Abstract
Corporate governance is a field in motion, or perhaps it is several fields each in motion and travelling at different speeds from different centres, often overlapping, sometimes colliding. A recent review article identified nearly 5000 articles published in peer-reviewed journals since 2004 before adding that ‘despite this enormous volume of research we still know very little about corporate governance’ (Ahrens et al., 2011). Making sense of this is the daunting task of any book that strives to provide an overview, let alone one that seeks to become the ‘handbook’, the first port of call for the perplexed and the inspiration for new research directions for a decade or so.
Part of the problem is evident from a quick scan of the literature. Many scholarly articles these days include a line that mentions the ‘dominance’ of agency theory, before going on to challenge it in one way or another. That so many do so is evidence that such dominance may be overstated. Scholarship on corporate governance appears in journals on economics, finance, financial economics, general management, human resources management, organization theory, strategic management, law, accounting, information and operations management, and ethics. There are now several journals devoted to the subject, when 20 years ago, there was only one, the then brand-new Corporate Governance: An International Review. A decade ago another journal arrived as pretender to the title (also called Corporate Governance, with two different subtitles during that time and now none) to give another view of the field. The reason we write so much about corporate governance may indeed be that we know so little about it.
Into the breach comes a new volume, The SAGE Handbook of Corporate Governance, edited by Thomas Clarke and Douglas Branson. Its 657 pages contain 27 essays organized in 7 themes, in an attempt to sum up and extend the field(s). Two years ago, the New York–based Wiley tried something similar, its 676 pages divided between eight subsections (Baker and Anderson, 2010), a volume to which this reviewer contributed 2 of its 30 essays. Both are valiant attempts to map a field in flux, but all too often in such contests, the flux wins.
The SAGE Handbook is explicit in how its editors have tried not just to represent the breadth of thinking but also to explain how its ‘boundaries have become extended’ (p. xx, ‘Preface’). The book describes how the early focus on structure and frameworks for publicly listed companies took for granted both the legitimacy of governance mechanisms and their effectiveness. These issues have become the focus of both the ethical and behavioural strains of corporate governance research, in particular, as it examines the work of boards of directors.
However, this concentration on boards and companies does not do justice to all the work on institutional investment and other investor types, audit and other gatekeepers and watchdogs, as well as the broader range of stakeholders making claims on corporate resources. The term ‘corporate governance’ has even become the expression used to describe governance arrangements in all types of organizations, including the governance of the government.
Clarke and Branson avoid the trap of trying to have their book be everything for everyone. Its focus is on corporations and includes how they relate to shareholders, with a concluding nod towards the themes of social responsibility and sustainability, and thus the role of corporations in society. Part 1 traces the origins of the field. In setting Bob Tricker’s contribution on ‘The evolution of corporate governance’ (Chapter 1) against Margaret Blair’s discussion of directors’ duties in light of the current financial crisis (Chapter 2), we get the sense that much of the past 20 years of scholarship has generated little by way of concrete solutions. It reminds us of what MacAvoy and Millstein (2003) called the ‘recurrent crisis’ in corporate governance.
Part 2 deals with markets and regulation, including Simon Deakin’s legally oriented challenge to notions of the supremacy of shareholders (Chapter 5), twinned with Michael Useem’s lament about the development of shareholder monitoring in a way that clashes with the service role of the board and the broader focus on strategic partnering between boards and top management (Chapter 6). Part 3 turns to the issue of accountability of board, with further focus on the tensions and ambiguity of the role of directors as they seek to be accountable, to shareholders among others, while engaging in strategy and innovation (Alessandro Zattoni and Amedeo Pugliese’s Chapter 10). John Roberts (Chapter 9) extends the themes of his earlier work on accountability (Roberts, 2001, 2009), with an examination of the work of boards in the United Kingdom showing that compliance with codes – and by extension with the letter of the law in countries with more formalized systems – is less than sufficient. Behaviour is what matters and that behaviour may involve less rather than more focus on transparency.
Part 4 takes us further inside the boardroom, with a focus on processes and configurations. The topical essays on board evaluation (Gavin Nicholson et al.’s Chapter 13) and women directors (Ruth Sealy and Susan Vinnecombe’s Chapter 14) run the risk of seeming dated before the Handbook achieves the full attention of its audience. But they are set against the historical sweep of Chapter 12, where Annie Pye et al. give a fresh instalment in more than two decades of conversations with directors, work that shows the continuity as well as the changes we have witnessed in corporate governance and board practice since 1989.
Part 5 moves from the micro to macro, with four attempts to come to grips with the diversity of corporate governance systems. Branson’s own contribution to the book (Chapter 16) questions the view current among many scholars a decade ago that the world was heading towards an orthodox, central view of corporate governance based on the efficiency of the new governance arrangements. What a difference a new crisis makes! This part also takes a look at comparative governance, seen as bundles of related approaches in different regimes (Chapter 17), family-owned businesses in Asia (Chapter 18) and the limitations of best practice (Chapter 19).
Part 6 is entitled ‘Dilemmas of corporate governance’, a phrase that might easily have been the title of the book itself. Its essays deal with a miscellany of themes: executive pay, finance and the regulation of conglomerates. Part 7 looks at governance and sustainability. Perhaps it would have been better to place a question mark in that title, as the first two of its four essays (including Clarke’s) examine the financial crisis and the role of corporate governance in causing it. There is nothing less sustainable than our view of corporate governance.
This book illustrates the richness of writing on the field as well as the devilishly difficult tasks of (a) getting the balance right and (b) building a coherent narrative of the field. It gives us law, accounting, finance and sociology. We learn about boards, management and investors (though less of other actors) and the tension between the board’s twin roles in monitoring management and contributing to value creation. We learn about the regulation of corporate behaviour, the failure of regulation to change it, and even about the undesirability of regulating behaviour. We learn about history and contemporary events, about structure, process and agency. Indeed, we learn about these themes several times in several different parts. Strategy, monitoring, the financial crisis and regulatory interventions recur in various parts of the book, and essays in one part might easily have appeared in another. There are, sadly, production flaws as well, spelling mistakes that had slipped through SAGE’s usually tight processes, a few incomplete sentences here and there and references that do not quite match the item cited. These things were missed perhaps in the rush to get so topical a book into print.
Still, this is a strong attempt to describe and delineate the field. There are scholars who will find it woefully incomplete, among them, I suspect, many who wrote the literature that was once so dominant. What this book demonstrates well, since those times and ideas, is how far the field(s) has (have) come.