Week 3 Flashcards
What is corporate governance?
Cooperative rule making by firm and or civil society organizations with little or no direct involvement of governmental institutions
Works though the market not public relations
How did corporate governance grow so big?
- increasing power of businesses
- the void that the government left
forms of corporate governance
- Corporate social responsibility reporting
- Condues of conduct
- Private standards
Key characteristics of corporate governance (2)
- represent requirements relying on certifications and auditing
- rely on market forces and scrutiny to generate social benefits
Types of private governance standards
- Business - led(regulation for mad cow’s)
- Civil society-led
- Multistakeholder
Effectiveness of corporate governance (3 levels)
- Output: the standards and it characteristics
- Outcome: change in behavior of actors
- Impact: actual improvement in the problem area
Output of corporate governance
- Stringency of the rules (how amibitous)
- Quality of the audit
Outcome of corporate governance
- Standard uptake: to what extent are standards adopted
- Level of compliance: not only adoption but real action to do things
3 levels of impact corporate governance
direct
indirect
cognitive
Trade-off in setting standards
high/low stringency and high/low impact
3 Direct strategies to improve impact
- Reward top players
- Reduce complexity
- Improve relevnce for laggards
Negatives of rewarding top players strategy
- Competition between local and global
- Tend to award bigger market leaders
- Price-premiums won’t always hold so smaller corporations will go broke
Backlash: USA not wanting to meet EU standards
Indirect approach strategy
Orchestration: synergies between competing and overlapping objectives of actors
Directive orchestration
Incorporate private standards and initiatives into regulatory frameworks (legality of verification)
Facilitative orchestration
Provide financial, technical support and endorsement
NSMD
non-state market driven: transnational private governance activities
5 potential explanations from literture why NSMD does not lead to less forest deforestation
- The insufficient coverage effect (strong)
- The crop switching effect (weak)
- The weak and fragemented effect (weak)
- The perverse market incentive effect (weak)
- The delayed impact effect (weak)
Forum shopping
Producers that look at different certifications and take the least difficult one
4 recommmendations to better use NSMD
- Subsidairies of firms seeking certification
- Partial certification
- Remote sensing and GIS data (more research)
- Jurisdictional approach: whole area needs to comply in order to get an certification
Five conditions that are likely to determine effectiveness of TNO in fostering sustainability objectives
- Problem structure
- Stringency of standards
- The quality of audit
- Acces of relevant soietal actors to decision making venues and procedures –> enhances accountability and legitimacy
- Uptake of standards by relevant actors
Indicators used to evaluate stringency
- Detail
- Quantifiable targets
- Ambition
- Performance
- Management
Indicators used to evaluate quality of the audit
- Third party auditing
- The auditing firm is accredited by independent organizations
- The standard requires 100% comliance with its rules
- The audit results are publicly available
- The standard includes severe sanctions in cases of non-compliance
VSS
Voluntary Sustainability Standards: private standards that require products to meet specific economic, socal and environmental sustainability metrics
2 pathways of VSS
Supply driven
Demand driven
Resources of producers/farmers
- Consumer facing premiums
- Philanthropic resources
- Development assistance
Mainstream paradox
Making a niche market mainstream most often decreases the values and norms which makes it not sustainable anymore
NSMD governance and why it does not work for deforsestation (3)
- Voluntary rules
- Multiple stakeholders
- Difficult to find causality
Pathways that could improve effectiveness of TNO (3)
- Maintenance of the multi tier system (less complexity)
- Standards may converge
- Standards operating at national level instead of global
Results effectiveness aquaculture and fisheries
- Tension, unceratinty, weak and fragemented, not taxation, low consumer awareness
- variaty of stringencies
- variaty of auditing quality
- discrimination in access
- modest uptake
low outcome of VSS due to the producers
- lack of knowledge
- lack of resources
mainstream paradox
Trade-off VSS
High standards + high premium = low uptake
Medium standards + medium premium = medium adaptation
High standards and facilitating help, however, due to insufficient producer capacity there is still an implementation gap
