ICMLG'15: the state of corporate governance research

James Lockhart, of Massey University, presented the results of an investigation he undertook, to understand what the research community has added in terms of knowledge about corporate governance in the last two decades. He did this by re-reading every issue of the top corporate governance journal (entitled Corporate Governance: An International Review). Over the 22 years since the first issue, 782 papers have been published (totalling 11,063 pages!). Lockhart has reviewed all of them, categorised them and done some analysis.

Sadly, his findings provide little comfort for the research community. They also challenge many of the commonly-held 'maxims' that have defined the commentary of belief system about the phenomenon:

• There is no unifying theory—simply put, we don't have a common understanding of what corporate governance is or does
• There is no coherent research agenda.
• The rate of progress (of research) is perhaps best described as 'plodding'.
• There seems to be a fundamental failure amongst researchers to understand the motivation of business.
• While most researchers claim 'agency theory' is the dominant theory, the reality is quite different: Approximately 42% of the research is based on agency theory. The rest is fragmented across five or six other theoretical frameworks.
• Only 21 of the 782 papers even attempted to attribute causality or approach the subject of prediction (that if boards do X, then the likelihood of performance outcomes is Y).

Gosh, this is a real indictment. It's little wonder that boards are reluctant to admit researchers to boardrooms to undertake research. Researchers are producing outputs for sure, but the queue of companies and directors waiting to consume the findings because they are relevant is remarkably short.

Lockhart's verbal summary was consistent with my own findings: that much of what business schools produce is of questionable value. If the research agenda is to be advanced in any meaningful way, then a whole new approach is not only warranted, it is crucial.