A Review of the Relationship between Corporate Governance and Organizational Performance through Systems Thinking

Abstract

There seems to be divergent views on the relationship between corporate governance and
organizational performance. These views seem to be inconsistent and inconclusive according to
some researchers. Why are the views not convincing? What are the possible causes of the
inconsistency? Reviewing relevant literature through a systematic approach, it was gathered that
various studies approached the subject through different individual attributes of corporate governance with different methodologies in different situations. The works show impact-degree relationship or directional-relationship or no relationship. It was also found that researchers hardly considered environmental factors in the governance-performance relationship discourse. The study therefore proposes the application of systems thinking perspectives for future studies on the subject.

This study corroborates the claim that there exist a relationship between corporate governance and
organizational performance. It identifies the lack of standard elements for measuring corporate
governance as the possible cause of the inconsistency. Contributing, the study attempted to classify the conclusions of identified works into three assertions to buttress the argument in favour of governance and performance relationship. The study suggests that policy makers and practitioners should take keen interest in not only board attributes but other factors within the organizational environment to identify, analyse, appreciate and address all possible challenges.

Keywords: Corporate Governance, Organizational Performance, Environment, Systems Thinking