An MPSB review of corporate governance

Corporate governance (CG) is about "an extension of ownership"; it is not the same as management, according to de Kluyver (2009).  A review of a corporate governance system in a country needs to cover:
(1) a number of external (in the external environment) and internal (in the internal environment) factors facing a company. These factors can be considered as contingent elements, which can be affected by the occurrences of CG scandals. Among the external environmental factors, the legal practices as related to CG and the behavioural codes for directors, formulated by the national Stock Exchange authority and related professional bodies are vital.
(2) The main players in a corporate governance system include the gatekeepers (e.g. auditors, security analysts, credit rating agencies and bankers), the owners (ie shareholders ) and other stakeholders (e.g. employees, creditors, investors, the general public, customers and suppliers, the stock market authority, the government, etc), and the corporate senior management team.
(3) The various debates in CG such as (i) who owns the corporation? shareholders or stakeholders? (ii) what should be purpose of company? Shareholder value maximization or firm value (which encompasses various stakeholders' values); should a company support shareholder capitalism or stakeholder capitalism? and (iii) what should be the roles of directors? As traditionalists, rationalizers or broad constructionists?

In short, the discussion of CG is complex and controversial. Using a multi-perspective, systems-based (MPSB) process of enquiry, I think we could proceed with the study of CG with the following tasks:

a. Take the shareholder capitalism as a unitary problem context and the stakeholder capitalism as a pluralist context.
b. Consider the following ideas as theoretically grounded in hard systems thinking: an organization is a profit-making machine, with directors being traditionalists who are solely responsble to account to shareholders (thus anchors the concept of CG to hard systems thinking)
c. Consider the following ideas as theoretically grounded in soft systems thinking: an organization is a relation-maintaining system that serves its stakeholders, with directors being broad constructionists, who are respnsible to the stakeholders of the company (thus anchors the concept of CG to soft ystems thinking)
d. In reviewing a specific CG system, to promote comprehensive and critical thinking, it is useful to switch from one perspective (e.g. hard systems thinking) to another perspective (e.g. soft systems thinking). This is known as a perspective switch in MPSB rsearch.

I think the MPSB approach is very useful for studying CG systems with good theoretical depth.

References

1. de Kluyver, C.A. (2009) A Primer on Corporate Governance, business expert press.
2. On MPSB research: http://josephho33.blogspot.com/2011/08/multi-perspective-systems-based.html
3. Park, S.J. and Horn, S. (editors) (2003) Asia and Europe in the New Global System, Palgrave
4. Eldenburg, L., Hermalin, B.E., Weisbach, M.S. and Wosinska, M. (2004) "Governance, performance objectives and organizational form: evidence from hospitals", Journal of Corporate Finance, 10, pp. 527-548.