Corporate governance and wealth and income inequality

Daniel Brou, Aroop Chatterjee, Jerry Coakley, Claudia Girardone, Geoffrey Wood

Research output: Contribution to journalArticlepeer-review

10 Citations (SciVal)

Abstract

Research Question/Issue: There has been growing concern about rising social inequality and its effects on general well-being and the polity. Much of this rise can be traced to changes in the manner in which corporations or firms are governed and how this impacts on income and wealth dispersion. This study systematically reviews the most recent literature on external and internal corporate governance (CG) that deals with the issue of income and wealth inequality. Research Findings/Insights: External mechanisms such as institutional regime (defined in terms of varieties of capitalism—liberal or coordinated markets) and financialization reveal important insights, often implicitly, into what makes or sustains inequality. The rise of the platform business model raises explicit concerns about increasing wealth and wage inequality. This is because it is associated with a rapidly growing precariat of gig workers, Big Tech entrepreneurs with untrammeled levels of control and extreme levels of personal wealth, and widespread tax avoidance despite record profits. The literature on internal CG is somewhat constrained in its reliance on agency theory and a focus on shareholder primacy. This only provides limited insights on how internal CG mechanisms impact on inequality. However, in recent work, the issue of perverse incentives posed by CEO reward systems and their impact on organizational sustainability and wage dispersion are receiving increasing attention. Theoretical/Academic Implications: Some studies do attempt to widen the lens, and we suggest a greater focus on theorizing codetermination and alternate forms of ownership, non-monetary incentives, the power of the Big Tech companies, and those strands of comparative institutional analyses that explore the determinants of internal CG structures. Practitioner/Policy Implications: The study reasserts the importance of the firm as a central analytical paradigm in understanding income and wealth inequality and that, in seeking to ameliorate the latter's negative consequences, more attention needs to be accorded to the governance and regulation of firms.

Original languageEnglish
Pages (from-to)612-629
Number of pages18
JournalCorporate Governance: An International Review
Volume29
Issue number6
Early online date22 Jul 2021
DOIs
Publication statusPublished - 30 Nov 2021

Bibliographical note

Funding Information:
The authors wish to thank the editor Konstantinos Stathopoulos and the two anonymous reviewers for their valuable comments and suggestions. Chatterjee, Coakley, Girardone, and Wood acknowledge the support of the UK Research and Innovation (UKRI) Global Challenges Research Fund (GCRF@Essex Project B010) for their support in the initial stages of the project.

Publisher Copyright:
© 2021 John Wiley & Sons Ltd

Keywords

  • corporate governance
  • inequality
  • review

ASJC Scopus subject areas

  • General Business,Management and Accounting
  • Strategy and Management
  • Management of Technology and Innovation

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