Corporate governance is one of those slightly quaint notions, like Robert’s Rules of Order, that seems to imply the need for rules of etiquette to bring order and decorum to what is, for all practical purposes, a knock-down drag-out brawl. Business must somehow govern itself, yes that’s the ticket.
Corporate governance is a Rorschach notion: you read into it your own preferences, prejudices, and cynicisms. For the fascistically inclined, it implies top-down command and control. In such a context, governance blurs into another trendy notion: compliance, or the paramount importance of responding to legal and/or regulatory mandates from above. For the anarchically predisposed, it suggests the barely constrained chaos of messy, meshy, federated, and overmatrixed modern business relationships. No real conscious governance there, unless you’re talking about the invisible hand (aka the iron competitive fist) of Adam Smith, which governs the business world with the same brutal logic as Darwin’s natural selection rules the biosphere. Those that survive and procreate govern this world, and the next, and the one after that. Not really intelligent design (to use another currently trendy phrase). More belligerent than intelligent, in terms of the dynamic that stamps the economic regime into nasty new shapes.
How can the rolling confusion of omnivorous capitalism produce something we can even begin to think of as governance? How can some coherent set of collective controls on self-interested human activity emerge in the absence of a coherent single “governor” (human, office, institution, constitution, etc.). Clearly, Adam Smith had an answer to that, when you’re talking about supply/demand effectively regulating markets of many buyers and sellers.
But what does “corporate governance” really mean in the current environment. What it actually refers to isn’t governance of markets. Rather, it actually means something closer to “business ethics,” or, even wimpier, “corporate citizenship.” In particular, how do we avoid repeat of the Enron, Worldcom, and other governance/ethics/criminal lapses within particular self-interested corporations over the past several years? How can corporate execs govern (i.e., restrain and refrain) themselves from raiding the cookie jar and robbing shareholders blind.
How can they comply with the Golden Rule, essentially, and not violate the public’s trust in the essential integrity of senior decision makers in large institutions? Or, if they step out of line, how can we the people crack the command/control whip of incarceration down on their sorry hides?
That’s governance, in the final analysis. And it requires government. Good old fashioned government. Unless the law enforcement, judicial, and prison systems are going to be “privatized.” In which case, how would those privatized governance institutions themselves be governanced?
There can be no effective corporate governance without good government. A big bad cop who can put you away.
Oooh…sounds more fascistic than I intended when I started this post.