Back To Corporate Governance History

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The rise to power of market finance since the mid-1970s has radically altered the characteristic traits of contemporary capitalism. This process of ‘financialization’ is driven by two movements. The first is the growth in the liquidity of capital markets, expressing increases in the breakdown and transfer of risks. The second is the upsurge, in these same markets, of investment funds, responsible for the management of continually increasing savings. Far from remaining limited solely to the financial sphere, these changes have profoundly affected listed companies, the main players in the world economy. In this respect, the ideology of ‘shareholder value’1 has played and continues to play an essential role.

The concept of ‘finance-led capitalism’ can be used to describe this new growth regime, in which a decisive role is given to the profitability of stock market assets, in both the creation and distribution of value added. Our aim here is to grasp the principal moving forces behind this ‘finance-led capitalism’, in other words to understand not only the regularities which maintain its functioning, if not its durability, but also its most widely recognized weaknesses – factors of instability. To this end, we concentrate on two questions. The first deals with the dynamic induced by the continual expansion of risk transfer in the financial markets. The second explores corporate governance, and the governance of listed companies in particular.

The term ‘governance’ covers all the measures, procedures, institutions and practices that determine the exercise of power in firms during a given period. Our hypothesis is that power relations within the firm, which determine the firm’s strategy in different markets (finance, products, labour), have been drastically altered by transformations in the financial sphere. The result is that these relations, formed among the main stakeholders in the firm (shareholders, executives, employees), around the control of the firm, have taken on a new dimension. Whereas the cycles specific to what is generally called ‘Fordism’ found their source in markets, we demonstrate that cycles are now driven from within large corporations.Today, corporate governance is a central institution, through the detailed study of which we can reach an understanding of the current regime.

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