The continuing diversity of corporate governance: Theories of convergence and variety

Publisher:
University of Leicester, University of Essex
Publication Type:
Journal Article
Citation:
Ephemera : Theory and Politics in Organization, 2016, 16 (1), pp. 19 - 52 (33)
Issue Date:
2016-03-04
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This paper examines the continuing diversity of corporate governance by critically analysing the impelling financial forces for convergence, and the vitality of institutional differentiation. Competing theories of convergence and diversity are examined through the disciplinary perspectives of history and politics, law and regulation, culture, and institutional complementarities. The paper challenges whether a universal corporate governance system is practical, necessary or desirable. The increasingly recognized premium for governance is considered in the context of a globalizing economy. The implications of the deregulation of finance and the globalization of capital markets are examined, with a focus on the growth of equity markets and the dominant position of the Anglo-American stock exchanges. The convergence thesis is debated, examining different theoretical arguments for and against the inevitability of convergence of corporate governance systems and the resilience of cultural and institutional diversity. This institutional diversity serves a productive purpose in contributing innovation and differentiation in products and services. The global financial crisis has shaken the institutional foundations of all advanced economies, and regulatory and market settlements are still occurring. In this context of forces impelling dramatic change yet encountering powerful impulses towards institutional continuity, the future direction of corporate governance trends is questioned, with the likelihood of greater complexity rather than uniformity emerging from current developments. While capital markets have acquired an apparently irresistible force in the world economy, it still appears that institutional complementarities at the national and regional level represent immovable governance objects. The issues are more complex than convergence theorists suggest, and while some degree of market convergence might be occurring, simultaneously there is the creation of greater divergence within national regimes of corporate governance.
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