Proceedings of 10th Annual London Business Research Conference
10 - 11 August 2015, Imperial College, London, UK, ISBN: 978-1-922069-81-8
Evolutionary Aspects of the Corporate Governance: from the
Orientation to Profit to the “Systematic” Vision of the Value
Alberto Dell’Atti* and Mario Turco**1
The present study aims to examine the evolutionary aspects of the function
and the role played by the enterprise in the current economic and social
context, highlighting the various implications on its survival conditions.
In particular, it intends to propose a vision of enterprise oriented to favour the
creation of "systemic" valued, deemed capable to solve in a different way the
relationship between the logic of profit and the logic of value and on which the
life conditions of enterprise are compatibles with the essential expectations of
the context and, more generally, of the surrounding environment.
JEL Codes: M10; M14
1. Introduction
The dialectic between profits and value creation continues to be central in academic debate
with specific regard to governance models and evolutionary dynamics of the business
system.
Given the relevance of these issues, this study aims to provide reflections aimed at
understanding the features characterizing the two different perspectives and the possible
relationship existing between them, also in order to highlight the conditions of a new logic
oriented to the “systemic” value and able to contemplate the articulation of the valueconditions of the stakeholders involved.
This governance model can enable managers to adopt appropriate behaviours aimed to
implement strategic factors and to influence corporate development.
The objective of this study, therefore, in continuation of a study already under way in doctrine,
aims to improve the understanding of the evolution of the metric values of corporate
performance, defining function and role of this latter in the current economic, social, political
and institutional context.
In particular, given the different influences on corporate governance deriving from the
prevalence of an order of interests over another, we intend to highlight the implications for the
conditions of corporate survival (economic logic) arising from the prevalence of an
instrumental conception of it, which tends to meet a single interest (that of property), and to
neglect a broader perspective intended to pander to the expectations of the other
stakeholders.
If we consider the corporation as a semi-open economic system, whose chances of survival
are linked, firstly, to the action of its management and, secondly, to the pressures and
Corresponding authors: *Alberto Dell’Atti is Associate Professor of Business Economics, at the Department of
Economics of the University of Salento.
**Mario Turco is confirmed researcher of Business Economics, at the Department of Economics of the
University of Salento.
This research is the result of the joint work of both authors, though paragraphs 2 and 3 can be ascribed to
Alberto Dell'Atti, and paragraphs 4 and 5 to Mario Turco.
Proceedings of 10th Annual London Business Research Conference
10 - 11 August 2015, Imperial College, London, UK, ISBN: 978-1-922069-81-8
expectations by the different systems connected to it, this contribution aims to achieve the
following results:
Understanding the transition from the profit logic to the value logic, reflecting also on
the related relationship between the function and role of corporation in the current economic
and social context;
Defining a new model of corporate governance privileging the vision of the value in a
"systemic" perspective.
This latter orientation faces in a different way the question of the relationship between profit
and value, a relationship in which the essential corporate conditions are compatible with the
essential expectations of the context, and more generally of the surrounding environment.
The research methodology is based on a deductive approach that aims to the critical analysis
of the main contributions of the (international and Italian) economic managerial and corporate
literature on governance models (Ferraris Franceschi, 1978, 2010).
This study, despite the extensive literature existing on the subject, is based on the general
positions, primarily related to the studies on the relationship between property and
management (Beadle, Means, 1932; Jensen, Meckling, 1979) and on the shareholder
(Friedman, 1962; Smith, 1973; Locke, 1988) and stakeholder theory (Freeman, 1984;
Freeman, Evan, 1990).
However, this study has some basic limits concerning, above all, the lack of consideration for
other doctrinal, equally important, positions, such as: the resource dependence theory
(Pfeffer, Salancik, 1978); more specific studies relating to the representation of the various
stakeholders within the bodies of upper management (Steiner, 1972; Lorsch, 1989); and the
composition of the property structure (Useem, 1999), etc.
2.
The role of the company in contemporary economy
The enterprise is an economically organized entity aimed at carrying out, in the respect of the
principle of economic efficiency, a production activity intended for exchange (Zappa, 1956;
Onida, 1961; Cassandro, 1969; Masini, 1970; Coda, 1988).
