can exist without some sort of communication that can be measured in bytes. The transmission or storage of bytes involves physical changes in materials or in energy states subject to scientific laws. Information overload and bounded rationality can be explained by the physiological and neurological limits on the ability of individuals to receive, store, process or communicate bytes and so information, knowledge and wisdom. Cybernetic laws of requisite variety in communications, control and decision-making provide additional criteria for evaluating and/or designing social systems and organisations with unreliable components.

The power of TBA is illustrated by showing how the nested network of firms around the town of Mondragon in Spain follows the strategies used in nature to create and manage complexity through simple components. Individuals, firms, groups of firms, and the whole network are shown to be a hierarchy of holons or 'viable systems' described as a 'holarchy'. A hypothesis of TBA is that evolution developed contrary characteristics in social animals to economise bytes for their self-regulation. Unlike many other organisational theories, TBA accepts that individuals can be either, or both, trusting/suspicious, cooperative/competitive and/or altruistic/selfish. TBA is compared with the Transaction Cost Economics paradigm, which it subsumes to allow any type of institution to be investigated to provide the foundations for a 'science of organisation'.

Cybernetics, Holons, Mondragon, Requisite variety, Science of organisation, Self-regulation, Social architecture, Tensegrity, Theory of the firm, Transaction byte analysis, Transaction

Abstract:
The contribution of this thesis is to present a framework to analyse firms controlled by more than one board. The literature survey of Chapter 2 revealed that there is little recognition of this phenomenon and no accepted way to investigate firms governed by multiple control centres described as a "compound board". The framework is developed in Chapter 3. The historical emergence of compound boards is outlined in Chapter 4 with examples of their architecture described in Chapters 5 and 6. Chapter 7 shows how the framework provides insights not available from other theories of the firm and how selfyes governance can be furthered by utilising contrary human attributes of competition/co-operation, trust/suspicion and self-interest/altruism.

The framework is described as transaction byte analysis (TBA) as it is based on the limited and inconsistent ability of humans to transact units of information described as "bytes". TBA identifies cybernetic principles and strategies that can mitigate human limitations in processing bytes. These provide organisational design criteria for firms to obtain operating advantages. As information is a common element in varies theories of the firm, TBA relates and subsumes them while allowing any type of organisation to be analysed.

Propositions are presented in Chapter 7 for illustrating how TBA provides insights into explaining: (i) why non-trivial employee owned industrial firms have more than one board; (ii) why self-regulation and self-governance of non-trivial firms cannot be assured without a compound board; (iii) how compound boards can simplify the role, knowledge, duties and liabilities of directors; (iv) the competitive advantages of appropriate compound boards in relation to unitary control systems; (v) how to compare and evaluate the relative advantages and disadvantages of firms with different ownership and control structures; (vi) how to compare the relative efficacy of hierarchical and non-hierarchical firms be they in the private or public sector.

Contrary behaviour, Corporate Governance, Evaluating Governance, Governance Architecture, Multiple boards, Organisational design, Self-governance, Stakeholder, Tensegrity, Theories of firms, Theory of organisations, Transaction Byte Analysis, Transaction Cost Economics

Abstract:
This paper identifies eight reasons why it is rational not to trust large complex Anglo corporations and how these reasons could be removed. First, directors are overloaded with information. Second, directors lack information independent of management to evaluate management and the business. Third, directors are irresponsible as they lack systemic processes to discover when their trust in management might be misplaced. Fourth, directors are given absolute power to legally act unethically in managing their own conflicts of interest. Fifth, dominant shareholders can unfairly extract value through related party transactions. Six, directors can be impotent to act alone and seventh, group loyalty constrains whistle blowing on expropriation by colleagues. Eight, shares can be manipulated and traded covertly. All eight concerns can be removed without any changes in the law by changing corporate constitutions to establish a watchdog board, elect directors by cumulative voting, establish stakeholder councils and introducing sunlight share trading.

Conflicts, Cumulative voting, Directors, Governance, Power, Shareholders, Stakeholders Councils, Sunlight trading, Trust, Watchdog board

Abstract:
All social relationships and the coordination of any activity between humans depend upon the transmission, reception, storage and processing units of information measured in bytes. Bytes provide a basis for grounding the study of social relationship and institutions in the natural sciences because their transmission or storage requires changes in energy or physical states. All humans are restricted in their ability to obtain data, information, knowledge, wisdom, or manage complexity, because of their physiological and neurological limits to transact bytes. This introduces an instrumental criterion for investigating, evaluating and designing the informational architecture of organisations and social relationships.

Transaction Byte Analysis (TBA) is introduced as a framework to subsume Transaction Cost Economics (TCE). TCE is based on the normative need to economise the social construct of cost while TBA is based on the instrumental need to economise bytes. Human limits in transacting bytes are quantified and used to explain information overload and bounded rationality. Four modes of information and control with their strengths and weaknesses are identified and related to four modes of governing relationships. Unlike TCE and many other theories, TBA accepts that individuals can be either, or both, cooperative/competitive, trusting/suspicious and/or altruistic/selfish. Laws of governance are introduced that provide methods for obtaining reliable results from unreliable components. These provide criteria for evaluating or designing social organisations to reliably achieve their purpose. The utility of TBA as a framework for investigating the form and effectiveness of institutions is illustrated with micro and macro examples.

Bounded rationality, Bytes, Complexity, Cybernetics, Governance, Information science, Requisite variety, Self-regulation, Social architecture, Transaction Byte Analysis

Abstract:
Orthodox economic analysis cannot provide affordable housing on a sustainable basis because it: (i) Considers the nature of property rights as a given rather than as a policy variable; (ii) Fails to take into account variations in the values of assets and liabilities; (iii) Ignores how government investment in urban infrastructure creates private profits for land owners; (iv) Does not identify surplus profits; and (v) Fails to recognize how surplus profits and windfall gains can cross-subsidize housing and commercial investors to democratize wealth. Duplex property rights are described as those that separate the value of buildings from the values created in their land by neighboring infrastructure investment. The resulting increase in economic efficiency improves equity by providing eight ways to distribute wealth to citizens without government taxes or welfare. The paper recommends that approval for public infrastructure expenditure and/or development be made conditional upon adopting duplex ownership of urban realty.

