Modes of Thinking in Corporate Governance: In Search of Root Causes of Governance Malfunctioning

This paper argues that the current two prevailing modes of thinking in corporate governance, the inward-looking and outward-looking modes of thinking, severely limit and constrain our understandings of corporate governance systems and problems and are thus unable to properly diagnose and rectify corporate governance defects and malfunctions in practice. The paper presents a new mode of thinking, i.e., the critically reflexive mode of thinking, to overcome the limitations of current modes of thinking. The new mode of thinking suggests that the core corporate governance issues are not purely from inside the corporation, nor solely from outside the corporation. Rather, they reside at the intersection of internal and external governance spheres interplayed by corporate powers and political, market and other key stakeholder players. With the illustration of three key exemplary theses, the paper shows distinguished understandings of corporate governance among the three modes of thinking. This critically reflexive mode of thinking points to a new direction in corporate governance research and a clearer agenda for effective corporate governance reforms.