Towards a Political Economy of Corporate Governance: A Critical Realist Analysis

Corporate governance (CG) has attracted much interest in research and policy reforms worldwide following recent financial crisis and subsequent bailouts of banks and other financial institutions. Despite this surge in CG research, the extant CG literature is reportedly weak in terms of empirical illustrations of CG practices at the organizational level. It tends to be concerned more with ‘compliance’ than ‘practice’. Against such a backdrop, this research empirically provides an insight into the CG practices of public limited companies (PLCs) following the recent CG reforms in a developing country. Theoretically, it aims to explain CG practices using a critical realist lens: internal conversation theory (ICT). To achieve the research objectives, a theoretically informed analysis of in-depth interview findings triangulated with a documentary survey and direct observation is undertaken. The research documents show evidence of ceremonial boards, stage-managed AGMs, and client-friendly audit practices in the post-reform regime. These practices, together with the relatively informal internal audit and financial reporting practices, substantially reflect the dominance of family institutions within PLCs. Such dominance of family institutions would seem to subvert the genuine spirit of the reforms. From the perspective of ICT, CG practices are shaped by the actions of reflexive agents whose life projects bring them into contact with pre-existing structures that create dispositions to act in a particular way. It is through the internal conversation (exercising the reflexive power of deliberation) that agents decide their ultimate course of action; however, this does not always necessarily conform to their confronted structural dispositions. To have an explanatory leverage on agential actions, therefore, it is important to capture both the nature of agency and the structural context. Overall, my analysis reveals the theoretical rigour of ICT in explaining empirically manifested CG practices. This research has some practical policy implications.