Governance and Government from an Aristotelian Perspective

Zingales (1998, 498) defines corporate governance as “the complex set of constraints that shape the ex post bargaining over the quasi-rents generated by a firm.” Shleifer and Vishny (1997, 737) state that it “deals with the ways in which suppliers of finance to corporations assure themselves of getting a return on their investment.” In effect, “the fundamental concern of corporate governance is to ensure the means by which a firm’s managers are held accountable to capital providers for the use of assets” (Gregory 2001, 438). Corporate governance becomes a particular case of the problems related with “agency theory.” Agency theory deals with issues arising from the fact that although one party, the agent (managers), agrees to act for the benefit of another, the principal (capital providers), the principal cannot always monitor the agent’s performance (Boatright 1999, 46–53).