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A preface to the political theory of economic organization Positive and normative perspectives on corporate governance

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Title: A preface to the political theory of economic organization Positive and normative perspectives on corporate governance


1
A preface to the political theory of economic
organization Positive and normative perspectives
on corporate governance
  • J. (Hans) van Oosterhout
  • RSM Erasmus University
  • joosterhout_at_rsm.nl

2
Intro and agenda
3
Intro and Preliminaries
  • Associate professor, Department Business Society
    Management, RSM Erasmus University
  • Research interests
  • positive and normative theory of institutions and
    organizations
  • comparative economic and political organization
  • corporate governance
  • corporate governance and corporate crime

4
Agenda
  • Observations, diagnosis and proposal
  • Basic framework for a political theory of
    economic organization
  • Applications
  • Discussion

5
Observations, diagnosis and proposal
6
Some observations
  • Economic organization does not exist in societal
    vacuum
  • Features of private enterprise organization at
    least partly explained by (lack of) public and
    societal features (institutions)
  • Business has significant social side effects
  • Corporationsand other business organizations
    naturally have non-business functions, tasks
    and features

7
My diagnosis
  • Dominant concepts and theories
  • Corporate Social Responsibility
  • Stakeholder theory
  • Corporate Citizenship
  • Metaphorical rather than conceptual
  • Lack of theoretical and empirical content?
  • Ideology?

8
My proposal
  • Lets forget about these concepts and theories
  • Develop comprehensive conceptual framework to
    answer the questions
  • what explains the division of labor between
  • markets and hierarchies
  • public and private institutions in a globalizing
    economic order ?
  • what division of labor is desirable or justified?
  • what are the implications of 1 2 for corporate
    governance more specifically?
  • A political theory of economic organization

9
Why a political theory?
  • Concern with basic institutional order
    (facilitating human coordination and cooperation)
  • Polity e.g. property rights, market vs.
    hierarchy
  • Policy what is the purpose of the firm?
  • Both efficiency and legitimacy count in economic
    organization
  • Methodological ecumenism
  • positive and normative theory building
  • conceptual and empirical research
  • different levels of analysis
  • behaviorism and phenomenology

10
The basic framework
11
Theoretical core propositions
  1. Both states and firms are authority systems
    (conceptual claim)
  2. predicate on a similar general justificatory
    logic (normative claim), yet
  3. they are different in terms of the specific
    conditions and considerations that justify
    authority in each (positive claim).

12
Two kinds of authority?
The public firm
Ow
Ma
Em
13
A Hobessian view of corporate authority
The State
The public firm
PA
Ma
Em
?
Ow
Ci
Ci
Ci
14
Perspective
  • Corporate authority best seen as a continuation
    of public authority by private means
  • Adjudicative ex post division of quasi rents
  • Legislative re-assignment of property rights
  • Embedded or federal structure of authority in
    society
  • What determines division of labor between levels?
  • Competition markets and jurisdictional
    competition
  • Politics the quest for legitimacy

15
Applications
16
4 applications, 1 example
  • Political theory of enterprise organization
  • A theory of corporate purpose
  • Economic democracy?
  • Workplace democracy?
  • Shareholderdemocracy?
  • Corporate crime (and social cost)

17
Corporate crime
  • Certain crimes have a corporate dimension
  • The problem of many hands
  • Two gaps
  • retribution gap
  • deterrence gap
  • Corporate criminal liability (CCL)?

18
CCL in the US
  • Extension of tort doctrine respondeat superior
  • Corporations vicariously liable for the actions
    of their employees when these
  • take place within normal scope of employment
  • benefit the firm
  • Economic rationale firms more efficient monitors
    than public law enforcement agencies (compare
    business judgment rule)
  • Extra-territorial reach of CCL (e.g. SOx 2002,
    SEC rules)

19
Corporate policing
  • FSG for Organizational Defendants
  • Both ex ante prevention and ex post offence
    cooperation pay! (reduction of fine)
  • ex ante ethics programs, compliance officers
  • ex post cooperation with prosecutors
  • Strategic risk and blame shifting (scapegoating)
  • Hence corporate policing

20
Corporate policing and corporate governance
  • Corporate policing private extension of public
    law enforcement
  • Renegotiation of the corporate contract?
  • Multilevel negotiations (beyond corporate
    constituencies)
  • high or asymmetrical bargaining costs?
  • Is competition on safeguards desirable?
  • Jurisdictional issues (e.g. unlimited shareholder
    liability for corporate torts and crimes?
  • Both efficiency and other (e.g. retributivist,
    restorative justice) considerations count in
    negotiating mutual safeguards

21
Discussion
22
Conceptual progress?
  • Conceptual and theoretical clarity (more
    established concepts and theories)
  • Explanatory surplus
  • Comprehensive perspective on corporate governance
  • multilevel analysis (regimes)
  • public and private ordering
  • normative and positive analysis
  • not just efficiency
  • Separation of positive and normative claims
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