Abstract:
Orthodox economic analysis cannot identify how to provide affordable housing on a sustainable basis because it: (i) Considers the nature of property rights as a given rather than as a policy variable; (ii) Neglects taking into account variations in the values of assets and liabilities; (iii) Neglects or omits how government investment in urban infrastructure creates private profits for land owners; (iv) Does not identify Surplus Profits; (v) Fails to recognize how surplus profits and windfall gains can cross subsidize housing and commercial investors to democratise the wealth of cites. Duplex property rights are described that separate the value of buildings from the values created in their land by neighbouring infrastructure investment. This allows uplift in land values created by infrastructure expenditure to be used to make all neighbourhood sites self-financing to halve the cost of urban housing and eliminate the cost of land for commercial developments. The resulting increase in economic efficiency improves equity by providing eight ways to distribute wealth to citizens without government taxes or welfare. The paper recommends that approval for public infrastructure expenditure and/or development be made conditional upon adopting duplex ownership of urban realty.

Affordability, Development, Housing, Infrastructure, Land, Property rights, Public policy, Self-financing, Urban

Abstract:
This paper outlines institutional arrangements for achieving accelerated self-financed democratic development with investment, consumption, income and savings increasing together instead of relying on a reduction of consumption to create the savings to finance investment or the need to use foreign finance. The arrangements are dependent upon introducing market forces to allocate interest free credit expansion by the Central Bank to finance projects that are self-financing to increase output. Credit is allocated by the price of investment loan insurance obtained through private sector markets outside the banking system. The cost of insurance replaces the cost of interest for democratically owned and controlled investments. An original theoretical framework is used to explain the arrangements. This identifies "consumption" and "degenerate" assets and the need for their current costs not to exceed current surplus values generated by "procreative" assets to allow accelerated development to be sustained without increasing government or external debt.

Central banks, Economic development, Democratic ownership, Loan insurance, Monetary policy, Self-financing

Abstract:
This paper provides evidence as to why emerging economies should not follow the US and the UK audit practices that have introduced untenable conflicts of interests and muddled corporate governance practices. The US 1933 law required corporations to appoint auditors based on the prospectus provisions in the UK 1929 Companies Act, to protect the investors from being misinformed about the future value of a company. However, this is not the legal purpose of the UK statutory audit whose role is to make directors accountable for protecting the company and provide shareholders/members with intelligence for voting on the election and remuneration of directors whether or not the company issues shares or whether it has shares publicly traded. The UK statutory auditor only reports to the shareholders who approve her/his appointment. The US auditor is appointed by the directors and reports to both the directors, and shareholders to subrogate the reason for having an auditor to identify any conflicting views between them. The establishment of an audit committee with independent directors cannot remove the conflicts. Their introduction from the Sarbanes-Oxley Act and the UK Combined Code introduces additional conflicts between the executive and non-executive directors. Some European countries avoid both conflicts by having a shareholder committee to control the auditor. Arguments are presented to conclude that convergence of audit practices on those found in the US or the UK is not in the best interests of directors or auditors and does not help in reducing their conflicts or safeguarding the investors, the proprietary rights of shareholders or self-governance.

Abstract:
This paper provides evidence why Emerging Economies should not follow US and UK audit practices that have introduced untenable conflicts of interests and muddled corporate governance practices. The US 1933 law that required corporations to appoint an auditor was based on the prospectus provisions in the UK 1929 Companies Act to protect investors from being misinformed about the future value of a company. However, this is not the legal purpose of a UK statutory audit whose role is to make directors accountable in protecting the company and provide shareholders/members with intelligence for voting on the election and remuneration of directors whether or not the company issues shares or whether it has shares publicly traded. The UK statutory auditor only reports to the shareholders who approve her/his appointment. The US auditor is appointed by the directors and reports to both the directors and shareholders to subrogate the reason for having an auditor to identify any conflicting views between them. The establishment of an Audit Committee with independent directors cannot remove the conflicts. Their introduction from the Sarbanes-Oxley Act and the UK Combined Code introduces additional conflicts between executive and non-executive directors. Some European countries avoid both conflicts by the auditor being controlled by a shareholder committee. Arguments are presented to conclude that convergence of audit practices on those found in the US or UK is not in the best interest of directors or auditors in reducing their conflicts or safeguarding: investors, the proprietary rights of shareholders or self-governance.

Audit, Audit Committees, Conflicts, Corporate Governance, Shareholder Committees

Abstract:
This reading identifies how the law, regulators and corporate governance codes have introduced and/or have facilitated unethical practices that jeopardize corporate performance of publicly traded firms. The reading argues that the need for corporate governance codes arises because lawmakers, regulators and stock exchanges have been irresponsible in allowing directors to obtain excessive and inappropriate governance powers that can corrupt both themselves and the business to harm stakeholders. Amendments in corporate constitutions for eliminating and/or mitigating unethical practices that would also further the interest of shareholders and other stakeholders are described that in many jurisdictions would not require changes in the law. The amendments would separate governance powers of directors from those required to manage the business. The division of power creates checks and balances similar to that found in the US constitution or in the lending covenants used by bankers or in the shareholder agreements of venture capitalist.

Competitiveness, Conflicts, Corporate constitution, Governance, Ethics, Regulation, Separation of powers, Stakeholder voice, Venture Capitalists

Abstract:
Four non-exclusive options are considered for rebuilding the economy with a more efficient, equitable and resilient financial system. A common feature of three options is the introduction of cost bearing money as supported by Fisher (1933) and Keynes (1936) to help stabilise prices. Cost bearing or "Free-Money" increases the efficiency of allocating resources and can result in the generation of electricity from renewable sources becoming cheaper than burning coal. One option for issuing Free-Money is for governments to adopt a Bill like that presented to the US Congress in 1933. A second option is the private issue of "stamped scrip" that circulated in the US during the Great Depression. A third option is the issue of Free-Money redeemable into a commodity as used in Europe 1928-33. A fourth option is to reform the existing financial architecture to reduce the: (i) cost of seigniorage, (ii) interest on government debt; (iii) size of organisations considered to big to fail; (iv) tax incentives to use debt rather than equity (v) different types of risks accepted by financial institutions and (vi) ability of banks and "shadow" banks to create credit to finance derivatives many times greater than the GDP of the global economy.

