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Abstract :
The paper aims to develop a CG theory of business growth. It aims so on several counts. One, several failures in corporate governance may be attributed to the pursuit of untenable growth trajectories and the pace of growth. Two, separation of ownership and management in corporate settings creates room for opportunistic managerial behaviour vis-à-vis business growth that needs to be addressed by effective corporate governance. Three, and as a corollary to two, whilst the extant CG theories viz., shareholder, stakeholder and trusteeship theories do provide a normative template for effective corporate governance, a more grounded CG theory of business growth is likely to emphasize the governance discourse from, instead of compliance to performance. A CG theory of business growth would be rooted more in the competence of the board and other CG mechanisms than abstract moral integrity. Fourth, while the extant literature on business growth does provide economic theory and managerial/ strategic theory perspectives on business growth, a governance theory of business growth is conspicuous by its absence. Generalizing the CG theory of business growth even further, the paper delineates governance roles during the successive stages of business growth via organizational transformation. Fifth, CG theory of business growth would be integrative of the institutional context of corporate governance just the way variety of capitalism (VOC) perspective permits acceptance of a variation in corporate governance mechanisms across different setting viz., diffused ownership, concentrated ownership, mode of finance, the scale of business, etc.
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13
KEYWORDS:
orporate governance theories; theory/ies of business growth; governance roles during business growth via organizational transformation
INTRODUCTION & OBJECTIVES:
Several instances of corporate governance scams, scandals and failures imply pursuance of ambitious growth as one of the main reasons. Ambitious growth often pushed beyond the limits of the economics of business growth gives rise to a host of governance-related risks. These risks may be accentuated by the concentration of power of decision-making preventing critical thinking. This concentration of decision-making power may be institutionally determined. In situations where the demarcation between ownership and control is sharply defined e.g. Anglo-Saxon settings there obtain two distinct forces at work. A centripetal force that results in the concentration of control over the physical assets among one/ few managerial personnel e.g. the CEO. In contrast, beneficial ownership of these physical assets is subject to a centrifugal force tending to divide and sub-divide to tradable lots (Berle & Means, 1968/2009). In other settings such as family-controlled corporate enterprises (FCCEs) managers from the controlling family wield similar power It is not just coincidental that the resultant managerial hubris has been held to be responsible for many a corporate downfall (Collins, 2009) (Seth, 2007). It does not require complex time regression to dissect the sequence of events often getting escalated to the level of corporate catastrophe. Catastrophe is preceded by crisis. Crisis is preceded by distress. Distress follows discomfort. Discomfort is preceded by complacency arising from previous success. Coming events cast their shadow before. We shall see, that corporate governance thus faces successive challenges along different stages in organisational evolution, read, business growth.
DOI:
https://doi.org/10.58426/cgi.v1.i2.2019.54-74