Fundamentals of Governance

Organizations, and how well they are governed, drive the wealth and happiness of a society, governance is about power but it is also about efficiency and effective leadership. We will study different forms of governance structures to understand how they function. A typical presumption has been that governance by the public corporation represents a standard with which to understand the potential of good governance. But the public corporation is besieged and stock exchanges show net de-listings, raiders are challenging venerable corporations, regulatory requirements impose heavy costs on IPOs and on statutory requirement. Is it true that the public firm, and in particular the American form of it, joins both a just distribution of power and an efficient form of governance? These questions are lodged in a larger, often political, debate. Are public, or private firms, delivering an economic performance that rewards the many stakeholders: shareholders, employees, society? For whom do corporations serve? What is their performance? Are they betraying national interests by outsourcing or by employing immigrants or by locating overseas, sometimes by inversions for primarily tax benefits? As this course is short and quick, we focus on the United States and compare across the types of governance, e.g. the public firm, the private firm, the ESOP, the sports league, and the non-profit. The primary institutions discussed will be the board, the shareholders, institutional investors, the stakeholders, and management. However, there will also be plenty of moments to think about the dynamics and personalities of families, CEOs, and directors. There are a variety of perspectives from which questions of corporate governance can be formulated and addressed but it has been economic analysis that has largely dominated contemporary discussions of the subject. Most theories of governance are preoccupied with the relationship between institutions of governance and economic performance. We expand this perspective to ask ultimately, are there forms of governance that are competitors to the public corporation? Would they satisfy stakeholders, and the wider public, more than the shareholder governance that is so much under assault today? It may help you also to understand what the course is not about. Because we are looking comparatively, we will not attempt to go deep, instead we go wide. This means, we will not look deeply at the issues of corporate governance, the relevance of law and regulation, and the functioning of governance at particular junctures, such as bankruptcy, acquisition, or in a proxy contest.