Central Banking, Financial system, Financialization, Free Banking, Free-Money, Neutral money, Seignorage, Stamped Scrip, Supplementary currencies

Abstract:
Directors of corporations governed by a single board (i) Have excessive and unethical powers to become "Sources of risk" and (ii) Lack processes to systematically obtain information independently of management on the Strengths, Weaknesses, Opportunities and Threats (SWOT) of either their managers or the business to be "Managers of Risk". The removal and/or mediation of unethical conflicts can be achieved by amending corporate constitutions to separate governance powers from the power to manage business operations. Systematic independent information on the SWOT of managers and the business can be obtained by the corporate constitution introducing advisory councils appointed by those individuals on whom the business depends for its existence such as its customers, suppliers and other stakeholders. Besides mitigating the operating, reputational and financial risks of directors and the firm, evidence is provided how stakeholder councils have produced competitive advantages. The changes in corporate constitutions described in the paper protect the reputations and personal liabilities of directors by removing perceptions of unethical conduct and provides them with creditable evidence that they can carry out their fiduciary duties with due care and diligence to monitor managers and manage business risks.

Competitiveness, Conflict management, Corporate Governance, Ethics, Operating efficiency, Requisite variety, Risk Management, Multiple boards

Abstract:
Directors of corporations governed by a single board are exposed to (i) reputational risk with personal liability from possessing absolute power to manage their own conflicts of interest and (ii) absence of power to systematically obtain information independently of management on the Strengths, Weaknesses, Opportunities and Threats (SWOT) of either their managers or the business. The removal and/or mediation of unethical conflicts can be achieved by amending corporate constitutions to separate governance powers from the power to manage business operations. Systematic independent information on the SWOT of managers and the business can be obtained by the corporate constitution introducing advisory councils appointed by those individuals on whom the business depends for its existence such as its customers, suppliers and other stakeholders. Besides mitigating the operating, reputational and financial risks of directors and the firm, evidence is provided how stakeholder councils have produced competitive advantages. The changes in corporate constitutions described in the paper empower directors by removing perceptions of unethical conduct and provides them with creditable evidence that they can carry out their fiduciary duties with due care and diligence to monitor managers and the risks of the business.

Competitiveness, Conflict management, Corporate Governance, Ethics, Operating efficiency, Requisite variety, Risk Management, Multiple boards

Abstract:
Most of the articles in this book deal with incremental changes in the existing structures of institutions and do not postulate revolutionary upheavals as preconditions to effective action on the land issue. Yet it is worthwhile to contemplate far-reaching changes in the ways that we commonly perceive land ownership. The thinking along that dimension has unfortunately been rather sterile and there appears to be ample room for further development of new concepts and new ideas.

An interesting scheme for restructuring the ownership of land in residential communities is given by Turnbull. Turnbull criticizes the conventional methods of owning land and housing by private individuals and corporations on the one hand and by the public authorities on the other as either inequitable or inefficient or both. The rampant exploitation generated by private ownership of land is not mitigated by government efforts at taxation and regulation. Government ownership of land and housing, on the other hand, is grossly inefficient and many socialist countries are turning towards home ownership schemes to combat the growing inefficiencies.

Turnbull sees the value of introducing a new duplex tenure system to remedy this situation. In this system, the ownership of structures and improvements on land is separate from the ownership of the land itself, and the land is collectively owned by the community as a whole. Each individual owns his house as well as shares in the community land corresponding to the size of his plot. He is free to sell his house and his shares, but his shares are sold to the community land bank, which in turn sells them to the new buyer at a higher price. In this manner, the community captures the increased land value, using the proceeds for infrastructure development and other community improvements. As only individual community members are allowed to own shares in land, additional revenue is generated from the leasing of community land to commercial and public enterprises. Turnbull discusses a number of mechanisms for creating cooperative land banks, the simplest one being the creation of a new community on virgin land. In areas occupied by tenants or squatters, he proposes a dynamic tenure scheme whereby, through regular payments, the tenants gradually gain equity to the land and structures they occupy and in the long run become owner-occupiers. Turnbull believes that using such mechanisms, communities varying in size from 3,000 to 50,000 people can be self-financed and self-managed, improving gradually over time in an equitable manner without resorting to central government subsidies.

The thinking on appropriate forms of land ownership and land tenure systems has by no means been exhausted, and there are inherent problems in existing systems which may require fundamental changes before they can be adequately resolved. Our current perception of land tenure is inherently bound up in the historical period we live in and in the existing relationships within the societies of which we are a part. Both are in a process of dynamic change and do not contain, in the last analysis, any patterns or rules of a permanent nature. As these patterns change, concepts and ideas which were considered completely unrealistic may emerge as new paradigms for a new order.

Cooperative ownership, Development profits, Duplex tenure, Dynamic tenure, Housing, Land, Self-financing, Squatter settlements

Abstract:
The objectives of the paper are to show how the sustainability of urban settlements can be improved by treating as a variable the design of: (a) property rights to realty, corporations and currencies and: (b) their communication and control governance architecture. System science provides the basis for showing that the governance of complexity is improved by increasing the richness and variety of communication and control channels. The new variables introduced also provide a way to integrate the design of the built environment into the design of its governance architecture. The scope of orthodox economic analysis is extended to include the value of assets and liabilities to provide additional feedback signals. This more holistic economic framework increases the richness of the "semiotic" channel of social communication and control that complements those based on senses, words and prices. The analysis reveals self-reinforcing feed forward and feedback channels between the use and maintenance of the built environment and its governance architecture not available in less holistic design frameworks. This identifies the need for urban planners to extend their discipline to become governance architects and how the knowledge of system scientists can be applied to improve the design of capitalism. The analysis indicates how a design paradigm that does not accept the nature of property rights as a given, but a design variable, can enhance the ability towns or suburbs to become self-financing, self-governing political units. It also shows how capitalism can be made more efficient, equitable, responsive and democratic.

capitalism, economics, governance, property rights, social system, system science, sustainable communities, urban planning

Abstract:
Climate change has been identified as “The biggest market failure the World has ever seen”, (Stern 2006). This paper identifies the cost of finance as an influential element of this market failure and how it can be removed. One approach would be to use a renewable energy backed currency to build a complementary more efficient, stable and resilient financial system. The equivalent investment cost per kilowatt-hour (kWh) of generating electrical power from renewable sources is typically a number of times greater than that from burning carbon. This makes the financing cost of renewable electricity generation a number of times greater. However, the operating costs of most renewable electricity sources are significantly less, as the cost of fuel is eliminated and labour costs reduced. The incentive for markets to allocate resources to burning carbon rather than to invest in renewable power would be reduced if the cost of finance for renewable electricity generation was eliminated. Two approaches are considered: (i) Selective monetary policies to introduce interest free Islamic Banking and/or (ii) The introduction of kWh vouchers to pay for renewable electricity that could be used to create an alternative decentralised global currency. The resulting renewable “Energy Dollars” would create a unit of value independent of any increases in the costs of coal, oil, gas or taxes on their consumption.

