Industrial Development Policy Discussion Paper 14 Corporate Governance and the Public Interest

Recent developments in understanding the theory and impact of the firm imply new insights into the policy significance of corporate governance. Unlike a market centred approach, a theory based on strategic decision making highlights the form of governance as a central determinant of people's wellbeing. To govern a corporation is to make its strategic decisions and therefore determine its broad impact. Preferences vary over strategy but the consensus is that not all interests are currently being represented, one reason why governance remains very topical. The essential difficulty is a failure to govern in the public interest. As solutions, we consider the design of company law and also more immediate ways forward, focusing on regulation and democratically controlled public agencies to monitor and influence firms' actions. Throughout, the arguments are illustrated using examples from various countries and industries, including education, information technology, football and public utilities in Europe and the US.