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Toward a More Humanistic Governance Model: Network Governance Structures

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Abstract

This conceptual article suggests a reexamination of current governance structures, specifically those of unitary boards after the financial crisis of 2008. We suggest that the existing governance structures are based on an outdated paradigm of business, rooted in economics. We propose an alternative paradigm, a more humanistic paradigm, which allows conceiving alternative, network-oriented governance structures. As hierarchical firms grow larger and more complex, the risk of failure increases from biases, errors, and missing data in communication and control systems. These problems are exacerbated by information overload on senior managers, directors, and their respective regulators. In contrast to traditional corporate governance, network governance introduces a division of power via multiple boards, checks and balances, and active stakeholder engagement. We argue that those features could have prevented the stresses and failures of financial firms in 2008, since they were anticipated by both individuals within firms and external commentators. However, those exposed to risks possessed insufficient influence in either governing and/or regulating firms to take corrective action.

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Authors and Affiliations

  1. Fordham University, New York, NY, U.S.A.

    Michael Pirson

  2. Institute for Self-Governance, Sydney, NSW, Australia

    Shann Turnbull

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  1. Michael Pirson
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  2. Shann Turnbull
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Correspondence to Michael Pirson.

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Pirson, M., Turnbull, S. Toward a More Humanistic Governance Model: Network Governance Structures. J Bus Ethics 99, 101–114 (2011). https://doi.org/10.1007/s10551-011-0752-x

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