Climate change, Demurrage currency, Energy money, Financial system, Islamic Banking, Market failure, Monetary policy, Seigniorage, Stamped script

Abstract:
This paper posits that the conditions precedent for some sort of global brain like phenomena emerging depends upon the governance system found in nature spreading in society around the World. This proposition is based on nature producing new emergent properties as its builds upon its own complexity. The new properties emerging for and from World governance as it obtain requisite complexity to match the increasing complexity of society. The architecture of complexity in nature is based on communication and control networks that form almost self-governing "sub-assemblies" or "viable systems" described as "holons". Throughout the universe, complexity is built up from hierarchies of holons with new emergent properties arising at each higher level. In this way the increasing complexity of society could result in creating the conditions precedent for the emergence of the mind of Gaia.

Bounded rationality, Cybernetics, Emergence, Governance, Information, Holarchy, Holons, Mondragon, Organisational architecture, Science of governance, Self-governance

Abstract:
This paper shows how a gap in organizational analysis can be filled by using the transaction of bytes to compare hierarchical organizations controlled by a single control centre with complex ones possessing distributed decision making with multiple communication channels and control agents. No social organization can exist without the transmission, reception and processing of bytes between and within biota. The ability of an organization to survive depends upon its communication and control architecture not requiring its components to exceed their ability to transact bytes. Bytes are represented by patterns in matter or energy. Data, information, knowledge and wisdom are composed of bytes. Transaction byte analysis provides an instrumental basis for evaluating, comparing and designing human organizations independently of the level of technology that may be employed. Transaction Byte Analysis is compared with Transaction Cost Economics that it subsumes when the social construct of cost becomes a proxy for bytes.

Bounded rationality, communication, control, cybernetics, governance, information, mondragon, organizational architecture, transaction byte analysis, transaction cost economics

Abstract:
This paper shows how a gap in organisational analysis can be filled by using the transaction of bytes to compare hierarchical organisations controlled by a single control centre with complex ones possessing distributed decision making with multiple communication channels and control agents. No social organisation can exist without the transmission, reception and processing of bytes between and within biota. The ability of an organisation to survive depends upon its communication and control architecture not requiring its components to exceed their ability to transact bytes. Bytes are represented by patterns in matter or energy. Data, information, knowledge and wisdom are composed of bytes. Transaction byte analysis provides an instrumental basis for evaluating, comparing and designing human organisations independently of the level of technology that may be employed. Transaction Byte Analysis is compared with Transaction Cost Economics that it subsumes when the social construct of cost becomes a proxy for bytes.

Bounded rationality, Communication, Control, Cybernetics, Governance, Information, Mondragón, Organisational architecture, Transaction Byte Analysis, Transaction Cost Economics

Abstract:
This paper identifies some policy options for encouraging widely dispersed shareholders and/or their fiduciary agents to become more effective in controlling corporations. Even though institutional shareholders have a fiduciary responsibility to exercise their ownership rights to discipline corporations, many are reluctant to do so for various reasons. The paper puts forward three ways to invigorate the voice of all shareholders to control corporations that could be introduced by regulation rather than by legislation. Complementary approaches are proposed based on tax incentives for corporations to distribute some or all of their operating cash flows to make them dependent upon shareholder re-investment to sustain and develop their operations. This would force shareholders to continuously re-assess if they would vote with their chequebooks to support their portfolio companies with new share issues when many new alternative investment opportunities would be created. Two of the cash dependency approaches depend upon adopting a more neutral tax system while the third is based on tax concessions for corporations that meet conditions that introduce compelling benefits of increasing economic efficiency and equity while enriching democracy.

Boards, Conflicts, Corporate constitutions, Directors, Governance, Regulatory conditions, Power, Voting

Abstract:
This paper describes how governments and regulators could introduce selective de-regulation based on exempting corporations from existing practices when they amend their constitutions to provide superior outcomes for investors and other stakeholders. An example is presented on how a company efficiently raised new equity through constitutional changes that also allowed the regulator to exempt it from the compliance processes and costs of changing auditors. System science is used to argue that the introduction of self-enforcing co-regulation based on outcomes rather than practices could introduce competition for developing the most efficient and effective regulation by both companies and regulators.

Co-regulation, Corporate constitution, Corporate Governance, De-regulation, Network governance, Self-enforcing, Stakeholder forums, System science, Watchdog boards

Abstract:
The paper recommends that State or Capitalistic Landlords be replaced with collective ownership and control of non-owner occupied dwellings in human settlements, with the entitlements of each resident in the co-operatively owned property being determined by rules established by the community.

Problems in owning and controlling human settlements are bound to arise wherever developing and less developed countries adopt the methods of ownership and control currently used in more advanced economics. A novel tenure system is described for reducing these problems by motivating and harnessing man's social, territorial and possessive instincts for the betterment of the community.

Alienation of residents from their habitat is an all too frequent problem in "advanced societies", no matter if the landlord is a capitalist of the State. Residents without ownership and control of their habitats are likely to be disenfranchised from participating in the management or structuring either their visible or invisible environments.

The paper argues that the invisible structures of human settlement - economic, social and local government - need to be planned and integrated into the design and location of the visible, physical structures. With proper planning and design the integration of both types of structure would provide an interdependent, reinforcing influence for maintaining and enhancing both the visible and invisible fabric of society.

The new property ownership and control rules proposed in the paper could be introduced into countries with advanced socialistic or capitalistic economies, through an evolutionary process. In developing countries it would provide an evolutionary method for land reform. Specific examples of how these rules can be applied in advanced economies, with no changes in existing legislation, are illustrated by economic models based on commercially prepared feasibilities studies for urban growth areas, urban renewal areas and isolated mining communities.

The new rules are designed to preserve and link both private and public property interests and values by creating a duplex title system. The aggregate result of such a system would be to form a town or suburban co-operative, or Land Bank. The system would eliminate absentee or corporate landlords and allow all residents to become part owners. The economic value of owning public property would accrue to tenants, - squatters and private property owners alike, according to how they contribute toward creating new economic value in the community's assets from their individual needs. New values created by users would flow back to them instead of providing windfall gains to owners.