The economic undertaking, in its fundamental aspects of productivity and efficiency, allows to
regenerate the value of the capital and, consequently, to continue the activity in the long run
(Amaduzzi, 1949).
From an "instrumental" point of view, the enterprise has found its legitimacy to exist and to
perform its function as generator of economic wealth. The growing recognition of its
instrumental function has allowed its institutionalization with the consequent legal and
economic protection in modern society.
However, the enterprise, because of the increasing complexity that has been characterising
its functional dynamics, has come to be identified, in addition to its fruitful economic action,
also as a centre of socially relevant interests.
To the objective element of the typical functioning of an enterprise has added over time the
"subjective" aspect of economic acting, with its specific "social" instances, which have
affected, with increasing intensity, its operational dynamics.
In this context, relevant is the question of interpreting how the subjective behaviours affect
both the operating conditions of the enterprise, and the social status of the people gravitating
inside its sphere of action with the related prospects of development and well-being for the
whole society (Vermiglio, 1984; Rusconi, 1997; Sacconi, 2004; Catturi, 2007; Cavalieri,
2009).
Likewise, when considering mutual constraints, it is necessary to examine the influence of
enterprises on the whole community, taking into account the effects on the whole system of
Proceedings of 10th Annual London Business Research Conference
10 - 11 August 2015, Imperial College, London, UK, ISBN: 978-1-922069-81-8
stakeholders, and on other (social, economic and political) supra-systems, with which it
keeps relations of various nature.
The environment in which the company operates and the different expectations of the local
community in which it is located, determine the perception of the "role" of the enterprise in
society and, consequently, that of the same managing body.
Under this perspective, from the company considered as an immutable enterprise-instrument
derives its social feature, changing over time as well as the evaluation parameters aimed at
the understanding of its performance.
It follows that within the doctrinal context are taking place renewed debates about the
purposes of the company, the primary interests influencing corporate governance and the
economic objectives inspiring its operation.
Given the typical function of the company, discussions on the concepts of reasonableness,
cost effectiveness and sharing are being carried out.
The company, operating in an environment characterised by scarce resources, needs to
operate in compliance with specific technical economic and market requirements, with the
aim to achieve an economic equilibrium point stable over time, assuring, under the objective
perspective, the proper use and operation of the instrument created for this purpose.
The functionality requirement is inherent in the very concept of the enterprise as an economic
instrument, which requires the creation of a positive difference between the value of the
production sold and the value of the resources used to create it, allowing for the
replenishment of the used resources and the '"fair" return on risk capital.
Any surplus obtained has to be reinvested in economic production, in order to strengthen the
survival chances of the enterprise.
Compliance with these conditions guarantees the normal and independent functioning of the
company, but cannot be qualified in itself as an ethically responsible behaviour (Cavalieri,
2007).
The latter, in fact, concerns the concrete ways in which the enterprise-instrument is used, the
specific positions taken by those in charge with management responsibilities, the ways of
defining ex ante the parameters for the calculation of the economic balance, as well as the
system of values that influence business decisions and the ways to achieve the same costeffectiveness (who is or who are the privileged subjects that have to take advantage of
business activity?).
The environmental conditions of political, cultural, and ethical nature, that led to recognize the
social role of the enterprise considered as a tool, focussed the attention of economists in
general and of business economists in particular on certain aspects characterising human
nature in relation to the concept of entrepreneurship, such as initiative, creativity, risk
propensity.
In practice, no enterprise can emerge without the (creative and gainful) entrepreneurial
impulse that leads both the founder and other subjects from other organizations (investor) to
make the financial investment.
At the same time, the performance of the economic activity requires that internal processes
are carried out by people organized in units that develop social skills, reasons, special
interests, often at odds with the common objectives.
In this perspective, the company, in addition to the economic function connected to the
proper performance of its function, can be considered a centre of systematic converging and
diverging subjective interests, that not always coincide, so that the company is called to meet
and reconcile them (Vermiglio, 1984; Terzani, 1987; D’Amico, 1996; Rusconi, 2012).
The dynamic behaviour of the company, therefore, is conditioned not only by various
opportunities but also by a number of constraints imposed by internal and external interest
groups (Adamo, 1999; Giaccari, 2003; Turco, 2011).
