Introduction: the nature of the firm and its governance
This volume is based on one assumption and two propositions. This assumption and the two propositions are the recurrent themes which this volume purports to address and whose significance will be demonstrated. For the sake of clarity, they should therefore be defined at this early point:
• Assumption: The recent thoroughly demonstrated and researched growth of economic inequality and economic stagnation in Western capitalism cannot be explained by individual activities or policy changes, idiosyncratic events, or by sheer force majeure beyond the influence of informed policy-making, but needs to be examined as institutional changes in what can best be described as the infrastructure of the corporate system of Western capitalism. More specifically, these infrastructural changes in the corporate system are most accurately described as questions pertaining to corporate governance. Corporate governance here includes ‘[a]ll the devices, institutions, and mechanisms by which corporations are governed’ (Macey, 2008: 2). Ultimately, corporate governance denotes decision-making regarding the value creation and value extraction in the corporate system, and, more specifically, within a focal firm, under the influence of market-based competition, legislation, and existing regulatory frameworks.
• Propositions: (1) Managers do not, by and large (even though noteworthy exceptions are reported), shirk or act incompetently in predictable ways when seeking to navigate in competitive environments to create economic value accruing to their stakeholders and when submitting to extant legal frameworks and institutionalized regulatory control. (2) If they did (which is counterintuitive and unsupported by empirical evidence regarding the degree of...
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