Network corporate governance: Information and risk-return sharing of connected stakeholders

Abstract

Traditional corporate governance patterns are based on the interaction among composite stakeholders and the various forms of separation between ownership and control. Shareholders, debtholders, managers, employees, suppliers, and clients cooperate around the Coasian firm represented by a nexus of increasingly complex contracts. These well-known occurrences have been deeply investigated by growing literature and nurtured by composite empirical evidence. Apparently unrelated network theory is concerned with the study of graphs as a representation of (a)symmetric relations between discrete objects (nodes connected by links). Network theory is highly interdisciplinary, and its versatile nature is fully consistent with the complex interactions of (networked) stakeholders, even in terms of game theoretic patterns. The connection between traditional corporate governance issues and network theory properties is however still under-investigated. Hence, the importance of an innovative reinterpretation that brings to “network governance”. Innovation may for instance, concern the principal-agent networked relationships and their conflicts of interest or the risk contagion and value drivers – three core governance issues. To the extent that network properties can be mathematically measured, governance issues may be quantified and traced with recursive patterns of expected occurrences