Why has innovation in corporate governance consistently fallen short of expectations? Little progress has been made to improve corporate governance outcomes despite repeated calls for change from activist shareholders, arbiters of good governance, and government regulators. We argue that the problem lies in the need for any corporate governance innovation to be recognized as legitimate from the outset, which is unlikely given that innovation itself is inherently illegitimate. We examine the legitimacy shortcomings of a number of corporate governance innovations, assessing them according to the categories of pragmatic, moral, and cognitive legitimacy. Failure to achieve multiple categories of legitimacy destines the innovation to contention and limited application, while gaining two or more suggests that the innovation will be widely adopted. We close with a call for greater conceptual and functional flexibility to allow firms to experiment with various corporate governance innovations and react more dynamically to changing firm and environmental conditions.
ASJC Scopus subject areas
- Business and International Management
- Strategy and Management