Corporate Governance from a Post-Communist Perspective

Abstract:     
In the aftermath of Enron and WorldCom scandals of 2001-2002, corporate governance (CG) has been put once again into the center of academic interest. Last time this happened in mid-1997, when a global financial crisis that began in Asia was widely attributed to appalling CG practices in Korea and Japan. Thus, for young readers this whole subject matter may seem to be an old hut. In reality, the term “corporate governance” has merely a 25 year long historiography. Systematic content analysis of the Anglo-Saxon press showed that the term CG arose first in the wake of the Watergate scandal. In the mid- to the late 1970s, public opinion suddenly discovered that major American corporations were involved in corrupt payments both at home and abroad. Prior to Watergate scandal, competitive markets and good governance of business enterprises had been regarded as two sides of the same coin. It was a tacit understanding that well-run companies are honestly run companies, and vice versa. Suddenly this equation was broken. Since then the fast-growing CG literature has had a moral loading. This paper offers an alternative conclusion. It will be argued that there is no such thing as “good” CG rules. It is simply not true that adherence to the prescribed CG principles can guarantee good business, or put it negatively, without outstanding CG capitalist firms cannot grow. It is equally misleading to hope that good CG can in any way seriously help to reduce macroeconomic volatilities. The second message of this paper is that size matters. In the globalized world of business, size is the real guarantee of success.

Number of Pages in PDF File: 23

Keywords: Corporate governance, post-communist systems, Hungary

JEL Classification: G340, L200, P140, P520

working papers series