Edited by Klaus Gugler and B. Burcin Yurtoglu
Chapter 3: Corporate Governance and the Public Interest: The Way Forward
3. Corporate governance and the public interest: the way forward* J. Robert Branston, Keith Cowling and Roger Sugden INTRODUCTION The idea of good governance refers to a wide range of so-called public and private activities, and accordingly to governments, public agencies, corporations and other organizations. Our particular focus is the economics of the modern corporation and the chapter is consequently a contribution to the long-running debate initiated by Berle and Means (1932). Seventy-ﬁve years have not dimmed the controversy and topicality of this subject for economies throughout the world.1 Indeed, the debate on governance was given fresh impetus by the collapse of the US energy corporation Enron in 20012 (see for example the reﬂections of Galbraith (2004, p. 49) on ‘the end to corporate innocence’). Questions were asked about shareholders’ inability to prevent managers in ‘their’ corporation from pursuing dubious and illegal strategies. These experiences led to policy queries in other countries, not least in the UK, where further questions were more recently asked of the Royal Dutch Shell Group concerning the role of directors in the overinﬂation of oil reserves.3 The response to these scandals focused on shareholders being wronged by the criminal or otherwise undesirable activities of the managers/directors of the various companies, and thus on what might be done to prevent such actions in the future. The implication is that corporate governance is primarily concerned with the relationship between shareholders and managers/directors. We would take issue with this response and, in contrast, argue in...
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