On the Discretionary Power of Top Executives: Evolution of the Theoretical Foundations

Pierre-Yves Gomez

International Studies of Management & Organization, 2004, vol. 34, issue 2, 37-62

Abstract: The history of corporate governance systems is now well documented. It is, however, necessary to better understand the link between the theories and the evolution of effective practices of governance. In this article, it is demonstrated that the development of theories (property rights, agency theory, stakeholder theory, etc.) parallels the evolution of the governance of corporations. Taking three main periods into consideration, I examine how economic theories offer rational frameworks for each period that give scope to and delineate the discretionary power of top management. These theoretical constructs answer the need for understanding both the governance systems and the legitimizing practices in use. As a result, I show how the evolution of corporate governance since the 1970s challenges the use of agency theory as the mainstream model and paves the way for new theories of corporate governance in an era of mass shareholding.

Date: 2004
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DOI: 10.1080/00208825.2004.11043703

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