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Repairing the Breach of Trust in Corporate Governance

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  • John Child
  • Suzana B. Rodrigues

Abstract

The governance of companies, other than very small ones, operates through a double agency relationship. The first agency relationship is that between owners or stakeholders, on the one hand, and corporate management, on the other. The second agency relationship is that between corporate management and the employees of a firm, including middle managers, who execute its plans and policies. This second relationship has been largely ignored in discussions of corporate governance, yet its effectiveness is essential for achieving a firm's objectives. If employees have limited trust in their companies, the ability of corporate managers to have their intentions executed will be impaired. There is considerable evidence that such trust is today at a low ebb. This paper suggests policies that may help to repair employee trust and in so doing strengthen corporate governance. Its underlying theme is that greater attention to the trust that employees have in managers would help to achieve a long overdue realignment of corporate governance theory and policy.

Suggested Citation

  • John Child & Suzana B. Rodrigues, 2004. "Repairing the Breach of Trust in Corporate Governance," Corporate Governance: An International Review, Wiley Blackwell, vol. 12(2), pages 143-152, April.
    • Handle: RePEc:bla:corgov:v:12:y:2004:i:2:p:143-152
    DOI: 10.1111/j.1467-8683.2004.00353.x
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    References listed on IDEAS

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    1. Margit Osterloh & Bruno S. Frey, "undated". "Corporate Governance for Crooks? The Case for Corporate Virtue," IEW - Working Papers 164, Institute for Empirical Research in Economics - University of Zurich.
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    Cited by:

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    2. Margit Osterloh & Bruno Frey, 2006. "Shareholders Should Welcome Knowledge Workers as Directors," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 10(3), pages 325-345, September.
    3. Cam Caldwell & Rolf Dixon, 2010. "Love, Forgiveness, and Trust: Critical Values of the Modern Leader," Journal of Business Ethics, Springer, vol. 93(1), pages 91-101, April.
    4. Anaïs HAMELIN & Vivien LEFEBVRE & Laurent WEILL, 2020. "In Business Groups We Trust," Working Papers of LaRGE Research Center 2020-06, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    5. Alexander Brink, 2010. "Enlightened Corporate Governance: Specific Investments by Employees as Legitimation for Residual Claims," Journal of Business Ethics, Springer, vol. 93(4), pages 641-651, June.
    6. Michael Pirson & Shann Turnbull, 2011. "Toward a More Humanistic Governance Model: Network Governance Structures," Journal of Business Ethics, Springer, vol. 99(1), pages 101-114, March.
    7. Claus Dierksmeier & Michael Pirson, 2009. "Oikonomia Versus Chrematistike: Learning from Aristotle About the Future Orientation of Business Management," Journal of Business Ethics, Springer, vol. 88(3), pages 417-430, September.

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