Proceedings of 10th Annual London Business Research Conference
10 - 11 August 2015, Imperial College, London, UK, ISBN: 978-1-922069-81-8
External interest groups, represented by supra-systems with which the company enters into a
(formal or informal) relationship, consider the firm as a tool to achieve their goals, not always
economic ones, developing expectations and affecting the evolution of the same business
project.
Internal interest groups, however, affect, through negotiation, the internal process of
distribution of the wealth created, often on the basis of the different positions of power hold in
the company.
The enterprise governance has, therefore, to manage the interferences from the different
interest groups and has the difficult task to meet the dominant interests from time to time,
without neglecting the inherent essential conditions of the enterprise-instrument (Dell’Atti,
2007).
In this context, the company, in its fundamental "institutional" role, must, on the one hand,
continually define the priorities to be privileged, so that the different (internal and external)
interests are reconciled with the essential needs of the company and, on the other hand,
assess the impact and risks on enterprise evolution of choices that tend to favour some
interests at the expense of others, or even to neglect the consequences of unmet
expectations considered insignificant.
The role of the company in society depends on the different way in which the enterprise
governance checks, orders and arranges the different subjective interests, as well as the
tools used to meet them.
For the purposes of its social legitimacy, important is the role played by the managers that
develop the business proposal.
The definition of the role of the enterprise is particularly complex, as it ends up with
influencing not only the economic production, but also the distribution of the wealth created,
which in principle should take in to consideration the real contribution made by each category
of the involved parties (Paolone, 2006; Sorci, 2007).
3.
The orientation to profits: definition, measure and destination
The notion of profit is among the most complex and controversial developed by the doctrine
of business management.
Scholars agree to include the concept of profit into the broader concept of entrepreneur’s
"income".
In principle, it is sometimes associated to the so-called extra-income, i.e. the financial amount
that remains after remunerating all factors of production, including the notional charges
(manager salary, implicit interests); and sometimes regarded as the remuneration for the
entrepreneurial skills, such as creativity, management skills, risk propensity, etc. (Ceccherelli,
1948).
According to the concept of capitalist enterprise, profit is linked to the entrepreneur's ability to
take the risk of losses on the capital he invested in business (Knight, 1921; Pacces, 1939).
In this context, however, emerge significant conceptual differences on the elements
contributing to its determination.
Historically, the classical economic doctrine (Smith, 1904; Ricardo, 1817; Stuart Mill, 1848)
linked the concept of profit to the aggregate remuneration of the capitalist entrepreneur,
which had a residual right (residual claimants) on the results produced by the enterprise.
On the one hand, the company, like any other economic good, in fact, should respect the
laws of private property and, therefore, should be used as a means to maximize the monetary
wealth obtainable from it (profit maximizing) in favour of its owners (Friedman, 1962).
On the other hand, the origin of the concept of profit as entrepreneur’s "gross" income,
defined on a contractual basis and consisting of the interests on the capital invested and of
Proceedings of 10th Annual London Business Research Conference
10 - 11 August 2015, Imperial College, London, UK, ISBN: 978-1-922069-81-8
the wages for the management of the production factors, was, however, due to the French
classical theory (Cantillon, 1959; Say, 1803; Williamson, 1985).
According to this approach, the enterprise, defined as the centre of the legal relationships
between the stakeholders, should tend to favour its owners’ expectations.
Starting from the classical concept of profit, the neoclassical economists came to define the
"net" profit, namely that part of the income remaining after paying the interests on the capital
and the management salary (Marchal, 1951).
In these terms, the profit was permanently associated with the concept of entrepreneurial risk
and was intended as a residual remuneration due to the entrepreneur.
Later, with the establishment of big companies and the separation between ownership and
management, the theory of capitalism, especially in its Anglo-Saxon and French definition,
asserted that profit represented the remuneration due to the enterprise considered as a
system and not to the entrepreneur (Marchal, 1951 ).
In this perspective, therefore, the profit consisted of a business income or of an economic
benefit to be paid to the management as a whole.
A definition that best accompanied with the classical concept of enterprise as an
economically organized and coordinated entity aimed to generate its own wealth and
regenerate its economic and production cycles.
