Governance and the Management of Global Markets

Abstract:     
It is clear that the definition of corporate governance has extended considerably beyond investor relations and encompasses relations with all stakeholders – including the environment. This is essential for the longer term survival of a firm and is therefore a key component of sustainability. There is evidence that some firms understand this but they are still in a minority although increasing in number. So it is possible to say that good corporate governance will address this but that not all firms recognize this. It is equally possible to state that a firm which has a more complete understanding of the relationship between social responsibility, sustainability and corporate governance will address these issues more completely. By implication a more complete understanding of the inter-relationships will lead to better corporate governance, and therefore to better economic performance.

The current economic crisis has not just highlighted the importance of governance: it has also shown that CSR is a central part of governance and that both are essential for sustainability. In this chapter we have highlighted some causes of the failure of the economic system and the origins of the 2008 financial and economic crisis. Part of the problem is caused by failures in regulation and governance brought about by the nature of global markets but more local governance. So attention needs to be paid to the development of a truly global system of governance. This is the immediate need for action.

In the longer term further action is needed. We have also argued that a significant part of the problem is predicated in the underlying political philosophy upon which market economics is based – namely its basis in Utilitarianism. This too will result in future problems unless addressed and so in the longer term attention must be paid to addressing this and developing an alternative philosophical underpinning to economic activity – one which is not amoral as is Utilitarianism but one which has built into it a sense of morality. This is a more difficult but more important task.

Keywords: governance. corporate social responsibility, stewardship, risk, codes of governance

JEL Classification: M14, O16, Q01, G01

Accepted Paper Series