The invisible structures are designed to allocate automatically, in negotiable form the new values created by the demand for tenure over social assets according to the rules determined by the community. The automatic distribution would be activated by both economic and non-economic (tenure) force's and signals. Tenure forces from competition for territory, possession, power; status and influence reinforce economic forces created by competition for value. The invisible structures are designed to respond not only to economic price signals but also to non-economic signals created by residents voting with their feet - through changing their residence - their hands, or by other actions.

Town co-operatives provide a fundamental social and local government building block for creating a new economic order. The other building blocks created from new ways for owning enterprises and natural resources are described in the author's book, Democratising the Wealth of Nations. The paper explains how the new tenure systems proposed for owning enterprises and resources are symbiotic and self-reinforcing with the operation of land leases without landlords.

Community, Co-operative, Duplex title, Dynamic tenure, Human settlements, Land Banks, Land tenure, Local government, Squatter, Tenant co-ownership

Abstract:
A bottom up self-enforcing strategy based on outcomes to replace the current top down approach based on compliance to practices is recommended to both the Australian Government and the Australian Securities Exchange (ASX). Introduction of the self-enforcing strategy is proposed on a selective basis for those corporations that provide superior protection for investors and other stakeholder than current practices. Corporations who changed their constitutions to provide greater power to their stakeholders to protect themselves and act as co-regulators would be exempted from complying with the relevant laws and regulations made redundant. In this way: (i) the cost of government regulation and compliance by companies could be reduced while superior protect provided and (ii) competition could be created between corporations to identify the most effective practices to achieve superior outcomes for investors, stakeholders, themselves and the public.

The ASX submission is included in this 2007 submission to the Government as 'Attachment II'. The ASX invited comments in 2006 on their review of their 'Principles of Good Corporate Governance Practice and Best Practice Recommendations' introduced in March 2003. The Australian Minister for Revenue and Assistant Treasurer invited the public in 2006 to comment on a report released by the government on Streamlining Prudential Regulation: Response to 'Rethinking Regulation'. 'Attachment I' is an article with the working title 'Fiduciary duty of Trustees to introduce Self-regulation' published with the title 'Buried Alive' in Superfunds, pp. 35-37, April 2007, The Association of Superannuation Funds of Australia.

Codes, Co-regulation, Corporate governance, De-regulation, Law, Practices, Principles, Prudential regulation, Self-enforcing

Abstract:
A system of economic analysis based on cash-flows rather than profit is presented as a basis for integrating the economic values obtained from tenure (ownership, control or use of assets) with the values obtained from production and exchange of goods and services. The paper indicates how the integration of tenure and trade values provides a basis for analysing and designing institutional structures to create a more efficient, equitable and self-correcting economic system. A feature of the paradigm is that the structure of property rights, governance and money can become a variable, subject to analysis, rather than a feature which is assumed constant and so omitted from evaluation.

Markets are identified as one of four different communication and control mechanisms of social integration. The other three being hierarchies (command), symbolic (semiotic) and the natural senses. The contribution of each of the four mechanisms is considered to compare various types of societies from those existing over 10,000 years ago to current forms of capitalism and socialism. The paper argues that to create a self-correcting, ecological, sustainable society, the structure of property rights, governance and money would need to follow the dynamic feed-back control architecture found in living things and be guided by the characteristics of the host bio-region. This would create a Third Way and a more democratic form of capitalism.

To follow the example of nature, the perpetual, monopoly and static rights to property and money would need to be replaced with time limited, competing, and dynamic rights. Corporate bodies would then obtain the attributes of living organisms with all users and/or stakeholders of all types of property obtaining appropriate ownership and control entitlements. This would result in multinational corporations and central banks being replaced with many decentralised locally owned and controlled competing institutions. To maintain its existence, the World Bank would need to change its role from distributing credit to educating communities how to build and manage their own local banking and currency systems based on ecological principles.

Capitalism, Cash-flow paradigm, Ecological systems, Governance, Procreative Assets, Property rights, Self-financing Development, Social capitalism, Surplus profits, Tenure systems

Abstract:
About the book - from back cover:

A revised edition of a classic work long out of print, this book is based on the Schumacher Society Seminars on Community Economic Transformation. It presents the underlying ideas and essential institutions for building sustainable communities. The three Major sections of the book deal with community land trusts and other forms of community ownership of natural resources; worker-managed enterprises, and other techniques of community self-management; and community currency and banking. Included also are a lexicon of social capitalism and a bibliography of key words on self-reliant economic change.

Community currencies; Cooperatives; Land banking; Land trusts; Regional economics; Social capitalism; Sustainable development; Worker participation

Abstract:
This paper describes how governments and regulators could introduce selective de-regulation based on exempting corporations from existing practices when they amend their constitution to provide superior outcomes for investors and other stakeholders. An example is presented on how a company achieved this objective to raise additional venture finance while also allowing the regulator to exempt it from the compliance processes and costs of changing auditors. The paper uses system science to argue that the introduction of self-enforcing co-regulation based on outcomes rather than practices would introduce competition for developing the most efficient and effective processes for both companies and regulators.

Co-regulation, Corporate constitution, Corporate Governance, De-regulation, Network governance, Stakeholder forums, System science, Watchdog boards

Abstract:
As a potential disruptive technology electronic-money raises fundamental questions on the role of money, how it should be designed, issued and managed. The 2008 financial crisis created the opportunity and need to rethink the role and design of the financial system. The now Governor of the Bank of England raised the possibility that “Free Banking” and/or decentralised banking could replace Central Banks. Profound changes would result in the power of governments, business and the nature of democracy. Four different historical types of money are considered for rebuilding the financial system with e-money: (i) the monopoly form of synthetic or “fiat” money as decreed by governments that can earn interest (ii), fiat money that does not earn interest but has a usage fee (iii) “Free-money” issued privately with a usage fee and (iv) natural money redeemable into specified goods and/or services with a usage fee. Market forces are identified that would favour the adoption of e-money with a use fee redeemable into units of renewable electricity. These arise from: (a) creating a stable unit of local value negating the need for Central Banks; (b) money no longer a store of value; (c) improved equity by reducing unearned income; (d) reversing financialization with real assets becoming more attractive; (e) facilitating steady state economies with a global unit of account but not of value; (f) promoting sustainability by making finance intensive renewable energy more attractive than burning carbon; (g) facilitating community banking (h) mitigating the social power of money and (i) enriching democracy.