This approach, in fact, was already at the basis of the Italian traditional business thought,
where profit was designed as a composite measure of the company and "not as
entrepreneur’s remuneration", that… "combines in a single and not divisible unit the
remuneration of many factors" (Zappa, 1956; Ferrero, 1968; Amaduzzi, 1978).
The affirmation of the profit as a composite measure lead to a further reflection both on the
amount to be pursued and on the identification of the beneficiary / beneficiaries.
Regarding the first aspect, both the economic and the business and management studies
reached the same conclusions.
In particular, with reference to the amount to be achieved by profit, the classical economic
theory argued firstly that profit maximization was the only goal of the company able to
"rationalize" the action of both the enterprise and the entrepreneur (Sen, 1983).
Subsequently, the neoclassical theory argued that profit maximization could not be
considered as a company objective, but just one of the many objectives of the entrepreneur,
who could have other possible interests of non-monetary nature orientating his business
conduct (Beadle and Means, 1932; Scitovsky, 1943; Winter, 1964, Ross, 1973).
This approach, which included a concept of non-maximized profit declined in other forms of
"rewards" other than income, found acceptance even in managerial studies. Such studies
pointed out that the decision-making processes of the company are aimed to satisfy not only
targets other than income, such as the increase in business volume, the company
dimensional growth, the economic growth, etc., but also the needs of the many individuals
involved in various ways in the business project and having different interests and goals
(Volpi, 1965; Saraceno, 1972).
In these terms, the same company doctrine stated the separation between the objective
function of the enterprise, coinciding with the continuous fulfilment of the survival conditions,
and the individual goals of those involved inside and outside the operation of the enterprise
(Onida, 1965; Masini, 1979).
With regard to the allocation of profit, there was a divergence between the economic
approach and the business management theory, due to two different ways of dealing with the
issue.
In particular, economists considered the issue in the context of the distribution of the wealth
generated by the company and finalized it to the satisfaction of the owners’ expectations. As
a result, the ownership of the profit, in the light of the contrast between parties differently
interested in the fate of the company, belonged to the entrepreneur for his position and his
Proceedings of 10th Annual London Business Research Conference
10 - 11 August 2015, Imperial College, London, UK, ISBN: 978-1-922069-81-8
role as head of the corporate governance, and as return for the entrepreneurial risk. Profit,
therefore, being contracted, was nothing more than the price for risk capital recognized to the
owner of that capital (Berle and Means, 1932; Del Punta, 1969;)
Differently, business economists and company scholars lead back the issue of the allocation
of profits to the time when the production of wealth was generated by the production process.
According to this different perspective, the profit was considered the surplus resulting from
the productive activity of the enterprise, and it represented the residual remuneration payable
to it, in order to ensure its survival and its development over time (Ceccherelli, 1948
Amaduzzi, 1966; Cassandro, 1968; Golinelli, 2000).
Under this perspective, therefore, the focus was not so much on the expectations of the
property, but on the chances of survival of the company, designed to regenerate and
increase its economic capital.
From this point of view, there was a clear conceptual coherence of the business management
theory, that considered the profit as "business income" and specifically as residual economic
value, and not as the objective of the company, but just as a means for its development.
This consideration created, therefore, distributive constraints to management and affirmed
the need for an ontological autonomy of the enterprise system.
Instead of the subjective interests of the entrepreneur and the different parties involved, the
company doctrine privileges an overriding interest, that of the survival of the business
production system.
4.
The prospect of value in its different declinations
The affirmation, especially in the second half of the twentieth century, of large companies,
based on models of governance with a clear separation between the ownership of the capital,
dispersed among the general public, and the management, shifted the orientation of business
management from (money) profit to "value creation" and, in particular, to the creation of value
for the property (Porter, 1992).
The growing importance of finance in business economics accentuated the management
dichotomy between a short-term financial perspective, aimed to meet the needs of higher and
higher returns for the property, and the economic perspective for a long-term equilibrium
typical of the enterprise (Guatri, Massari, 1992).
Furthermore, in this changed scenario the concept of profit as a residual measure of the
income was not exhaustive for measuring the real wealth created for the property.
