Corporate Governance and Corporate Legitimacy: The Role of Boards

The field of corporate governance can to a large extent be traced back the aftermath of the Great Depression 1929. The problem which led to the crash of the stock market was described as a division between control and ownership. The problem was described as managerialism. The thesis of managerialism inspired agency theory which has been synonymous with corporate governance theory. The theory focuses on the shareholder perspective and the importance of maximizing profits. Although corporate legitimacy has become a more important concept within institutional theory, it has had limited influence on the corporate governance discourse. That is, however, likely to change as the importance of the stakeholder perspective is growing. To align corporate governance with stakeholder perspective and strive for corporate legitimacy will have profound effects on the role of boards and corporate governance.