Cost carrying money, Electronic-money, Energy dollars, Financialization, Free banking, Islamic Banking, Natural money, Renewable energy dollars

Abstract:
Cash-flow rather than profit is presented as a basis for grounding the discipline of economics in commercial reality. It allows the traditional remit of economics to be expanded from the production and exchange of goods and services to also include the exchange and transformation of assets and liabilities. In the cash-flow paradigm wealth is not defined in terms of income, but according to the commercial definition which is the value of assets less liabilities. Traditional economic analysis cannot detect when investors get over-paid to create inefficiencies and inequalities and so identify either the need or means for reforming capitalism. Nor can orthodox economics based on the production and exchange of goods and services identify how individuals, corporations, governments and society increase or lose commercial wealth. The cash-flow paradigm introduces an inclusive methodology for understanding, evaluating and designing economic institutions and the process of economic development. It explains how development is achieved in commercial practice and shows why the World Bank, other international and domestic development agencies can change their operations from providing credits to providing the knowledge of how to make economic development self-financing - a condition for individuals, towns, regions and nations to achieve financial and so political independence.

Cash-flow paradigm, Confluent Development, Contrary Development, Degenerate assets, Market failure, Procreative Assets, Self-financing Development, Self-governance, Surplus profits, Surplus value.

Abstract:
As a potential disruptive technology electronic-money raises fundamental questions on the role of money, how it should be designed, issued and managed. The 2008 financial crisis created the opportunity and need to rethink the role and design of the financial system. The now Governor of the Bank of England raised the possibility that "Free Banking" and/or decentralised banking could replace Central Banks. Profound changes would result in the power of governments, business and the nature of democracy. Four different historical types of money are considered for rebuilding the financial system with e-money: (i) the monopoly form of synthetic or "fiat" money as decreed by governments that can earn interest (ii), fiat money that does not earn interest but has a usage fee (iii) "Free-money" issued privately with a usage fee and (iv) natural money redeemable into specified goods and/or services with a usage fee. Market forces are identified that would favour the adoption of e-money with a use fee redeemable into units of renewable electricity. These arise from: (a) creating a stable unit of local value negating the need for Central Banks; (b) money no longer a store of value; (c) improved equity by reducing unearned income; (d) reversing financialization with real assets becoming more attractive; (e) facilitating steady state economies with a global unit of account but not of value; (f) promoting sustainability by making finance intensive renewable energy more attractive than burning carbon; (g) facilitating community banking (h) mitigating the social power of money and (i) enriching democracy.

Cost carrying money, Electronic-money, Energy dollars, Financialization, Free banking, Islamic Banking, Natural money

Abstract:
Recent turmoil in the financial markets can be explained by the science of governance used by engineers to design the regulatory systems of devices operating in unknown, dynamic environments. Turmoil is the result of insufficient supplementary co-regulators. The laws of governance "absolutely prohibits any direct and simple magnification but does not prohibit supplementation" of regulation. This law creates an imperative for regulators to require that their regulatees establish a requisite variety of co-regulators. It is the stakeholders of regulatees that can provide the requisite variety of co-regulation required to avoid regulatory failure. Many stakeholders would typically include those individuals or organizations that government regulators are created to protect. The introduction of bottom up outcome based co-regulation by relevant stakeholders would result in the partial privatization of regulation. The resulting flexibility would allow regulatees to reduce compliance costs and obtain operating and competitive advantages. The paper identifies how bottom up private sector co-regulation by stakeholders could be introduced on an incremental basis. An example is presented on how a company efficiently raised new equity through changes in its constitution that also allowed the regulator to exempt it from the compliance processes and costs of changing auditors. A requirement for stakeholders to be effective co-regulators to reduce elements of public sector regulation is that they obtain the: (i) information, (ii) will and (iii) capability to act independently of regulatees to protect their own interests and that of the financial system as may be relevant.

The role of government and its regulators would change from defining practices and processes to defining outcomes of the stakeholder and system protection required. An outcome based regime would introduce flexibility for regulatees to develop the most efficient and effective practices and process in their particular business to achieve the desired outcomes. A co-regulatory strategy would also reduce the cost to government as stakeholders complemented the monitoring role of regulators and reduced the need for regulators and the courts to take corrective action.

Co-regulation, Corporate constitution, Corporate Governance, De-regulation, Network governance, Requisite variety, Self-enforcing, Stakeholder Councils, Watchdog boards

Abstract:
This paper outlines (i) a theoretical framework for designing institutions to facilitate self-financing economic development and (ii) institutional arrangements for establishing self-financing development. The framework introduces the concepts of: (i) "procreative" assets that generate wealth (ii) "de-generate" productive assets that consume income and (iii) "consumption" assets that also consume income but are manifestations of higher living standards. Self-financing development depends upon replacing the conventional "contrary" process based on reducing consumption to generate savings to finance investment and/or obtaining external development finance with a "confluent" development process. Confluent development allows consumption and investment to increase together with increases in productivity from the new investment creating the savings to cancel the credits used to fund them. Institutional arrangements that allowed the US and Japan to internally finance development at the beginning of the last century provide a basis for considering how credit insurance could be used to introduce self-financing development. The cost of insurance provides a market driven mechanism for allocating credit to the most prospective wealth generating assets. Internally generated finance accelerates development as the cost of servicing external financiers is minimised and the resulting selective monetary regime facilitates economic management. The paper recommends that development institutions like the World Bank change their role from distributing credit to distributing the technology of self-financing development.

Economic Development, Loan insurance, Self-financing development, Selective monetary policy

Abstract:
Climate change has been identified as "The biggest market failure the World has ever seen", (Stern 2006). This paper identifies the cost of finance as an influential element of this market failure to allocate resources to renewable energy. One approach to mitigate market failure is the selective introduction of Islamic Banking to remove the bias against renewable energy created by interest costs. Another approach is the introduction a complementary currency redeemable into units of renewable energy. This could improve the efficiency, stability and resilience of the financial system. Renewable "Energy Dollars" create a unit of value independent of any increases in the costs of coal, oil, gas, or taxes on their consumption.

Climate change, Demurrage currency, Energy dollars, Islamic Banking, Monetary policy

Abstract:
While the visible structures of cities may be designed, the invisible structures of how land, buildings, enterprises and money are owned and controlled are accepted as a given. This paper argues that to sustain humanity on the planet, the invisible structures of society need to follow the self-correcting design criterion found in nature. The invisible structure of ecological cities would make the visible structures of society accountable to the needs of their host bio-regions to create ecological republics. The current perpetual static monopoly rules for owning land, buildings and enterprise would be replaced with time limited, dynamic, and inclusive rules. The paper outlines how invisible structures based on ecological rules could be introduced and why this would create a more efficient, equitable and sustainable society.