The growing dematerialisation in the processes of wealth creation and the affirmation of the
importance of intangible resources showed, in fact, the limits of the accounting tool when
measuring business performance (Itami, 1988).
To meet these prevailing needs, a new value-oriented perspective was introduced, which
privileged aspects connected to market, social responsibility, ethics and environmental
protection (Carroll, 1991; Friedman, 1997; Drucker , 2000).
The first formulation of the business management doctrine, accepting the reflections already
affirmed in economic literature, associated the concept of value to a specific category of
stakeholders.
In particular, the first formulation of the value theory, favouring an orientation to the
consumer-customer, introduced the concepts of "usage value" and "exchange value" and
highlighted the importance of the market (Pantaleoni, 1895; Besta, 1922).
In fact, this approach maintained that the enterprise objective was to maximize the utility of
the good / service perceived by the consumer-customer, allowing to achieve high levels of
efficiency and profit. The latter represented the reward recognized by the market to the
production sold.
Proceedings of 10th Annual London Business Research Conference
10 - 11 August 2015, Imperial College, London, UK, ISBN: 978-1-922069-81-8
The survival of the company over time depended, therefore, on the degree of customer
satisfaction, which determined a high exchange value, able to achieve efficiency.
From a perspective of corporate governance, the orientation to value in terms of satisfaction
of specific subjective interests, coinciding with those of the consumer, did not allow to
develop a value conception of systemic type, referred to the company as a standalone
system capable of reconciling objective aims, like the survival of the company over time, with
subjective interests (Mazza, 1969; Cavalieri, 1981; Catturi, 1989; D'Amico, 1999)
Based on these theoretical assumptions, especially managerial studies suggested an initial
approach which privileged, however, the interest of the holders of the ownership rights over
the company (Locke, 1988).
It is the theory of the shareholder value, based on the underlying assumption that generating
value for the property means creating value for the company itself and for all stakeholders
(Williamson, 1985).
In this context, developed the different concepts of value, such as the market value of the
shares, the economic value of capital, etc., and were proposed different measuring
instruments (discount of the cash flows, capacity perspective of income distribution and so
on).
The value perspective focussed on the property value, especially in large spread-capital
companies, and ended up favouring a short-term perspective, sacrificing at the same time the
survival expectations of the company.
Moreover, in an economic-productive system, where the creation of value depended mainly
on the human, intellectual, relational capital, it seemed reductive to orientate the creation of
value only to the monetary aspects of the property.
To overcome these major problems, a new school of thought established in doctrine, the
stakeholder theory, which orientated the creation of value to a broader perspective, which
included all stakeholders (Berle, Means, 1932; Freeman, Even, 1990; Jensen, 2002).
According to this approach, the company must properly balance, weigh and meet the
expectations of all stakeholders. The resulting value that the company should be able to
achieve for its very survival is not only of an economic, but also of a personal nature.
The manifold relationships between the company and the various stakeholders required the
construction of multidimensional models for value measurement, which were difficult to
construct and evaluate.
The stakeholder theory, therefore, resulted abstract and uncertain in its determinations, and
without control tools able to support management decisions.
Moreover, on the one hand, it denied the right of the company owners to decide how their
economic entity should be used, on the other hand it released the management from liability
towards the company owners. In these terms, the company had not a specific, unique and
supreme goal orientating governance (Sternberg, 2000).
Therefore, in order to establish an exclusive objective to be met by the evolutionary dynamics
of the company, capable of ensuring order and rationality in the company management,
reconciling the interests of both shareholders and the other parties involved with the essential
company interest for survival over time, the value theory, by Fisher, Hicks and several other
scholars, placed in the middle of corporate behaviour the concept of "economic value of the
capital".
This approach, developed in Italy by Guatri (1991), found its roots in the company theory by
Gino Zappa, according to which the economic value of the capital was an expression of the
company capabilities and potentials to generate future wealth.
This determination took into consideration mainly the enterprise productive, organizational,
relational and economic potentials and the added value created, and considered as marginal
the value of the company on the financial markets (Brown, 1990).
