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Corporate governance

A quick introduction

The central institution of modern capitalism is the business company. Without we would not be where we are today. We share a common responsibility to make it work. Corporate governance is concerned with its guiding principles, not company management as such but with the conditions under which managers operate. We cannot tell managers what to do, since we have too little information. But we can try to set up a system which makes them create value for their shareholders and for society at large.


The classic definition of corporate governance is "the control and direction of companies" through ownership and shareholder control, boards and monitoring, incentive and bonus systems, company law and other kinds of regulation. We know that other mechanisms such as social norms, reputation, creditor pressure and market competition  are also important.  They all help keep managers on their toes. We need to find suitable combinations of these mechanisms to match the needs of individual companies.


There are many ways to go. The choices range from family business to bank capitalism, investor ownership, state control, pension fund governance and so one. Recently I have become very interested in "industrial foundations" - foundations which own companies.

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