Corporate governance – bank versus market systems

1. The United Kingdom and the United States In his study of financial systems, Berglof (1990) argues that there are essen­tially two models of corporate governance – market oriented and bank ori­ented. Using this taxonomy, both the system in the UK and in the USA fall into the category of market oriented. A market-oriented

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Principal–Agent theory of the firm

1. RESIDUAL CLAIMS AND ENTERPRISE GOVERNANCE The joint-stock corporation is an immensely important institutional form, but it is not ubiquitous, and, as Chapters 8 and 9 have shown, it faces sig­nificant contractual problems. Given these problems, we might not expect the joint-stock enterprise to be better adapted than any alternative pos­sible assignment of property

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The contractual incompleteness and principal–agent problem in the firm

1. PROFIT SHARING AND CONTRACTUAL INCOMPLETENESS As has been emphasised on frequent occasions, information costs and bounded rationality mean that real world contracts are not fully specified. This contractual incompleteness leaves people vulnerable to opportunism and makes the assignment of residual control rights a matter of great importance. The governance structure of the worker-owned

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The labour–capital partnership and te role of peer pressure

1. THE LABOUR-CAPITAL PARTNERSHIP Sections 4 and 5 have been concerned with the difficulties faced by cooper­ative and profit-sharing enterprises when confronting investment and employment decisions. The labour-capital partnership is a form of organ­isation which has some attractive theoretical properties and is discussed in detail by Meade (1989). It is distinguished from the worker

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The retail cooperative, Marketing and supply cooperatives

1. THE RETAIL COOPERATIVE 1.1. Transactions Costs and the Retail Cooperative Where consumers are poorly informed about the quality and reliability of the goods offered by suppliers, the formation of a cooperative may be seen as a response to the adverse selection problem. By setting up a cooperative, consumers establish an institution that can

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Mutual enterprise and Stakeholding

1. MUTUAL ENTERPRISE Where people form a ‘club’ to provide various forms of financial protec­tion, we refer to ‘mutual enterprise’.29 Mutuals have played an important role in insurance and banking in the past and still feature significantly in many countries in spite of considerable ‘demutualisation’ in the 1990s, especially in the UK. The basic

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Non-profit and charitable enterprise

1. THE NON-PROFIT ENTERPRISE Institutions which cannot distribute residual profits and issue no exchange­able or non-exchangeable claims to profits are non-profit enterprises. Non­profit enterprises have a board of trustees who are responsible for appointing managers to run the day-to-day administration, and for ensur­ing that the activities of the enterprises are compatible with the purposes

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Examples of non-profit enterprise

The following four subsections offer a short discussion of non-profit enter­prise in particular areas from the perspective of the theory of contract failure. 1. Hospitals In the United States, two thirds of employment in the short term and general hospital sector is in non-profit enterprises. As we have seen, discussion of hospitals has formed

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Evolution and economic organization

1. THE VARIETY OF THEORETICAL APPROACHES Over the last ten to twenty years, institutional change has proceeded at a rapid pace in many countries. The wholesale collapse of the organisational structures of the planned economies of Eastern Europe is of obvious importance, but even in Western countries, which could loosely be described as ‘market-oriented’

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