New Challenges in Corporate Governance
This text summarizes the introduction to the 2016 International Governance Conference ( CIG ) at the University of Montpellier: Governance and Governmentality in the Age of Big Data: What Are the Challenges for Businesses?
Véronique Bessière, University of Montpellier and Eric Stéphany, University of Montpellier
The 15the The International Governance Conference (CIG 2016) organized by the International Academic Association for Governance (AAIG), held on May 17 and 18, 2016, at the IAE in Montpellier, provided an opportunity to discuss the new challenges facing corporate governance. Researchers in governance operate at the intersection of several management disciplines.
Originally, research on governance drew primarily on agency theory (see Gérard Charreaux’s overview) and focused on large, managerially run corporations, where the more or less conflictual relationship between shareholders and executives is paramount. These classic issues are not set in stone; they are regularly revisited and remain relevant, as evidenced by the range of topics addressed at the 2016 CIG, as well as recent developments (Carlos Ghosn's salary(for example).
A longer focal length
Research on governance therefore continues to focus on the role of the board of directors, the impact of auditing standards, executive compensation practices, and corporate fundraising, but also to the structure of a company’s relationships with its various partners, new forms of governance such as cooperatives, the specific characteristics of family-owned businesses, and issues of diversity in governance (gender, in particular). CSR is also heavily represented in current governance themes.
More broadly, we have observed for several years an evolution in governance theories that are gradually but very clearly shifting away from a coercive or disciplinary approach toward a much more cognitive and behavioral one. When discussing, for example, the impact of diversity on a company’s board of directors, the focus is on examining the board’s role in terms of its knowledge base rather than in terms of control. Governance research has thus evolved over time, notably by incorporating resource and knowledge functions and by examining the dynamics of their deployment within the organization.
The digitization of the real world
This trajectory of governance efforts is now taking a new direction. A new object of governance has recently emerged—one that is difficult to pin down—arising from what might be called the “digitization of reality.” Through big data (which, incidentally, is not always that “big” ), statistical processing (algorithms) has become a lever of governance: it predicts, guides action, and even makes decisions. It can do so in a quasi-autonomous manner through unsupervised learning. At the same time, a second effect of this digitization is the massive sharing of information.
This new object—or these new objects—arising from the digital transformation all rely on information. This is one of the reasons why governance research is particularly well-suited to leading these discussions. Information is indeed the central issue in governance matters, because it is on the basis of information that decision-making is organized and that power and action are exercised within companies or, more generally, organizations.
Algorithms and Knowledge
The perspective offered by agency theory helps explain and frame these issues. Simply put, the agency relationship can be illustrated by the example of the relationship between a patient and their doctor, or between a car owner and a mechanic. The patient entrusts their health to their doctor because the doctor is more qualified and possesses the knowledge needed to conduct the proper diagnosis and make the right decision. Yet, it is an entire sector here that is being upended by the wave of big data and algorithms. This agency relationship, where delegation is based on knowledge, is being transformed by the power of big data and algorithms.
The example of the car owner and his mechanic is also instructive. Here, it is the platforms that are disrupting the relationship—platforms like Uber, which are becoming increasingly common in the trades. The mechanic’s behavior is now visible; it is reported on and evaluated by all users.
But the production and control of this information raise many questions. The 2016 CIG focused on these new areas of governance by dedicating its plenary session to: “Governance and Governmentality in the Age of Big Data: What Are the Challenges for Businesses?” Two management researchers presented their insights on two themes: platforms and algorithms, on the one hand, and, on the other hand, the blockchain.
Christophe Bénavent (University of Paris 10), in his presentation titled “From the Sharing Economy to the Algorithmic Governance of Platforms,” examines the intermediary role of platforms and their algorithmic operations, which resemble a “black box” (Frank Pasquale). These black boxes influence numerous sectors: credit, healthcare, insurance, security, agriculture, and more…
Jean-Fabrice Lebraty (University of Lyon 3) focuses the discussion on the issues of organization, transparency, and information sharing. Blockchain technology enables decentralization and disintermediation, which disrupts the centralized logic of proprietary servers. Information governance thus becomes shared, operating on a peer-to-peer basis, and authenticates, for example, transactions or even diplomas. J.F. Lebraty provides an overview of this technology and its impact on corporate governance.
Véronique Bessière, Professor, Management Sciences, IAE Montpellier, University of Montpellier and Eric Stéphany, Director of the IAE, Associate Professor (HDR), IAE Montpellier, University of Montpellier
The original version This article was published on The Conversation.