From Governance to Governing - Corporate Governance and Business Ethics

Currently dominant theories of corporate governance, despite their contrasting and competing perspectives, remain trapped in the same mode of thinking which assumes that the reality of governance practice should be force-fitted to idealized models. However, such an approach is not likely to be applied in practice and would not improve corporate governance if it did, and “the alternative approach of adapting the model to reality rather than reality to the model deserves equal consideration” (Kay and Silberston 1995).

The fundamental problem with the current analyses of corporate governance is that their perspectives are constructed through a purely homeostatic approach (Kirkbride and Letza 2004) that ignores the continuous interaction between choices made and their specific contexts, and the continuous flow of corporate governance practices including especially issues of precedence, personal incentives, individual perceptions and societal approval. Although the competing models may claim that their perspectives are based on corporate governance practice and drawn from observations and investigations, there is, in fact, little evidence of their theoretical viability. The main reason for this is quite simply that such research and analyses rely upon a static and initiative view of reality which presupposes that situations, definitions and contexts remain stable and are hence not subjected to the necessary vagaries of change and interpretation.

Thus, they tend to deal only with abstract conceptual frameworks and pre-given assumptions as well as a priori principles rather than on discrete empirical factuality, continuity and radical experiences. The preoccupation is thus on consistency rather than on relevance. Taking their hypothetical and theoretically established “entities” and “generative mechanisms” as ontologically unproblematic, they justify their theses by insisting that their perspectives are truthful in so far as they accurately represent the “objective” realities of corporate governance practice. By so doing, they commit to “the fallacy of misplaced concreteness”: mistaking theories for reality itself (Whitehead 1929/1978, 1933/1961).

We argue that corporate governance cannot be viewed as a pre-designed, universalized and fixed model; rather, it is a process of governing, an emergent pattern continuously generated from complex social interactions in historical and contextual specifications. It is an ongoing reality-constituting and reality-maintaining activity in which all participants both inside and outside corporations actively participate in shaping and reshaping perceptions and priorities. In this sense, principles, assumptions, issues, problems and solutions cannot be interpreted as pre-given, objective and taken-for-granted. They are always in the process of constructing, reconstructing, changing and renewing. We thus suggest that to comprehend corporate governance practice, one should not attempt to subscribe to theoretical linearity, extremity and absoluteness and ignore the dynamics and flexibility of human minds, character, behaviors and social interactions. What is needed is to draw attention to and understand the “rationality of practice”, the diverse responses to localized requirements and the continently emerged governing pattern, having its own logic and intrinsic value and being acceptable at a given moment. A significant inspiration for “governors” in practice is an “art of governance” (Foucault 1974), an art “which concerns all and which touches each” and “which presupposes hought” (Burchell et al. 1991). Human minds, thought and ideas enjoy real power in the construction and change of social reality and governance. An art of governance is, in contrast to the “science” of governance, to work with the invented and changeable ideas, appreciate different viewpoints, respect distinctive ways of doing things, set fluid targets, take flexible measures and solutions, adjust and readjust strategies and techniques. Governance is a non-linear and unstable equilibrium. It is to prepare for change, flow with change and forward to change.

The term “governing” as a descriptive action verb is better than the static noun “governance” as the intended description of governing activities in continuing processes, “here and now”, rather than the abstracted description of any end-state and outcome of activities, “there and then”. “Governing” directs our attention to what is emerging and happening in practice, what is being done and relating to people involved in specific governing processes, and what people are directly experiencing, ideally perceiving and socially communicating and interacting. It avoids directing interest to abstracted theorizing and modeling. Above all else, governance suggests the past, whereas governing is firmly in the “here and now”, albeit with one eye on a multiplicity of uncertain futures.

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Corporate Governance and Business Ethics Topics