Nongovernmental Organizational Governance and Corporate Governance: A Comparative Analysis

다국어 초록 (Multilingual Abstract)

In an organizational setting, the board members are the persons in
whom power is entrusted by the principals to act as fiduciaries and to guide the
organization. A main cause of concern originates from the classical problem of
the separation of ownership and control. Although agency theory, the dominant
approach to research on corporate governance in particular, holds that the separation
of ownership and control constitutes an efficient division of labor, there is
widespread awareness that managers and boards may take actions that hurt principals
or constituencies they are meant to serve. An agency problem can manifest
in several ways. First, managers and boards exert insufficient effort while
overcommitting themselves to external activities. Second, they might reap private
benefits in the form of perks. Last, they may take unnecessary risks by
committing to mature projects. This basic agency problem suggests a possible
definition of corporate governance and nongovernmental (organizational) governance
as addressing both an adverse selection and a moral hazard problem. A
good governance structure is then one that selects the most able managers and
makes them accountable to relevant constituents. Moreover, strengthening board
performance in NGOs and thus their governance structure is widely recognized
as being a major requisite for the improvement of community services that
NGOs provide.
This paper seeks to address the following recurring questions:
1. What are the fundamental similarities and differences between corporate governance and nongovernmental governance?
2. What lessons can these forms of governance draw from each other in terms of recent governance reform efforts in both sectors?
3. What constitutes an efficient NGO accountability structure?
4. Should institutional constituents such as large donors interfere with management?
Clearly, such questions lead observers to examine the comparative merits of various legal, fiscal, and regulatory environments. In this paper, I examine recent
advances in both agency theory and stakeholder theory in the organizational
governance context. This is because many have advocated moving from traditional
principal value to the broader concept of the stakeholder society, in which
the interests of various community groups would be better represented.
This paper suggests that the traditional agency theories of organizational governance
are fundamentally inadequate to build trust. We propose an alternative
theory and approach based on stakeholders and managerial stewardship. We
briefly compare agency theory, stakeholder theory, and stewardship theory as
models of organizational governance. We conclude by providing insights into
the key implementation steps that are important in implementing an ethically
consistent stakeholder model—key steps for restoring and rebuilding public
trust.