Proceedings of 10th Annual London Business Research Conference
10 - 11 August 2015, Imperial College, London, UK, ISBN: 978-1-922069-81-8
Despite this new perspective represented an evolution towards a systemic and prospective
vision of the value and of the company itself, it was linked, however, to the expectations of
value creation for the property; such expectations, especially in large companies, were
referred to the short or even very short period and disregarded the expectations of other
stakeholders, bearers of other interests worthy of attention.
Subsequent developments about the systemic value of the company lead to consolidate the
belief that no expectation could take a long-term prominent position, as this would raise the
survival risks of the overall enterprise system over time.
The consideration of the interdependencies between the different stakeholders lead to affirm
the concept of "system value", aimed at reconciling competitiveness with context coherence.
With this in mind, we attempt to combine the objective interest of the company survival with
the various subjective interests by the different stakeholders (Porter, 1992).
The company becomes a multidimensional centre for value creation, with specific essential
needs and subject to different judgments on the part of the various stakeholders, each
interested in maximising the expected value (Von Beartalanffy, 1971 ).
The chances of survival of the company over time, therefore, depend on the negotiation and
mediation abilities of the corporate governance, as well as on a weighted analysis of the risks
deriving from failure to meet the stakeholders’ expectations.
The concept of "systemic value” highlights the importance of the enterprise function and role.
Creating value in a systemic vision means, on the one hand, pursuing the primary interest of
economic action, i.e. achieving the economic equilibrium over time (depending on the
enterprise-instrument) in compliance with the various financial and organizational conditions
and, on the other hand, pursuing the goal of meeting individual and collective expectations, in
harmony with the major stakeholders and the environment (Golinelli, 2008).
In order to increase the chances of survival of the company over time, we believe that the
subjective interests should always be considered in a long term perspective, without
neglecting short-term sacrifices.
The recognition of the central role in governance of competitiveness and harmony, both
considered in the medium to long term, leads to a concept of enterprise as a “composite",
"varied" system contextualized in a specific place and time, and to the definition of its
complex operating properties (Zappa, 1950).
The acceptance of this governance model brings about considerations on how to fulfil the
function and role of the enterprise.
5.
The corporate governance oriented to "systemic value"
The orientation of the company to "systemic value" is, with respect to the tendency for profit
and value, an evolutionary logic typical of companies operating in evolved economic
contexts, just as those of Western countries, characterized by high complexity and capable of
influencing (socially, politically, legally etc.) economic action.
In such contexts, the company chances for survival necessarily entail the creation of wealth
based on increasing flows of economic efficiency accompanied by equally increasing flows of
social legitimacy (Drucker, 1954; Freeman, 1984).
The management action is focussed not only on the improvement of the micro-economic
production efficiency, but also to a high standard of economic performance in the medium-tolong period and to match the stakeholders’ expectations.
The company, therefore, becomes a "complex system," which requires the formulation of
management strategies which take into consideration not only the different aspects of its
economic evolution, but also the different needs of the surrounding environment, based on
Proceedings of 10th Annual London Business Research Conference
10 - 11 August 2015, Imperial College, London, UK, ISBN: 978-1-922069-81-8
the consideration that the failure to meet the stakeholders’ expectations can affect the same
survival of the company (Ferrero, 1968; Ranalli, 1992; Bertini, 1988; Cavalieri, 2008).
The success of the "systemic value" over time, in a highly dynamic context like the current
one, can be fulfilled only if the company manages to secure a productive activity made of
intrinsic specificities able to preserve the economic potentials in its quantitative-monetary and
qualitative-innovative aspects.
In these terms, the management has the difficult task, on the one hand, to ensure the natural
function of the company, i.e. the equilibrium conditions of the enterprise and, on the other
hand, to match the different and often conflicting interests and expectations, of both the
property and the community involved (Amaduzzi, 1957; Cassandro, 1991; Di Cagno, 2012).
It is the management body that must identify, through the adoption of proper and farsighted
management actions, the path that bridges the gap between economic function and socioeconomic role, due to the contrast between production logic and distribution logic, between
orientation to dyadic relationships and orientation to context sharing.
