Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Could the 2008 US financial crisis have been avoided with network governance?

Could the 2008 US financial crisis have been avoided with network governance? Banks failed in 2008 because individuals with knowledge of risks were not connected to individuals who had the incentive and power to take corrective action. Evidence of this problem is provided by reports from the Lehman liquidator and The Financial Crisis Inquiry Commission. Improved communications and control within and between banks, their regulators and stakeholders can be achieved with network governance. Lawmakers and/or regulators can introduce network governance by requiring bank shareholders to amend corporate constitutions to introduce a division of power with checks and balances with stakeholders, who can take on the role of supplementary and/or co-regulators. Such decentralized regulatory architecture is how simple living creatures sustain their existence in complex, dynamic and unpredictable environments without suffering communication errors and/or overload. The natural science of control and communication identified in 1948 by Wiener explains why centralized control and communication systems are not found in nature. This science of regulatory systems explains why regulators and large firms fail to reliably manage, regulate or govern complexity. Examples of large network-governed firms provide evidence that they obtain sustainable operating advantages over business cycles. This indicates how natural systems provide design criteria to enhance the efficacy of business operations, governance and regulation. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Disclosure and Governance Springer Journals

Could the 2008 US financial crisis have been avoided with network governance?

Download PDF
26 pages

Loading next page...
 
/lp/springer-journals/could-the-2008-us-financial-crisis-have-been-avoided-with-network-PmVQp01EtZ

References (115)

Publisher
Springer Journals
Copyright
Copyright © 2011 by Palgrave Macmillan, a division of Macmillan Publishers Ltd
Subject
Business and Management; Business and Management, general; Accounting/Auditing; Corporate Finance; Corporate Governance
ISSN
1741-3591
eISSN
1746-6539
DOI
10.1057/jdg.2011.26
Publisher site
See Article on Publisher Site

Abstract

Banks failed in 2008 because individuals with knowledge of risks were not connected to individuals who had the incentive and power to take corrective action. Evidence of this problem is provided by reports from the Lehman liquidator and The Financial Crisis Inquiry Commission. Improved communications and control within and between banks, their regulators and stakeholders can be achieved with network governance. Lawmakers and/or regulators can introduce network governance by requiring bank shareholders to amend corporate constitutions to introduce a division of power with checks and balances with stakeholders, who can take on the role of supplementary and/or co-regulators. Such decentralized regulatory architecture is how simple living creatures sustain their existence in complex, dynamic and unpredictable environments without suffering communication errors and/or overload. The natural science of control and communication identified in 1948 by Wiener explains why centralized control and communication systems are not found in nature. This science of regulatory systems explains why regulators and large firms fail to reliably manage, regulate or govern complexity. Examples of large network-governed firms provide evidence that they obtain sustainable operating advantages over business cycles. This indicates how natural systems provide design criteria to enhance the efficacy of business operations, governance and regulation.

Journal

International Journal of Disclosure and Governance – Springer Journals

Published: Dec 22, 2011

There are no references for this article.