Corporate Governance and Complexity Theory

Corporate Governance and Complexity Theory

Marc Goergen, Christine A. Mallin, Eve Mitleton-Kelly, Ahmed Al-Hawamdeh and Iris Hse-Yu Chiu

This multidisciplinary book takes an innovative approach to corporate governance by linking governance and complexity theory. It provides important new insights into why governance systems are failing and what may be done to improve this situation.

Chapter 2: An Introduction to Complexity Theory – Some Insights

Marc Goergen, Christine A. Mallin, Eve Mitleton-Kelly, Ahmed Al-Hawamdeh and Iris Hse-Yu Chiu

Subjects: business and management, corporate governance, economics and finance, behavioural and experimental economics, corporate governance, law - academic, corporate law and governance

Extract

2.1 INTRODUCTION AND SOME INSIGHTS FROM COMPLEXITY THEORY This chapter is based on practical work undertaken as part of an ESRC1funded study on complexity theory and corporate governance frameworks. The study included in-depth interviews with a wide cross-section of employees in one global organization (to be referred to as company Z) and with the following organizations which make up part of the corporate governance social ecosystem in the UK: Trades Union Congress (TUC), Financial Reporting Council (FRC), Department of Trade and Industry (DTI), Her Majesty’s Treasury (HMT), State Street Global Advisors (SSgA), Financial Services Authority (FSA), the London Stock Exchange and several fund management companies. The findings were validated at several workshops with representatives from company Z and from all the stakeholders interviewed, as well as other stakeholders who had a direct interest in corporate governance, but had not been interviewed. All human systems and institutions are complex in the sense that they are multidimensional with social, cultural, political, physical, technical, economic and other dimensions which interact and influence each other. They are able to adapt to and co-evolve with changing conditions and are able to create new order. In a corporate governance context, new order may take the form of new rules, regulations, corporate governance frameworks, or a new culture; it may also include the creation of enabling environments that facilitate good corporate governance within individual organizations as well as industries and economies. Complexity theory therefore studies social systems holistically; it does not focus exclusively on one aspect such...

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