Agency Perspectives on Corporate Governance of Multinational Enterprises

This paper argues for a greater focus on an agency theory (AT) perspective in understanding corporate governance in multinational enterprises (MNEs) since, despite recent developments, the traditional internalization theory approach limits our understanding of the behaviour of these firms. We analyse the contribution of an AT perspective to understanding various aspects of corporate governance in MNEs: internationalization, international joint ventures (IJVs), headquarters–subsidiary relationships, and new forms of global business groups. From this analysis, we suggest that even with the emerging AT literature's focus on the role of ownership as a key governance factor, there is substantial need for research on several key corporate governance mechanisms; namely, the role and nature of dominant owners, the composition of boards of directors, the separation of CEOs and board chairs, executive remuneration, and the role of the market for corporate control. There is scope to examine further the implications of different institutional environments for AT perspectives on the behaviour of MNEs.