Better Corporate Governance: What, Why and How
Leon Kozminski Academy of Entrepreneurship and Management Distinguished Lecture Series No. 19
32 Pages Posted: 14 May 2009 Last revised: 25 Jun 2009
Date Written: March 28, 2008
Organization can be seen as an alliance among various people, each of whom pursues his or her self interest. Culture of an organization can be seen as the shared expectations of the behaviour of one another held by its participants. Good governance is achieved when there is a balance or match between the shared culture (mutual expectations) and self-interest of the participants. Good governance is supposed to make everybody in the society better off. The elements of good governance are the balance among regulation, market forces, and social norms. Threats to good governance include changes in environment, markets, and the self-interest of participants. Organizations require strategic management to anticipate and address those threats. From the point of view of the society as a whole an organization can be evaluated by the sum of surplus received by all participants. Finally, there is no Holy Grail: good governance is a constant struggle to maintain this balance under ever-changing conditions.
Keywords: Good governance, balance, self-interest, incentives, environment, value of the firm
JEL Classification: D21, G34, H32, L21, L22
Suggested Citation: Suggested Citation