Ecological, Finance, Governance, Property rights, Realty, Urban economy

Abstract:
This book introduces three techniques for democratising the wealth of nations. The three techniques: Ownership Transfer Corporations (OTCs), Cooperative Land Banks (CLBs) and Producer-Consumer Cooperatives (PCCs), like Employee Share Ownership Plans (ESOPs), transfer wealth without taxes or welfare to allow the extent of taxes, welfare and the size of government to be reduced. Unlike ESOPs, the three techniques systemically democratise wealth by replacing static, exclusive and perpetual property rights with dynamic, inclusive and time limited rules of ownership. In this way a more efficient, equitable and participatory economic system can be created described as Social Capitalism. The Credo of Social Capitalism being: From each according to their interest; To each according to their contribution; Provided the basic needs of all are fulfilled. Differences between economists and business people in describing the nature and meaning of wealth are explained along with the non monetary value wealth. Also explained is why employees and professionals stay poor and how corporations concentrate wealth in a manner that is not reported by accountants. The book explains how wealth can be gained from inflation but this is limited by the ability of society to create wealth from production. The introduction of dynamic property rights could be used to create a community dividend to replace welfare to allow governments to replace full employment policies with a policy of fulfilment from work and/or leisure.

Capitalism, Community Dividend, Democracy, Ownership Transfer, Property rights, Wealth

Abstract:
Ecological principles provide criteria for building a global society composed of self-financing, self-reliant, self-governing communities. Communities would adopt the design of biota with limited life for ownership of realty, corporations and money. Money is redeemable into inflation proof units of local renewable energy. Money carries an insurance cost to eliminate unearned income from interest and Ponzi banks. Incentives are provided to attract foreign enterprises and technology that are matched with built-in ownership transfer back to stakeholders resident in the community to terminate draining away surplus profits. Urban land mutualised to form self-financing Land Banks to halve the cost of housing and attract commercial investment. This also minimises non-residents extracting windfall gains and surplus profits that can make communities financially dependent on higher orders of government. Centralised big government, taxes and banking are replaced with federations of bio-regional economies financing nation states that in turn finance global governance.

Ecological capitalism, green energy dollars, network governance, self-financing communities

Abstract:
Orthodox economic analysis cannot identify how to provide affordable housing on a sustainable basis because it: (i) Considers the nature of property rights as a given rather than as a policy variable; (ii) Focuses its analysis on the production and exchange of goods and services to neglect values that arise from the ownership and control of assets and liabilities; (iii) Does not identify Surplus Profits; (iv) Neglects how government investment in urban infrastructure creates private profits for land owners and so also neglects; (v) How windfall gains and surplus profits can be used to cross subsidize housing and commercial investors. Duplex property rights are described that separate the value of buildings from the values created in their land by neighboring infrastructure investment. This allows uplift in land values created by infrastructure expenditure to be used to make all neighborhood sites self-financing to halve the cost of urban housing and eliminate the cost of land for commercial developments. The resulting increase in economic efficiency improves equity by providing eight ways to distribute wealth to citizens without government taxes or welfare. The paper recommends that approval for public infrastructure expenditure and/or development be made conditional upon adopting duplex ownership of urban realty.

Cash-flow analysis, Housing affordability, Property rights, Self-financing suburbs, Surplus profits

Abstract:
This article explains why the author coined the word "ownee" to explain the relationship of traditional Australian Aboriginals to land in a report commissioned by the Australian Government. A similar relationship is found in a number of other traditional indigenous cultures. The belief system that allows land to have power over people means that there need not necessarily be a conflict with a culture that recognises proprietary rights of ownership. In this way the word ownee" can provide a way to minimise conflicts between the two cultures.

Land, Ownership, Proprietary rights.

Abstract:
This chapter critiques corporate governance practices widely promoted as being “best” for Publicly Traded Corporations (PTCs). The criteria used to identify good governance are those that minimize the involvement of Regulators or Law Makers with PTCs. The different drivers of corporate evolution in Europe and the United States explain the development of some of the counterproductive practices in Anglophone countries. These include directors obtaining inappropriate powers and conflicts of interests for directors and auditors. These intrinsically flawed practices have become enshrined as “best” practices in governance codes, governance metrics, regulations, securities exchanges, and the law. This chapter uses the natural laws of requisite variety, identified by mathematicians who founded the science of governance in the 1940’s to explain why current practices are not “best”. Natural laws explain why the communication and control architecture of PTCs and corporate regulators do not permit executives, directors, and regulators to directly monitor or control on a reliable basis the complex workings of modern firms without co-regulators.

Audit conflicts, Director conflicts, Power, Network governance, Self-governance

Abstract:
This paper provides a framework for evaluating the strengths and weaknesses of Australian public assets when owned by: a government department, a State owned corporate body, private investor's, or a network of constituents. The framework evaluates the generic characteristics of the four different types of governance architectures by considering their: accountability, quality of service, operating costs, funding, cost of finance, and political outcomes. Network governance introduces distributed: communications, intelligence, decision making, and control which can be used to augment and/or replace the centralized architecture of the other three alternatives. Network governance is identified as a condition precedent for developing self-governance and enriching democracy.

Abstract:
Four non-exclusive options are considered for rebuilding the economy with a more efficient, equitable and resilient financial system. A common feature of three options is the introduction of cost bearing money as supported by Fisher (1933) and Keynes (1936) to help stabilise prices. Cost bearing or “Free-Money” increases the efficiency of allocating resources and can result in the generation of electricity from renewable sources becoming cheaper than burning coal. One option for issuing Free-Money is for governments to adopt a Bill like that presented to the US Congress in 1933. A second option is the private issue of “stamped scrip” that circulated in the US during the Great Depression. A third option is the issue of Free-Money redeemable into a commodity as used in Europe 1928-33. A fourth option is to reform the existing financial architecture to reduce the: (i) cost of seigniorage, (ii) interest on government debt; (iii) size of organisations considered to big to fail; (iv) tax incentives to use debt rather than equity (v) different types of risks accepted by financial institutions and (vi) ability of banks and “shadow” banks to create credit to finance derivatives many times greater than the GDP of the global economy.