This awareness highlights the centrality of the economic and social responsibility of the
management action, vision and decisions that, in view of the strengthening of the survival
chances of the company over time (functional purpose), must ensure the creation of the
systemic value (institutional purpose), which allows to reach the conditions of efficiency, and
the fulfilment of more and more extended and diffuse expectations (inborn or natural
purpose), (Di Cagno et al., 2011).
The outlined perspective may have the merit of bringing back the company function to its
"natural" role of "economic instrument" and, at the same time, of "social institution".
Its acceptance leads to state a principle of business excellence, according to which the
fulfilment of the expectations of the various stakeholders must be achieved in a harmonious
and mutually reinforcing way, aiming for a sustainable, responsible, ethically acceptable
profitability, compatible with the surrounding community.
The concept of enterprise value takes on, therefore, a particular significance: it is no longer
attributable to shareholder's value, since this is only one of the values that the company, as a
whole, creates for its stakeholders.
The company itself has to be seen as value system, i.e. as a set of economic and social
benefits enjoyed by the various stakeholders who contribute to the success of its strategies
(Beadle and Means, 1932, Onida, 1965; Masini, 1979; Golinelli, 2000).
In these terms, the "systemic" value is an expression of the company's ability to "survive by
making others to live" and its value is found not only in the stream of income that it creates,
but also in its social behaviours. Its economic capital, determined by the traditional criteria,
should be "dealt" with the appreciation of the social role of the enterprise (integrated
economic capital).
In this perspective, profit "is not an end in itself, but is a necessary instrument" through which
the company can exist, grow and realize its economic function and fulfil its social role.
The aim is that to realize, albeit with different intensity in space and time, multi-dimensional
processes, where the maximization of value creation over time, peculiar of economic
institutions, integrates with the needs of the social contexts in which it operates.
In order to give dignity to the essential economic and social aspects of corporate life, while at
the same time nourishing the virtuous circle of mutual and widespread prosperity, the
company policies are oriented to the achievement of the "company good", identifiable
essentially with everything can contribute to the growth, development and survival of the
company (Drucker, 1954; Freeman, 1984; Cavalieri, 2009; Bianchi, 2012; Coda, 2012).
This is a multifunctional goal that the management must pursue, the achievement of which,
given the structural complexity of the company and the influences deriving from its operation,
requires the reconciliation of often conflicting objectives, as well as the combination of
Proceedings of 10th Annual London Business Research Conference
10 - 11 August 2015, Imperial College, London, UK, ISBN: 978-1-922069-81-8
profitability, productivity and competitiveness with social, environmental and welfare needs in
general (Cavalieri, 1969; Terzani, 1987; D'Amico, 1996; Rusconi, 2012).
The acceptance of such a holistic perspective, typical of developed economies, lays the basis
for the formulation of a new so-called "integrated" development model, in which the economic
objective, peculiar of the company, is also a source of a (qualitative and quantitative) value
system for the territorial community of belonging.
In this way, management is required to weigh up the strategic decisions in terms of what is
"better to do," according to a hierarchy of issues that take into account, among the various
possible options, not only the necessary financial results, but also the effects that these
decisions have or will have, in space and time, on the "wealth" of individuals and of society
(Adam, 1999; Giaccari, 2003; Marchi et al., 2003; Turco, 2013).
In these terms, the integrated development of the company goes beyond the social
responsibility, i.e. the fulfilment of stakeholders’ expectations, by encompassing it and
avoiding that economic development sacrifices other equally affected dimensions, such as
the growth of individual and collective skills; the development of the environment; the socioenvironmental development (Drucker, 2000; Sorci, 2007; Terzani, 1987).
In planning and pursuing the survival of the enterprise system, therefore, the economic
objectives tend to be integrated and made compatible with the objectives of other relevant
value dimensions, typical of the company and of society as a whole.
This does not mean that all factors, which form the lasting value for the business system,
must grow and be pursued simultaneously and with the same intensity. Indeed, under the
conditions of efficiency, conflicts between objectives are solved not by privileging a goal to
the detriment of others or on the basis of a hierarchical order between them, but in the overall
context of a broader development strategy in which different objectives are linked by dynamic
relationships of cause and effect that only the passage of time can unfold (Coda, 1988).
This approach justifies present sacrifices for future rewards; cost savings for development
investment; productivity gains for benefits to be divided among employees, owners and
customers, and so on.
