In his excellent book, “Corporate Governance and Chairmanship”, Sir Adrian Cadbury tells us that the word “governance” goes back to Chaucer. Its fourteenth-century connotations were wholly positive.There was clearly very little box-ticking on the road to Canterbury.
By the time of Adam Smith and joint stock companies however, the agency problem was causing him to take a dim view of corporate governance, predicting that “negligence and profusion . . . must always prevail, more or less, in the management of the affairs of such a company.” The most apocalyptic post-Enron commentator has not taken quite so fatalistic a view. Indeed, the mood today seems to be the opposite of fatalism: a conviction that regulatory threat can cure all and ensure that negligence and profusion never occur.
So I approach this topic with a keen sense of what Demb and Neubauer, in their work on the corporation board ten years ago, rightly called its paradoxes. I had better start with a declaration of interest. Or rather four declarations.
See full Article (in pdf format).
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