INTRODUCTION

EB434 ENTERPRISE + GOVERNANCE

why study ‘the company’?

• Corporations play a leading role in most societies

• Recent corporate failures have had a major social impact and highlighted the importance of good corporate governance

• Corporations, and the governance of them, are a good prism through which to view differences in economic systems across countries

• weak economies in many countries today results in distributional conflicts

• Many political issues are fundamentally conflicts between shareholder interests and conceptions of corporations’ responsibilities to a broader set of ‘stakeholders’

• Studying governance of the corporation provides insights into conceptions of agency, decision, risk and markets.

course overviewThe course will examine the rich variety of capitalisms, and of other economic systems, across time and place. We will explore the historical development of the business firm, its particular economic advantages and social impacts, and the technological, political, creative, financial and societal forces that are transforming the landscape of contemporary enterprise. The course will examine how governance of the private institution of the firm is patterned by the structures of public governance within which it it situated, how they have evolved mutually over time, and how there has been systematic variance in governance forms and enterprise outcomes across countries. It will offer a a multidisciplinary and historical feel for the development of enterprise & its contexts and will complement prior studies in business, politics, history and related fields.

society + firmsIn capitalist economies

corporations contribute to wealth creation

(for shareholders, employees, suppliers) and

innovation (benefiting consumers directly)

corporations gain from...

• Social stability

• Sound institutions of public governance

• Effective legal system

• Specific corporate law provisions – such as limited liability for shareholders, other defined and limited liabilities, accounting provisions

• Public infrastructure

• Human resources

• Regulation of industries and markets which create barriers to rival enterprises

system logics

• Each country has had unique historical settlements (by compromise, force or accident) between contending business, state and societal (eg. labour) actors

• with diverging interests within each broad category too

• particular features can be understood through universally applicable concepts and theories from economics, political science, sociology, psychology etc

values & social institutions

issues in this course

• the nature & extent of varieties of capitalism seen across place & time

• determinants of this variation, consequences, direction of change?

• the universal elements of a market system

• risk & resources

• distributional issues & varied responses to inequality across systems

• disruption of existing industries and of national economic systems

• social contexts & contemporary issues (diversity, aging, openness, nationalism and populism)

issues II

• contemporary outlooks for particular ‘varieties of capitalism’

• ‘adaptive efficiency’ of particular systems

• Interface between distinct social systems and corporate governance practices

• & human capital formation (education & training) & HRM systems in particular

• corporate & other institutional failure, remediation – ‘exit, voice and loyalty’

• demographic constraints (influenced by particular social structural features)

firm-level issues• Why is the corporate organisational form so prevalent?

• its key features and functions in various contexts

• In whose interest does the firm act?

• Shareholders and other stakeholders in the firm

• Agency, interests, incentives

• Concentration versus diffusion of authority – leadership, voice and decision systems

• Major and minor shareholder interests

• Hostile takeovers

• Control systems in firms to guard its assets (broadly defined)

• Transparency and accountability

in free & competitive markets

businesses are UN-FREE

always striving to maintain market position

approach

• Conceptual – key terms & concepts

• Theoretical – stylised explanations of how the world works (at least the bits relevant to enterprise, governance & companies)

• Empirical – looking at specific real world instances (case studies), applying (and testing) the concepts and theories we have explored

• Normative – forming judgments in light of those empirical observations (or at least coming to an understanding of the more common normative positions in relation to capitalist systems and corporations)

we must question common assumptions

what do we ‘know’ about the Japanese economy & firms?

not quite two lost decades some growth & gradual deflation

source: quandl.com

inequality vs incentives

• ‘executive compensation’ is controversial in many countries

• least so in the USA despite extreme difference from average incomes

• dilemma of attracting managerial talent vs demoralising workers

Country Level ~5Y Ago ~10Y Ago ~25Y Ago

USA 13.49% 11.01% 9.63% 8.91%

China 26.40% 26.72% 34.08% 10.60%

Japan 14.73% 17.71% 11.87% 9.76%

Germany 50.67% 42.46% 38.55% 24.22%

France 28.28% 24.07% 25.91% 21.48%

Brazil 12.55% 10.98% 16.43% 8.93%

UK 29.84% 27.01% 24.36% 22.59%

Italy 28.56% 22.47% 24.05% 18.57%

Russia 28.37% 27.94% 34.42% 21.90%

India 24.82% 20.05% 17.55% 6.90%

Canada 30.08% 28.44% 37.46% 25.12%

Australia 19.88% 22.53% 17.01% 15.14%

Spain 31.56% 22.67% 25.18% 16.68%

Mexico 31.75% 27.28% 26.23% 19.00%

South Korea 53.92% 47.55% 38.30% 28.53%

Indonesia 23.74% 24.16% 32.22% 24.29%

Turkey 25.65% 23.32% 23.55% 16.20%

Saudi Arabia 51.79% 47.09% 50.99% 33.75%

Argentina 14.27% 17.40% 21.50% 13.06%

South Africa 31.14% 27.29% 26.42% 26.69%

variance example: export-orientation

Exports as % GDP, 2013, G-20 Economies

source: quandl.com