Corporate Governance and Values: Postulating a New Typology of Corporate Governance Systems Including Values

1. Introduction

The subject of corporate governance has become a major concern for business and academia, reflecting the owners’ deep concerns about the diverse and dynamic business environment and the results they want from their corporations (Hilb, 2016).

While a moderate amount of literature exists that defines corporate governance, most of the definitions are based on implicit or explicit assumptions about underlying objectives and intentions (Goergen, 2012). Among the variety of definitions for the term corporate governance that have been suggested, the authors would first like to use the definition suggested by Wahl (2011, 2012, 2015), who saw it as a system concerned with the implementation of the owners’ will.

Furthermore, conflicts of interest (CI) remain a major component in corporate governance field; they concern the relationships between owners and top management and mitigating conflicts of interest is a prime issue in different corporate governance systems (Cox, 2003; Wahl, 2015; Hilb, 2016). Therefore, traditional studies of corporate governance are conducted within the framework of agency theory (Alchian & Demsetz, 1972; Jensen & Meckling, 1976), viewing the modern corporation as a nexus of contracts between principals (owners) and agents (top management) (Aguilera & Jackson, 2003). Despite that a significant number of studies have been conducted towards a better solution to mitigating conflicts of interest, the issue remains dubious due to the substantial number of existing corporate crises (Hilb, 2016).

Moreover, knowledge transfer is another major component that is currently receiving considerable attention in corporate governance field; to practically transfer knowledge there is a need for proficient owners. Nonaka, Toyama and Konno (2000) see a corporation as an entity that creates knowledge continuously. To transfer knowledge, there is a need for proficient ownership through knowledge vision, e.g., clearly expressing the owners’ will in the form of an ownership strategy (Wahl, 2015). Despite the widely recognized importance of knowledge as a vital source of competitive advantage, there is little understanding of how corporations create and manage knowledge dynamically.

On the other hand, theorists, policy-makers, and practitioners share the understanding that corporate governance reflects national culture, and differences in it are also determined by national culture (Licht, 2004; Licht, Goldschmidt, & Schwartz, 2005), especially values (Wahl, 2015). Values are used to characterize cultural groups, societies, and individuals, to trace change over time and to explain the motivational bases of attitudes and behaviour (Schwartz, 2012a; Schwartz, et al., 2012b). Furthermore, Gini and Green (2014) described values as the ideas and beliefs that influence and direct our choices and actions. Zetterberg (1997) considered values to be generalized, relative, enduring and consistent priorities for how we want to live. Additionally, Schwartz (1992) described values as being deeply rooted, abstract motivations that guide, justify or explain attitudes, norms, opinions and actions (Schwartz & Bilsky, 1987; Schwartz, 1992). Currently, these introductory definitions of values are based on an individual level and individual level values; this study argues that owners under different corporate governance systems implement ownership strategies based on values to achieve desired results and success in the long run within diverse business environments. In this regard, Luoma (2011) defined ownership strategy as an expression of the will of the corporation’s owners; it clarifies what owners want in terms of rights, resources, risks, responsibilities and returns. Moreover, studying individuals’ basic values can contribute directly to our understanding of owners’ behaviour and will (Wahl, 2012). Therefore, it is evident that individual basic values have a significant role in corporate governance systems.