- Elgar original reference
Edited by Mario Levis and Silvio Vismara
Ever since the famous Berle and Means (1932) appraisal on the performance of large corporations, the term ‘corporate governance’ is used to describe questions of how to govern a firm or a company and is nowadays on everyone’s lips and labels every organization. One of the most influential academic papers on corporate governance is the Jensen and Meckling (1976) approach. In this paper, the authors draw on the Berle and Means (1932) finding that corporations which are governed by managers instead of large shareholders, are underperforming. Jensen and Meckling (1976) put this finding in the context of the emerging literature on perfect contracts. Corporate governance is since then described as a contractual problem at the top of a firm to solve market imperfections. Oliver Hart (1995, p. 678) mentioned that: ‘Corporate governance issues arise in organizations whenever two conditions are present. First, there is an agency problem, or conflict of interest, involving members of the organization – these might be owners, managers, workers or consumers. Second, transaction costs are such that this agency problem cannot be dealt with through a contract.’
You are not authenticated to view the full text of this chapter or article.
Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.
Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.
Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.