What is the Impact of Corporate Governance on Organisational Performance?
Loizos Th. Heracleous
University of Oxford - Strategy and Organisation
Corporate Governance: An International Review, 2001
Research on the importance of generally accepted "best practices" in corporate governance has generally failed to find convincing connections between these practices and organisational performance. We discuss research outcomes on the relationship between two such "best practices" (CEO/Chair duality and insider/outsider composition) and organisational performance, that find this relationship to be insignificant. We propose four possibilities for this tenuous relationship, that are not mutually exclusive: firstly, the possibility that "best practices" in governance are indeed irrelevant to organisational performance; secondly, that the operationalisation of theoretical concepts has low face validity; thirdly, that studies are too narrow, aiming to relate board attributes directly to organisational performance and ignoring other systemic factors; and lastly, the possibility that different types of organizations require different practices in corporate governance. Lastly, we address the methodological and substantive implications of each of these possibilities.
Keywords: Corporate governance, best practices, performance, research methodology
Date posted: February 27, 2001
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