The increasing cost of corporate governance: decision speed‐bumps for managers

Chris Durden · Richard J. Pech

47 citations0/0 files storedCorporate Governance

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Corporate Finance and Governance Regulation and Compliance Studies Organizational Management and Leadership

Abstract

Purpose Decision speed, flexibility, and innovation have often been cited as key ingredients to business success on the turbulent twenty‐first century business landscape. Sets out to argue that the increasing emphasis on legal and regulatory compliance, the push for which can be attributed to the spectacular collapses of WorldCom and Enron, will burden management with decision‐making speed‐bumps as opposed to protecting shareholders' interests. Design/methodology/approach The impact of legal and regulatory compliance is discussed within the business decision‐making context. Businesses succeed or fail in a dynamic environment where the smallest advantage can push one competitor ahead of another. Arguments in favour of increasing legal compliance are debated and the impacts of proposed regulatory compliance issues are discussed within the context of the competing business firm and its need for speed and flexibility. Findings The issue of increasing and stricter compliance for business is far‐reaching. Attempting to protect shareholder interests through further measures of compliance will only introduce further operating complexities for management while increasing costs and reducing decision speeds and flexibility. The impact on firms forced to compete under such conditions will be considerable, particularly if they find themselves on an international landscape competing against firms not burdened with the same regulatory requirements. Originality/value This paper is based on original work by the authors commencing with issues surrounding shareholders versus stakeholders, followed by a debate concerning corporate governance mechanisms and a discussion concerning the consequences and impacts of levying further regulatory burdens on business and managers.

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References

1997A Survey of Corporate Governance 1993The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems 2006OECD Principles of Corporate Governance 2001Twenty‐five years of corporate governance research … and counting 1998A Study of The Link Between a Corporation's Financial Performance and Its Commitment to Ethics 2000The Governance of the New Enterprise 2002MANAGEMENT CHALLENGES IN A NEW TIME.1998U.S. Industry Adjustment to Economic Deregulation

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