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The term “corporate governance” has generated a lot of debate in both scholarly and organizational discussions, particularly regarding its definition. Through her article, “What Does “Corporate Governance” Actually Mean?” Barbara Marie L’Huillier suggests that the confusion has been brought on by the combination of a weak definitional base of the term coupled with strong motivational forces (300). Cremers et al. argue that corporate governance revolves around three major elements (736). The items are the staff, the structure, and the management (Cremers et al. 736). These three elements also form an integral part of any organization, and can either lead to profitable ventures or spectacular failures.
L’Huillier examines academic documents that have used the term “corporate governance” from 1985 to 2012 and try to come up with different connotative meanings of the said term (300). The findings of the study reveal that the agency theory perspective is the most used, and arguably, offers a better definition of the term “corporate governance.” This essay is a critique of L’Huillier’s article to analyze the strengths and weaknesses of the said article and provide a logical explanation of the importance and implications of the study for real society.
Strengths and Weaknesses
One strength of the provided article is its clear structure. The author has explained the purpose of the study, the research methodology that was used, the findings, and the implications of the study. The fact that brief explanations have been given on all these elements, and others, on the first page, help the reader understand the context they are about to read. Additionally, it captures the attention of the reader.
The author takes the time to give a detailed background of the term “corporate governance.” The background makes the research study richer as the reader can tie the purpose of the study to the developments already achieved towards creating the perfect definition of the term in question. The author goes on to highlight some of the theories that have been used to support the different interpretations of the phrase. On the same note, L’Huillier uses the same approaches to make her arguments and support her premises. The author has used past studies also to strengthen and critique her case. With an elaborate reference list that both supports and critiques her assumptions, the author can provide a thought-provoking and rich discussion of the same.
Despite the advantages mentioned, there are a few weaknesses that can be highlighted. One main weakness of the study is that it does not provide a detailed research methodology. Instead, the author describes and continues to justify the need for the study. There are several reasons as to why comprehensive research methodology is critical in such scientific studies. One such reason is that it aids in the removal and demystification of any form of bias that a reader or a critique might have regarding the way the research was done. Additionally, research methodology also goes hand in hand with assuring and ensuring research ethics.
Importance and Implications to Society
The findings that are realized through the study are not only important to society but also have several implications. One implication is that organizations need to choose one definition of the term to align their structures and strategists according to the definition adopted. L’Huillier argues that the different definitions of the phrase are tied to theories generated by academics.
She focuses on four methods, agency, stewardship, resource dependency, managerial hegemony, and stakeholder theories, to show how each of the said principles has a different definition of the term “corporate governance.” Towards this end, therefore, organizations that identify with the various theories highlighted have to also use the definition of the term “corporate governance” as portrayed by associated theory (Goshen and Squire 820). In turn, more businesses will be streamlined regarding structure, staff, and management.
Another implication of the study and its findings is the focus on agency theory as the best placed to define corporate governance. The scholar, however, clarifies that agency theory is superior due to the intense and extensive research that has been done on the same. Therefore, an additional implication to society is the importance of further research in other theoretical suggestions.
It can also be argued that the findings affect the day to day activities of businesses and organizations. For instance, the realization that companies use different definitions of the term in their strategies allows corporate gurus to reshape their strategies accordingly (Shehata 162). In so doing, such corporates will change their day to day activities and overall strategies. It should be noted, however, that L’Huillier’s suggestions are theoretical. Therefore, there is further need for scientific research to determine the viability of the premises, and findings realized, in businesses. Until a time when such a study is done, one cannot wholly argue that the conclusions projected by this particular study are critical in real society.
Cremers, K. J. Martijn, et al. “Commitment and Entrenchment in Corporate Governance.” Northwestern University Law Review, vol. 110, no. 4, 2016, pp. 727-810.
Goshen, Zohar, and Richard Squire. “Principal Costs: A New Theory for Corporate Law and Governance.” Columbia Law Review, vol. 117, no. 3, 2017, pp. 767-829.
L’Huillier, Barbara Marie. “What does “Corporate Governance” actually Mean?” Corporate Governance, vol. 14, no. 3, 2014, pp. 300-319.
Shehata, Nermeen. “The Status and Determinants of Corporate Governance Disclosure: The Case of the Gulf Countries.” Journal of Developing Areas, vol. 51, no. 4, 2017, pp. 157-165.