Globalization and the Political Role of the Firm: Implications for Corporate Governance

University of Zurich IOU Working Paper No. 118

54 Pages Posted: 26 Nov 2010 Last revised: 10 Dec 2010

Anselm Schneider

Stockholm Business School

Andreas Georg Scherer

University of Zurich - IBW Department of Business Administration

Date Written: November 24, 2010

Abstract

Corporate governance practice is mainly centered on the protection of investors’ rights. However, this view neglects the fundamental changes in the operating conditions of business due to globalization and the weakening of regulatory frameworks. Weak or absent enforcement of contracts, increasingly unfettered negative externalities of corporate action, and involvement of private actors in the provision of public goods change the role of business in a fundamental way, rendering it a political actor. Resulting in the extension of corporate power these developments challenge the very assumptions of efficiency based corporate governance theory. Recurrent misuse of power poses a threat to organizational legitimacy as well as to the legitimacy of the capitalist system. Drawing on suggestions to restore organizational legitimacy by means of discursive processes, we argue that opening corporate governance to such processes is a suitable means to safeguard organizational legitimacy in a globalized world. Based on these considerations, basic requirements as well as limits for modification of current corporate governance practice are introduced.

Keywords: Corporate Democracy, Corporate Governance, Deliberative Democracy, Legitimacy, Shareholder View, Stakeholder Democracy, Theory of the Firm

Suggested Citation

Schneider, Anselm and Scherer, Andreas Georg, Globalization and the Political Role of the Firm: Implications for Corporate Governance (November 24, 2010). University of Zurich IOU Working Paper No. 118. Available at SSRN: https://ssrn.com/abstract=1714407 or http://dx.doi.org/10.2139/ssrn.1714407

Anselm Schneider (Contact Author)

Stockholm Business School ( email )

Stockholm
Sweden

Andreas Georg Scherer

University of Zurich - IBW Department of Business Administration ( email )

Universitätsstrasse 84
Zurich, 8006
Switzerland
+41 44-63 45302 (Phone)
+41 44-63 45301 (Fax)

HOME PAGE: http://www.business.uzh.ch/professorships/as.html

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