Corporate governance: quo vadis?

Abstract

Purpose

This paper aims to examine current research trends into corporate governance and to propose a different dynamic, humanistic approach based on individual purpose, values and psychology.

Design/methodology/approach

The paper reviews selected literature to analyse the assumptions behind research into corporate governance and uses a multi‐disciplinary body of literature to present a different theoretical approach based at the level of the individual rather than the organisation.

Findings

The paper shows how the current recommendations of the corporate governance research models could backfire and lead to individual actions that are destructive when implemented in practice. This claim is based on identifying the hidden assumptions behind the principal‐agent model in corporate governance, such as the Hobbesian view and the Homo Economicus approach. It argues against the axiomatic view that shareholders are the owners of the company, and it questions the way in which managers are assessed based either on the corporate share price (the shareholder view) or on a confusing set of measures which include more stakeholders (the stakeholder view), and shows how such a yardstick can be demotivating and put the corporation in danger. The paper proposes a humanistic, psychological approach that uses the individual manager as a unit of analysis instead of the corporation and illustrates how such an approach can help to build better governance.

Research limitations/implications

The paper's limited scope can only outline a conceptual framework, but does not enter into detailed operationalisation.

Practical implications

The paper illustrates the challenges in applying the proposed framework into practice.

Originality/value

The paper calls for the use of an alternative unit of analysis, the manager, and for a dynamic and humanistic approach which encompasses the entirety of a person's cognition, including emotional and spiritual values, and which is as of yet usually not to be found in the corporate governance literature.

Citation

Isaac Mostovicz, E., Kakabadse, N.K. and Kakabadse, A. (2011), "Corporate governance: quo vadis?", Corporate Governance, Vol. 11 No. 5, pp. 613-626. https://doi.org/10.1108/14720701111177019