Decentralizing corporate governance? A praxeological inquiry

Scott L. Mitchell (), Mark D. Packard () and Brent B. Clark ()
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Scott L. Mitchell: OCEG (Open Compliance & Ethics Group)
Mark D. Packard: Florida Atlantic University
Brent B. Clark: University of Nebraska, Omaha

International Journal of Disclosure and Governance, 2022, vol. 19, issue 4, No 4, 413-429

Abstract: Abstract The theory and practice of corporate governance has been in something of an arms race with corporate malefactors—as corporate governance mechanisms have incrementally advance, so too have the strategies of malefactors who skirt those governance practices to engage in costly misconduct. Modern centralized governance approaches appear inapt to filling the gaps caused by agency and knowledge problems. Here, we start afresh using the atypical ‘praxeological’ method to reconstruct governance theory anew from basic foundations. The resultant theory is distinctive from prevailing corporate governance theorizing in several key ways. One of the more important conclusions from our reconstructed theory is that governance may benefit from a more ‘market’ or decentralized approach. In short, the governance holes derived from agency and knowledge problems are, or may be, much smaller when governance is decentralized, where employees police each other. While the implementation of such a radical rethinking of governance practice is left ambiguous in our treatment, the theoretical basis for such an approach is compelling.

Keywords: Corporate governance; Agency theory; Knowledge asymmetry; Ownership; Management; Praxeological method (search for similar items in EconPapers)
JEL-codes: B53 D82 D86 G30 G34 O16 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1057/s41310-022-00151-7

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