University of Vaasa - Vaasan yliopisto

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From that definitional perspective, it might seem as though corporate governance is
irrelevant to sustainable development issues. For example, Shkolnikov & Wilson
(2009) state that many of the private sector issues that corporate governance are
concerned with may seem to bear little relevance to broader development concerns,
which deal with day-to-day issues of poverty, job-creation, anti-corruption, education,
media, and political reform.
However, looking closely on the four principles on which corporate governance is
built, (fairness, transparency, accountability and responsibility) and the meaning of
governance, especially democratic governance, as Clarke (2004) suggests that “it
basically means how to ensure the power of organisation is harnessed for the agreed
purpose, rather than diverted to some other purpose, and its institutions provide a
framework within which the social and economic life of countries is conducted”, it is
clear that there is a direct linkage between the two types of governance. Therefore, it
is fair to say that the CG principles are in fact applicable to any sector of any
economy regardless of size activity type and location; thus it is fair to argue that
corporate governance and economic social development are strongly linked and their
application in various sectors of the economy should have a bearing on the success or
failure of that economy. Furthermore, these definitions also suggest that there is a
skewed approach to research on this subject that limits most of it to the financial
sector; therefore, it is important to spread the pillars of corporate governance into
broader management and governance research.
Shkolnikov & Wilson (2009) and many other scholars on the concept have posited
that good governance of corporations plays an important role in attracting investment,
establishing a healthy private sector, and building democratic societies. Overall,
well-governed companies (private, public or state-owned) tend to perform better and
contribute to long-term productivity and broad based economic growth. It should
then be fair to say that proper institutionalization and incorporation of good corporate
governance transforms its four principles into core values of transparency, fairness,
accountability, and responsibility which if and when allowed to spread throughout all
sectors of an economy, they instill accountability in the political economic and social
system, and close off space for exacerbating corruption and cronyism.
From an institutional theory perspective, good corporate governance equally breaks
the hold of vested interests that would otherwise undermine the proper functioning of
markets and inhibit the development of social and democratic political institutions.
Generally, it is fair to argue that in the same way that good governance principles
and practices contribute to the sustainable development prospects of countries,
increased economic sustainability of nations and institutional reforms that come with
them, corporate governance provides the necessary basis for improved governance in
the public and private sector.
On the other hand, corporate governance failures can undermine development efforts
by misallocating much needed capital and resources and developmental fallbacks can
reinforce weak governance in both the private and public sectors, and undermine job
and wealth creation. This has been seen in the current global economic crisis, which
some bodies such as the Association of Chartered Certified Accountants (ACCA)
have argued that it has its roots in the credit crunch, which in part was as a result of