Organizational institutionalism and corporate governance

Abstract

In this essay, we outline an institutional approach concerning corporate governance, highlighting its dimensions, institutions, and institutionalization. Special attention is paid to the legitimizing quality of governance, since legitimacy is the central point in organizational institutionalism. The literature claims that the legitimacy of governance practices is based not only on rational-utilitarian questions but also on matters of social and symbolic order, e.g., the ideal of distributive justice, in which minority shareholders seek to justify greater control over controlling shareholders and managers guiding organizations on the morality of such requirements. We delineate some elements of the process of institutionalization of corporate governance practices around the world, noting that the emergence of the phenomenon and its spread is the result of several factors that end up pushing the product and capital markets to conform their practices to internationally prevailing standards. We conclude this theoretical essay by highlighting the implications for understanding the governance practices from the standpoint of organizational institutionalism, unfolding possibilities for future studies.

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