Correcting the Failures in Corporate Governance Reforms
8 Pages Posted: 6 Feb 2008
Date Written: October 14, 2007
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.
Keywords: Communication, Control, Co-regulation, Governance, Regulation, Regulators, Requisite variety, Self-governance
JEL Classification: B49, D79, G18, G28, G34, G38, H11, K22, L51
Suggested Citation: Suggested Citation