We are witnessing a quiet but quick transformation of corporate governance. The rise of digital technologies and social media are forcing companies to reconsider how they organize themselves and structure firm governance.
What is interesting is that the corporate governance discussions haven’t really changed that much. The focus is still on reducing managerial misbehavior and maximizing the value of shareholders (the stakeholders who are taking the most significant risk). And the mechanisms for achieving this are more transparency and more supervision.
But framing corporate governance primarily in terms of shareholder value is incomplete and potentially misleading. It encourages box-ticking and conformity. Managers are often motivated to project an image of compliance, while continuing as before.
More significantly, digital technologies are now turning the world upside down. It is a fascinating, but challenging, time for business. Industry boundaries are disappearing. Platform companies operate across multiple industries (transportation, finance, healthcare, food, etc) and use networks to deliver new business models and disrupt incumbents. Social media empowers all the stakeholders and has transformed the meaning of transparency.
We cannot think in terms of traditional corporate structures anymore. Their boundaries have become more fluid and porous. Traditional corporate organizations with their departments, business divisions, and hierarchical relationships between the different groups of stakeholders are changing as companies adapt to the digital environment. Companies are not static hierarchies anymore, but complex, dynamic ecosystems comprising diverse, interacting elements.
Fenwick, Mark and Vermeulen, Erik PM, The End of the Corporation (October 20, 2019). Lex Research Topics in Corporate Law and Economics Working Paper no 2019-7.