Seriously?’, you might think. A paper about the history and future prospects of corporate governance amidst Covid-19? Why would two corporate law scholars think that their reflections on how in the past companies have been, and in the future might be run, could be of relevance today when millions of workers have lost their jobs, and some countries’ governments are engaged in the biggest ‘bail out’ the world has ever seen,? What would be the value of such analysis, when so many of us are asking about what it is that companies do, and for whom, instead of how they are run, and which role shareholders and directors play in corporate governance?

Our motivation to disseminate our research at this time is our belief in the importance of looking at a crisis such as that triggered by the coronavirus from a historical perspective. By trying to identify the ‘conditions’—broadly understood, yes, but requiring an analysis in detail—of how companies have been regulated and deregulated by law, we aim at placing the field of ‘corporate governance’ in a larger context of political economy. We are interested in the interplay of the doctrinal and conceptual dimension of corporate law and its symbolic and political significance in the ‘real world.’ As we recognize how companies have been allowed to become the nodal points in administering the bulk of ‘essential’ (!) services, ranging from health care to food security, telecommunications to infrastructure maintenance, energy to warfare, we argue that a historically informed and a forward-looking analysis of the law of corporate governance must take this context of state transformation, privatization and relegation of formerly public services to market actors seriously. The global pandemic confronts us  with a situation in which so much can change in a split second. What climate change scientists and activists have not dared to demand is being achieved as an effect of grounded airplanes and not everyone flying to every wedding bash around the planet on a ‘discount’ airline. The same governments that neoliberals and neoconservatives have berated for even remotely social-democratic initiatives are now held responsible to save the economy.

Our paper, forthcoming in the Oxford Handbook of Transnational Law (Peer Zumbansen ed.), originates out of a longstanding collaboration in research and teaching ‘transnational corporate governance’ through the use of comparative regulatory analysis and complex real world fact patterns. As comparative corporate governance and socio-legal scholars, we argue that the field of corporate governance is today a true laboratory of opposing views on market regulation, corporate responsibility and, even, capitalism itself. The end of ‘embedded liberalism’ and the emergence of regulatory frameworks which have since long been sitting uncomfortably beside and in-between traditional categories of ‘public authority’ and ‘private power’ have long blurred the borders between differently legitimated regulatory authorities, posing lasting challenges for the assessment and evaluation of corporations’ power, the legitimacy of their actual functions in society and with regard to their accountability to a wide range of societal stakeholders. This ‘big picture’ understanding of corporate governance is complemented by a continuing and today dramatically and literally existentially intensified examination of the role of the key corporate  entities (shareholders, managers, directors and stakeholders) and their relations to civil society in making decisions about the future of existing market democracies. While, until a few months ago, discussions still focused on curbing short-term value-maximizing practices and not just a particular company’s ability to foster sustainability but with regard to the underlying system of capitalist market organization itself, Covid-19 gives these debates a drastically expanded meaning. In this context, corporate governance began to push against and, increasingly, grow beyond the confines of nationally specific cultures and historical experiences of corporate law, to become, instead, a hotly contested, transnational regulatory field of competing visions of firms’ institutional and normative infrastructure in search of creating the most advantageous conditions to attract capital in volatile markets. This shift occurred at the same time that regulatory transformations in Western post-industrial societies since the early 1980s had begun to significantly shift public service provision and state-organized frameworks for old age security guarantees, access to health services or education to the sphere of the market.

In this paper, we identify and challenge two key narratives that have been in tension in the academic but also the more general writing on corporate governance ever since the rise to dominance of a shareholder value-oriented understanding of the modern business organization. The first is a seemingly self-fulfilling law and economics perspective on corporate governance whereby the rise of shareholder value maximization is not only presented as inevitable, but also as comprehensive and without alternatives. The second is a political economy perspective which studies corporate governance from within historically evolved political economies and, more specifically, against the background of existing and evolving frameworks of company regulation, industrial relations, social protection and employment law. We argue that these two perspectives on corporate governance represent two ends of a discursive spectrum. While the former—law and economics—eventually separates or ‘disembeds’ corporate law rules as well as the entities they concern from the political battlefield of competing visions of market regulation, the latter—for example, the political economy perspective of the ‘Varieties of Capitalism’ scholars in the 1990s and 2000s—long insisted on seeing corporate governance as an integral part of a country’s economic policy making. With that, both perspectives have for the longest time remained at loggerheads with little room for compromise.

Against this background, we reveal a breath-taking proliferation of actors and institutions that are involved in creating corporate governance norms today and we provide two telling examples of what we see as a sustainable-oriented transformation of corporate governance norm creation. The first case study focuses on the transnational shift from voluntary codes of conduct and international initiatives towards mandatory disclosure and more recently regulatory governance in the form of due diligence and expansive directors’ duties to address issues of environmental and social corporate sustainability. Another telling example of how corporate governance continues to evolve as a transnational and spatialized regulatory regime is reflected in the development of stewardship codes for institutional investors. These illustrate, as under a magnifying glass, the increasing pressure on corporate actors to effectively embrace normative policies that are geared at a more sustainable and equitable organization of business going forward. Both cases are indicative of the complex dynamics of regulating societal concerns within a relationship between state, corporate and civil society actors.

In light of these findings, we argue for an understanding of corporate governance regulation that goes beyond the well-known and tired references to state versus market, which made sense in a Keynesian context of embedded market capitalism, but which now rings hollow in a globally financialized and data-driven economy. Its fundamentally spatialized proliferation and its anti-political functionalization make corporate governance a transnational regulatory concern that requires a methodologically different response than those which have been at the forefront of debates around ‘convergence’ and ‘divergence’ until now. While these regularly revert to the nation state as reference point for authoritative political ‘intervention’, the transnational nature of corporate governance in a globally interconnected economy has to address the ‘footloose’ and ‘timeless’ status of multinational corporations and provide a blueprint for assessing the future prospects of corporate governance.

 

Dionysia Katelouzou is Senior Lecturer in Corporate Law at The Dickson Poon School of Law, King’s College London

Peer Zumbansen is the Inaugural Chair of Transnational Law, King’s College London & Professor of Law, Osgoode Hall Law School, Toronto