Corporate Governance Adrift

Corporate Governance Adrift

A Critique of Shareholder Value

The Cournot Centre series

Michel Aglietta and Antoine Rebérioux

Recent corporate governance scandals have brought to the fore the inherent contradictions of a capitalism dominated by financial markets. This challenging book by Michel Aglietta and Antoine Rebérioux argues that capitalism’s basic premise – that companies must be managed in the sole interest of their shareholders – is incongruent with the current environment of liquid markets, profit-hungry investors and chronic financial instability. The authors advocate rather that a company should be managed as an institution where common objectives are developed for all stakeholders, and that this democratic principle should be extended to the management of collective savings to reduce macro-financial instability. These two conditions, they contend, could make contemporary capitalism a vehicle for social progress.

Chapter 5: Accounting, Finance and the Firm

Michel Aglietta and Antoine Rebérioux

Subjects: business and management, corporate governance, economics and finance, corporate governance, financial economics and regulation, industrial organisation


5. Accounting, finance and the firm The preceding chapters focused on the question of corporate governance, that is to say, the power structures of listed companies. The rise to power of financial markets expresses itself in the opening up of these structures to a shareholder logic: the development of stock options and instruments for the measurement of shareholder value, the liberalization of the takeover market, institutional activism, emphasis on the independence of administrators, and so on. From a theoretical viewpoint, governance appears as the central mediation channel between f rms and financial markets. We turn fi f our attention next to a second mediation: corporate accounting. As a f rstfi order cognitive resource on the activities of firms, accounting is essential to financial market information, which is interested in forecasting future corporate performance. Interactions play equally in the other direction: what happens in capital markets can influence the accounting representation of the company. If the technicality of debates on governance often causes the importance of the underlying issues (definition of the company, capital–work relationship, etc.) to be lost from view, this is even truer of accounting. The adoption of one particular accounting language over another is the adoption of a corporate representation: the nature of the information that is produced about an activity depends very largely on the idea one has or wishes to convey of this activity. Thus in a complex syntax, which too often makes the theme accessible only to experts, there are hidden essential questions...

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