The increasing cost of corporate governance: decision speed‐bumps for managers

Abstract

Purpose

Decision speed, flexibility, and innovation have often been cited as key ingredients to business success on the turbulent twenty‐first century business landscape. Sets out to argue that the increasing emphasis on legal and regulatory compliance, the push for which can be attributed to the spectacular collapses of WorldCom and Enron, will burden management with decision‐making speed‐bumps as opposed to protecting shareholders' interests.

Design/methodology/approach

The impact of legal and regulatory compliance is discussed within the business decision‐making context. Businesses succeed or fail in a dynamic environment where the smallest advantage can push one competitor ahead of another. Arguments in favour of increasing legal compliance are debated and the impacts of proposed regulatory compliance issues are discussed within the context of the competing business firm and its need for speed and flexibility.

Findings

The issue of increasing and stricter compliance for business is far‐reaching. Attempting to protect shareholder interests through further measures of compliance will only introduce further operating complexities for management while increasing costs and reducing decision speeds and flexibility. The impact on firms forced to compete under such conditions will be considerable, particularly if they find themselves on an international landscape competing against firms not burdened with the same regulatory requirements.

Originality/value

This paper is based on original work by the authors commencing with issues surrounding shareholders versus stakeholders, followed by a debate concerning corporate governance mechanisms and a discussion concerning the consequences and impacts of levying further regulatory burdens on business and managers.

Citation

Durden, C. and Pech, R. (2006), "The increasing cost of corporate governance: decision speed‐bumps for managers", Corporate Governance, Vol. 6 No. 1, pp. 84-95. https://doi.org/10.1108/14720700610649490