Financial system, Financialization, Free Banking, Neutral money, Stamped Scrip, Supplementary currencies

Abstract:
There is currently increasing pressure for the mandatory establishment of audit committees in both the private and public sectors. Audit committees, as presently conceived, cannot adequately manage the conflicts of interest and loyalty to board colleagues which arise from boards processing information which is used to evaluate their own performance. As a complementary approach, the paper examines the use of binary boards in both the private and public sectors for improving the management of conflicts. The origin, development and use of audit committees in the private and public sectors within the US and Australian context is reviewed. Audit Committees are compared with the use of supervisory boards in Europe, and the development in Australia of a corporate senate in the private sector and client (stakeholder) councils in the public sector.

The paper notes that audit committees were initially created in the US to protect outside directors in a different context than currently exists in either the US or Australia. While they may also serve the interest of management and auditors, Audit Committees may not protect shareholders and operational stakeholders. The paper concludes that the audit expectation gap could be minimised through management becoming accountable to a Corporate Senate in the private sector, and a Stakeholder Council in the public sector, with the auditor being engaged by and reporting to these bodies.

Audit Committees, Conflicts of interests, Corporate Senates, Stakeholder Councils,

Abstract:
This paper compares the competitive advantages of stakeholder mutual firms with firms that are publicly traded, family or government owned. A stakeholder mutual is owned and by its employees, customers and suppliers. These strategic stakeholders can have greater knowledge and commitment to the business than investors. The efficiency and effectiveness of competition for control between stakeholders is compared with competition for control through the stock market in making a firm a competitive. The empowerment of stakeholder constituencies to directly participate in corporate governance is identified as a means for reducing the need for detailed prescriptive government regulation to protect stakeholders. The operating advantages, the flexibility and the competitiveness of a stakeholder mutual is compared with government or private ownership. Examples are used to support the analysis that stakeholder governance can provide a superior approach for increasing efficiency and equity while creating a building block to develop a participatory stakeholder democracy.

Governance, stakeholders, competitiveness, self-regulation, privatisation, ownership transfer, mutualisation, theory of the firm

Abstract:
Corporate identity constantly faces the threat of ethical risks, which in turn calls upon the vigilance of the board of directors. But are corporate governance structures well-equipped for the task? Shann Turnbull, author, chairman and former chairman of many publicly held companies, suggests that corporations, especially those not having a dominant shareholder, establish a Corporate Governance Board. Besides taking on the functions often delegated to board subcommittees, its role would essentially consist of acting as a supervisory board responsible for initiating management practices and procedures, particularly those dealing with the appointment of the chairman of the board and with the framework of debates in shareholder general Meetings.

Abstract:
The stakeholder co-operatives formed around the town of Mondragon in the Basque region of Spain have been outstandingly successful on a number of measures in comparison with other forms of firms. The control architecture within and between Mondragon firms contains a number of innovations and lessons for developing the theory and practice of corporate governance. This paper outlines the 38 year evolution of Mondragon worker and consumer co-operatives and their innovative governance structures. The control and incentive architecture of Mondragon firms was custom designed according to the nature of both their activities and their principal stakeholders. The resulting unique control arrangements and outstanding performance supports the hypothesis that the structure of governance is a determinant of sustainable competitive advantages. The evolution of Mondragon firms also illustrates the need to consider corporate architecture as a variable at any one time or over time. The Mondragon experience illustrates how the social research approach of 'action science' can be used to create competitive enterprises. The paper recommends this approach for developing the theory and practice of corporate governance.

Abstract:
This paper outlines the conceptual, cultural, contextual and disciplinary scope of the rapidly evolving topic of corporate governance. As a basis for improving the rigour of research and analysis, some definitions are suggested. Reasons for the diversity of viewpoints and concerns are considered. To provide an orientation for new scholars and those from specialized disciplines, recent surveys of corporate governance are reviewed from their ethnocentric, contextual, and intellectual contingencies. The prospects of developing the topic as a "science of organization" are considered along with areas for future research.

Abstract:
A cybernetic perspective is used to evaluate firms with or without stakeholder participation in their information and control architecture. This approach also provides a basis for evaluating firms with more than one board or control center as found in Japan, Europe, and labor-managed firms. Empirical evidence supports the hypothesis that multi control centers with stakeholder participation can provide competitive advantages. This hypothesis is supported by the Law of Requisite Variety and the Williamson analysis of why Multi-divisional firms provide advantages over Unitary Form firms. The opportunity to support stakeholder governance with stakeholder ownership is identified from an analysis of how corporate rights of perpetual succession permits investors to be overpaid. The public policy implications of investor overpayments are considered. Also considered is the use of cybernetic principles to introduce self-regulation as proposed by the US Vice President. Policy initiatives are identified to build a 'stakeholder economy' as proposed by the Leader of the Labor Party in Britain. The paper concludes that appropriate stakeholder governance could improve equity and self- governance in the private sector, the quality of democracy in the public sector, and the efficiency of both sectors.

Abstract:
In response to public outrage over inadequate compensation for victims poisoned by asbestos the Australian Parliament set up an inquiry into Corporate Responsibility in 2005. This paper presents a submission dated September 12 and a supplementary submission of September 25. The second submission further develops the recommendations with answers to questions raised from the UK Financial Reporting Council and relates them to the UK 2005 White Paper on Corporate Law Reform.

The recommendations illustrate: (a) How the interests of shareholders and directors can be protected and furthered while promoting corporate social responsibility and (b) How the law, regulations, codes, and the cost of compliance and information reported by companies can be reduced by corporate constitutions transferring reporting obligations from directors to stakeholder representatives of those concerned with triple bottom line issues. The submission recommends: (a) No change in directors duties, (b) A reduction in the scope of information provided by directors by replacing some of their reports with information from stakeholders who extend the scope of corporate reporting, (c) The Minister in charge of corporation law having the power in exceptional circumstances to allow directors to be replaced with nominees of stakeholders and (d) stakeholders appointing their own separate auditor to report on the value of their company on a non going concern basis for unsecured creditors.

The recommendations are relevant for non-trivial corporations in the private, non-profit or government sectors. Separate stakeholder councils elected by employees, customers and suppliers including host community infrastructures services provide a systematic basis to improve operations by providing directors with information independently of management to direct and monitor management and the business. The councils and a shareholder committee provide a basis to reduce the quantity of information reported by directors with an increase in the scope of public corporate reporting while significantly reducing the quantity of information reported to matters of contention. The shareholder committee manages director conflicts, including control of the auditor, and the conduct of shareholder meetings. The possibility of directors being nominated by stakeholders rather than shareholders provides a compelling incentive for shareholders to support social responsibility by their directors.

Advisory Councils, Corporate Constitutions, Corporate Social Accountability, Self-enforcement, Stakeholders, Shareholder Committee