Corporate Governance, The Limits of Rationality and Proceduralisation

A striking feature of theorising about corporate governance, whether from the perspective of economics or in terms of a stakeholder model of the company, is that even quite basic questions posed at the outset remain to be answered. Thus, in the case of economic theorising about the firm, it has been said that findings to date must be seen as provisional in the absence of an adequate account of why contracts are incomplete. Similarly, in stakeholder theorising, the pressing problem has been identified as one of detailing the rights and responsibilities of the various stakeholders and of suggesting how conflicts among the different groups can be resolved. In view of the obstacles encountered by traditional approaches, a range of alternatives from both law and economics is considered which may be described as procedural theories. Including conventionalist economics and autopoiesis, these alternative theories are seen to offer tantalising possibilities of answering some of the questions currently confronting traditional approaches. Much work, however, remains to be done if this potential is to be fulfilled. A later version of this paper was subsequently published in French as a book chapter. The details are: (Paterson.J.), "'Corporate governance', les limites de la rationalité et la procéduralisation," in Procéduralisation du droit et régulation démocratique, pp.365-409, Bruxelles: Bruylant, 2000. Philippe Coppens & Jacques Lenoble eds.