A preface to the political theory of
economic organization
Positive and normative perspectives on corporate governance
J. (Hans) van Oosterhout
RSM Erasmus University
[email protected]
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Intro and agenda
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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
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Agenda
• Observations, diagnosis and proposal
• Basic framework for a political theory of
economic organization
• Applications
• Discussion
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Observations, diagnosis and proposal
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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
• Corporations—and other business organizations—
‘naturally’ have ‘non-business’ functions, tasks and
features
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My diagnosis
• Dominant concepts and theories:
– Corporate Social Responsibility
– Stakeholder theory
– Corporate Citizenship
• Metaphorical rather than conceptual
• Lack of ‘theoretical’ and empirical content?
• Ideology?
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My proposal
•
Lets forget about these ‘concepts’ and ‘theories’
•
Develop comprehensive conceptual framework to
answer the questions:
1.
what explains the division of labor between
–
markets and hierarchies
–
public and private institutions in a globalizing economic order ?
2.
what division of labor is desirable or justified?
3.
what are the implications of 1 & 2 for corporate governance
more specifically?
•
A political theory of economic organization
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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
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The basic framework
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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).
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Two kinds of authority?
The public firm
The State
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A Hobessian view of corporate authority
The State
The public firm
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Perspective
1.
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
2.
Embedded or federal structure of authority in society
3.
What determines division of labor between levels?
•
Competition: markets and jurisdictional competition
•
Politics: the quest for legitimacy
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Applications
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4 applications, 1 example
1.
Political theory of enterprise organization
2.
A theory of corporate purpose
3.
Economic democracy?
4.
•
Workplace democracy?
•
Shareholderdemocracy?
Corporate crime (and social cost)
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Corporate crime
• Certain crimes have a corporate dimension
• The problem of ‘many hands’
• Two gaps:
– retribution gap
– deterrence gap
• Corporate criminal liability (CCL)?
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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)
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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
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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
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Discussion
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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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