Corporate governance has long been a concern for industrial economists but not typically a centrepiece of policy. One reason is that policy design has been based on a market‐orientated approach to the theory and impact of the firm. In contrast, this paper is rooted in a strategic decision‐making perspective that makes corporate governance a central policy issue. Moreover, whereas responses to corporate scandals have focused on shareholders wronged by managers, we see the significance of corporate governance very differently. Merely to punish managers who fail shareholders is to ignore systemic failures, namely that, by design, managers are not democratically accountable to all interests in corporations’ activities. The impact of modern corporations turns crucially on who governs. In practice preferences over strategy vary across actors but not all interests are currently being represented in decision making, resulting in a failure to govern in the public interest. As solutions, we consider the design of company law and also more immediate ways forward, focusing on regulation and democratically controlled public agencies. Our prime concern is the fundamental significance of active, effective citizens. Throughout, the arguments are illustrated using examples from various countries and industries.
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