ABSTRACT
This chapter examines how governance activities complement legislation and norms in the institutional framework of contemporary competitive capitalism. The domain of governance, structured around regulatory control and oversight, is midway between law and norm, being in many cases the de facto presence of the sovereign state in markets. Governance is a highly disputed term and there are a variety of definitions of governance in the literature. In contrast, economists and law and economic scholars tend to reduce the concept of governance to practices pertaining to the reduction of agency costs that befall the firm’s investors, for example, its shareholders. The combination of free-market theory advocacy and the reliance on the sovereign state as a provider of both ex ante governance systems and ex post resolution systems makes finance institutions the foremost example of the embedded autonomy of the corporation. The term corporate governance, the governance of the firm, is defined differently depending on the underlying theoretical framework enacted.
