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Authority and Democracy in Corporate Governance?

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  • J. (Hans) van Oosterhout

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    Abstract

    Although McMahon offers a potentially valuable extension of Joseph Raz's conceptualization of authority by distinguishing three different kinds of authority, this paper argues, first, that his account of the conditions and considerations that would justify managerial authority is problematic because it relies on a conception of reasons for action that excludes precisely the kind of rationality that plays an important role in theâ\x90£explanation and justification of authority in economicâ\x90£organization. This paper explains, second, why McMahon's thesis of the justificatory similarity of authority in governments and nongovernmental organizations can also be seen to hold for corporate governance of publicly owned firms more specifically. Finally, this paper raises some critical objections against McMahon's presumption of democratic governance in governments and NGO's alike. The thrust of these objections is that democratic corporate governance does not make sense in the publicly owned firms because: (1) it will not produce results that are fair or welfare maximizing, and (2) it will undermine the legitimacy of managerial authority in such firms. Copyright Springer Science+Business Media, Inc. 2007

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    Bibliographic Info

    Article provided by Springer in its journal Journal of Business Ethics.

    Volume (Year): 71 (2007)
    Issue (Month): 4 (April)
    Pages: 359-370

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    Handle: RePEc:kap:jbuset:v:71:y:2007:i:4:p:359-370

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    Web page: http://www.springerlink.com/link.asp?id=100281

    Related research

    Keywords: corporate governance; McMahon; Raz; authority; managerial democracy; economic theory of the firm;

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    1. Raghuram G. Rajan & Luigi Zingales, 1997. "Power in a Theory of the Firm," NBER Working Papers 6274, National Bureau of Economic Research, Inc.
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    4. Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer, 1998. "Corporate Ownership Around the World," NBER Working Papers 6625, National Bureau of Economic Research, Inc.
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    7. Vives,Xavier (ed.), 2006. "Corporate Governance," Cambridge Books, Cambridge University Press, number 9780521032032.
    8. Boatright, John R., 2002. "Contractors as stakeholders: Reconciling stakeholder theory with the nexus-of-contracts firm," Journal of Banking & Finance, Elsevier, vol. 26(9), pages 1837-1852, September.
    9. Dow, Gregory K., 1987. "The function of authority in transaction cost economics," Journal of Economic Behavior & Organization, Elsevier, vol. 8(1), pages 13-38, March.
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    11. Joseph Farrell & Matthew Rabin, 1996. "Cheap Talk," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 103-118, Summer.
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