Lecture 9 Flashcards
What are institutions?
Rules and norms that guide how individuals, organizations, and markets interact with each other (the rules of the game in a society)
What are the three types of institutions?
Regulative
Normative
Cultural-cognitive
Explain regulative institutions in terms of basis of compliance, mechanisms, logic, behavioral reasoning, basis of legitimacy, and who it is studied by
Legal obligation
Coercive (fear & coercion)
Instrumentality
Have to
Legally sanctioned
Economists
Explain normative institutions in terms of basis of compliance, mechanisms, logic, behavioral reasoning, basis of legitimacy, and who it is studied by
Moral obligation
Normative (duty & responsibility)
Appropriateness
Ought to
Morally governed
Sociologists
Explain cultural-cognitive institutions in terms of basis of compliance, mechanisms, logic, behavioral reasoning, basis of legitimacy, and who it is studied by
Taken-for-grantedness (internalized values)
Mimetic (social identity & personal desire)
Orthodoxy
Want to
Comprehensible, recognizable, culturally supported
Anthropologists, organization theorists
What is corporate governance?
A legal institution where rights and responsibilities of different parties are anchored in law
What is comparative corporate governance?
Different national institutions which have an influence or the corporate governance mechanisms per country
What are a variety of different perspectives of corporate governance?
Economics & Management
Legal
Political science
Culture
Sociology
What are Economics & Management views/theories and discuss its limitations?
Agency Theory
- Principal-Agent
- Agency costs
- Alignment of interests
Financial System View
- Capacity of the banking sector
- State policies towards banks
- Wider social systems
Stakeholder Theory
- Broader set of goals
- “Agents” become “Trustees”
E&M suggests a dichotomous system. There are two broad dichotomous systems + one more:
1. Anglo-Saxon Model
- Uses common law, which operates with lay judges, broader legal principles, and oral arguments
- Based on the principle that government intervention in the economy should be minimal
- Example: USA
- European Model
- Places less faith in the invisible hand and calls for more state intervention in economic activity
- Has more state ownership
- Uses civil (Roman) law, which is based on professional judges, legal codes and written records
- Example: Germany - Asian Model
- Closer to the European system regarding its institutional arrangements
- Exists in several forms and involves a great deal of experimentation
- Example: Japan - More hybrid systems (e.g. Japanese Model)
- Bank-oriented finance & cross-shareholding with affiliated companies (Rhineland)
- Unitary board, few outside directors (Anglo-Saxon)
- Corporate restructuring (Rhineland)
Limitation for a cross-national context:
- Ignorance of the institutional, legal, and cultural environment in which organizations and decisions are embedded (i.e. paid little attention to the different organizational and institutional environments in which agency problems take place)
What are three main pillars of the Legal perspective of corporate governance?
- Property rights
- Legal family
- New forms of regulations
Explain political science perspective of corporate governance
Focus broadly on the political coalitions, party politics, and political institutions influencing corporate control
Explain culture perspective of corporate governance
How is culture related to cross-national diversity in corporative governance?
- Collectivism - Individualism
- Power distance (small -large)
- Femininity - Masculinity
- Uncertainty avoidance (tolerant - avoiding)
Explain the sociology perspective of corporate governance
Institutional theory within sociology has taken up the theme of cognition and ideas but sought to overcome the limits of more Hofstedian cultural analysis by grounding in a more specific framework of organizational ideologies
