The shortcomings of the corporate standard: towards new enterprise frameworks?

Abstract

As corporate governance is more driven by shareholder‐oriented principles, managers are expected to adopt new attitudes and to be more accountable to shareholders in terms of their strategies and decisions. Yet, when governance is seen primarily as a ‘corporate matter’, it exclusively concerns the coalition of shareholders. This convergence towards the model of the public corporation raises major questions as it leaves aside collective activities and their value creation processes. Coordination, capabilities development and innovation are omitted in the prevalent representation of the corporation. This omission is symptomatic of the confusion between the legal corporate model and the actual activities of the firm. In their own ways, both shareholders’ and stakeholders’ approaches of the firm refer to the legal framework of the public corporation. This article argues that the concept of the firm should be distinguished from its corporate forms. Going back to the basic nature of the firm, it suggests that a firm is a collective endeavour whose activities are directed by management to create new potentials. By challenging the public corporation as a relevant model for the governance of the firm, it indicates new possible and pluralist norms of governance.

Keywords:

• enterprise
• governance
• corporation
• corporate law
• stakeholder
• shareholder
• management

JEL classification:

• g30
• l20

Notes

1. See in particular Szramkiewicz (1989).

2. The US case has followed a quite similar pattern according to various sources, e.g. Blair (2005).

3. It should be noted that elaborate credit mechanisms had not yet been developed at this point in history. Merchant banks only appeared in the nineteenth century.

4. Similar ideas have been advanced by a number of commentators, including Gréau (2005), Paillusseau (1967) and Ripert (1951).

5. This is consistent with the analysis of Blair and Stout (1999) who consider that the corporation is actually the residual owner of the surplus generated by team production.

6. As Blair and Stout convincingly demonstrate, in order to be effective, the members of the team have to subordinate their inputs. The authors refer to a transfer of control rights: ‘both team members might improve their welfare by agreeing to give up control rights to a third party … to the actual productive activity’ (Blair and Stout 1999).

7. It should be noted that the three elements constituting the model depend on the expertise of and relationships between the actors involved in the firm. This model should therefore be regarded as a series of formal axioms describing collective action. Neither the nature nor the meaning of such action are presupposed. The model can, of course, evolve (Hatchuel 2001).

8. This approach has a notable precedent in the French civil service: the so‐called ‘slipper rule’ obliges graduates of the prestigious Polytechnique schools to pay a lump sum to the State if they fail to become civil servants after having undergone salaried training.