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Corporate Governance, The Firm and Investor Capitalism

Alexander Styhre

The shift from managerial capitalism to investor capitalism, dominated by the finance industry and finance capital accumulation, is jointly caused by a variety of institutional, legal, political, and ideological changes, beginning with the 1970s’ downturn of the global economy. This book traces how the incorporation of businesses within the realm of the state leads to both certain benefits, characteristic of competitive capitalism, and to the emergence of new corporate governance problems emerges. Contrasting economic, legal, and managerial views of corporate governance practices in contemporary capitalism, the author examines how corporate governance has been understood and advocated differently during the New Deal era, the post-World War II economic boom, and the after 1980 in the era of free market advocacy.
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Introduction: the nature of the firm and its governance

Alexander Styhre


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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