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http://ssrn.com/abstract=1533920
 
 

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Can Network Governance Reduce Risks for Financial Firms Too Big to Fail?


Shann Turnbull


International Institute for Self-Governance; Sustainable Money Working Group

Michael Pirson


Fordham University - Graduate School of Business Administration; Harvard University; Humanistic Management Network

January 15, 2010

Fordham University Schools of Business Research Paper No. 2010-013

Abstract:     
This paper compares the competitiveness and resilience of firms governed by a single board that were considered “too big to fail” in 2008 with firms governed by a network of boards. Network governance introduces a division of power, checks and balances with stakeholder engagement. Hierarchical firms and/or regulators governed by a unitary board can deny the reliable identification, communication, analysis and mitigation of operating problems and risks. These problems increase with the size of the organization and are exacerbated by information overload on senior managers, directors and/or regulators. The 2008 financial problems were anticipated by some employees and external commentators. However, stakeholders exposed to risks possessed insufficient influence in either governing and/or regulating firms to take corrective action. Empirical evidence reveals that the resilience of network governed organizations arises from distributed intelligence, decision-making and controls that facilitate the mitigation of risks while providing competitive and/or operating advantages. The paper concludes that it is imprudent for regulators to allow financial firms that are excessively large and/or with excessively complex operations to exist without network governance or for any such non-financial firms to be publicly traded.

Number of Pages in PDF File: 19

Keywords: Competitiveness, Control, Decision making, Firm size, Network governance, Regulation, Risk management

JEL Classification: E02, E61, G01, G18, G28, G38, K23, L25

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Date posted: January 15, 2010 ; Last revised: November 2, 2013

Suggested Citation

Turnbull, Shann and Pirson, Michael, Can Network Governance Reduce Risks for Financial Firms Too Big to Fail? (January 15, 2010). Fordham University Schools of Business Research Paper No. 2010-013. Available at SSRN: http://ssrn.com/abstract=1533920 or http://dx.doi.org/10.2139/ssrn.1533920

Contact Information

Shann Turnbull (Contact Author)
International Institute for Self-Governance ( email )
PO Box 266 Woollahra
Cell: +61418222378
Sydney, New South Wales 1350
Australia
+61293278487 (Phone)
+61280655905 (Fax)
HOME PAGE: http://independent.academia.edu/ShannTurnbull/CurriculumVitae
SKYPE: shann.turnbull
Sustainable Money Working Group ( email )
Holyoake House
Hanover Street
Manchester, M60 0AS
United Kingdom
Michael Pirson
Fordham University - Graduate School of Business Administration ( email )
1790 Broadway 1147
New York, NY New York 10019
United States
Harvard University
1875 Cambridge Street
Cambridge, MA 02138
United States
Humanistic Management Network ( email )
St. Gallen
Switzerland

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