Corporate governance and disappointment

This paper raises fundamental questions about the political and economic conditions and consequences of UK and US corporate governance. It does so by locating corporate governance in present day capitalism. Politically, the rise of governance since the early 1990s is part of a more general discursive attempt to combine neoliberalism with social responsibility, which works in the specific case of corporate governance by constructing a plausible but intellectually fragile narrative about agency problems and solutions which would align shareholder and management interests. Economically, the initial promise of corporate governance in the 1990s and the growing disappointment with governance in the early 2000s are then related to successive phases of financialisation: governance promised much in the 1990s as long as the bull market delivered equity value for shareholders; while the limits of corporate governance were demonstrated after the tipping point in the different circumstances of the early 2000s. It is then argued that disappointment is inevitable because procedural rules cannot control the self-serving behaviour of social and political elites in the UK and US. If corporate governance was ostensibly about safeguarding shareholder interests, effectively corporate governance sanctioned a huge increase in absolute and relative pay for US and UK top managers who remain the major beneficiaries of governance in a world where the giant corporation has become an important accelerator of inequality.