To the economic objective function, necessary for company survival, is connected in a cause
and effect relationship the holistic objective function, namely that of the integral development.
This, in order to be pursued, requires full knowledge by management of the role and
relationship between the economic activity and the local area of reference.
Within these synergistic relationships, essential to identify and enhance the whole untapped
potentials of the company and the way they can be combined, are revealed the
entrepreneurial and managerial skills of those responsible for corporate governance.
The challenge is to overcome the complexity of the administrative procedures by developing
models, tools and management techniques that, though their intrinsic limitations, permit to
shorten the gap between the function and the role of the company, caused by the antithesis
between production logic and distribution logic and the consequent orientation of
management action to match the property needs or context needs.
In this perspective, the management action not only affects directly the dynamics of the
company economy, but produces also repercussions on other economies linked to it, and
even influences the social context of a local area and of an entire country.
6.
Conclusions
The persistent economic crisis, we are experiencing, is questioning the function and role of
the enterprise in modern society and is delegitimizing, in some ways, the same management
action, that has very often proved unable to understand and interpret situations as well as
Proceedings of 10th Annual London Business Research Conference
10 - 11 August 2015, Imperial College, London, UK, ISBN: 978-1-922069-81-8
market and environment opportunities and, at the same time, to assess the risks associated
with the conditions of company survival.
The observed different perspective to profit or to value that inspires corporate governance
has allowed to define the relationship between the function and the role of the company,
noting that the company role results, in the current economic and social context, inextricably
linked to the behaviours hold and the manner in which management fulfils the company
function for economic development.
The new complexity of economic action demands, therefore, a governance capable of
assessing, in particular with regard to priorities, different systemic values qualifying the entire
context in which the company operates.
From the property perspective, profit orientation or value orientation, although continue to be
important stimuli to private initiative and, in some ways, even to the institutional function of
the company, constitute a constraint to enterprise governance, which still needs to combine
this view with the social legitimacy for the enterprise.
In this regard, the change of logic from profit to value has determined for the enterprise
system, especially in large and medium-sized enterprises, the affirmation of a governance
model attentive both to the conditions of survival of the company and to the interests of the
various stakeholders, with both aspects in the focus of the company strategic policies.
In order that profit and value creation can coexist and ensure the conditions for a lasting and
shared functionality, it is necessary that value creation is oriented into a broader perspective.
In these terms, corporate governance is called to perceive and interpret the goals and meet
the expectations of those involved, trying to reach acceptable levels of agreement and
resonance with the surrounding environment of reference.
The consequent establishment of the economic and social responsibility of the enterprise,
leads the management to implement shared development paths.
The pursuit of such a consonance in governance is not, at present, a scientific activity, but is
a choice of the economic entity. It becomes, therefore, necessary to develop shared
measurement tools both to make rational the synergistic use of the competitiveness and
sharing drivers, and to better manage the different risk and change profiles considered
necessary to balance the different interests at stake.
The survival chances of the company depend increasingly on the risks connected not only to
the loss of competitiveness, but also to the failure to achieve consonance.
In the logic of the systemic value, the company value lays on its capacity of producing income
and social potential. Efficiency comes therefore from sociability, while sociability is based on
the efficiency.
Maximizing the systemic value, as the ultimate goal of the company considered as a living
system, raises the need to consider:
- Firstly, the governance structure most suitable for that purpose;
- Secondly, the possibility to quantify and monitor the systemic value itself.
With reference to the first aspect, there is a need to make the usual models of corporate
governance evolve towards reference designs based on a broader and integrated vision of
both stakeholders and enterprise results.
Indeed, by encouraging a proper allocation of decision-making powers, the alignment of
divergent interests and the reduction of information asymmetries, all stakeholders would be
encouraged to promote and implement behaviours favouring the creation of the systemic
value.
With regard to the instruments for value measurement, they should try to include more and
more the multiple dimensions that contribute to make up the value of the company, including:
the competitive strategies and the cohesion of differing expectations; the organic and
Proceedings of 10th Annual London Business Research Conference
10 - 11 August 2015, Imperial College, London, UK, ISBN: 978-1-922069-81-8
coordinated performance of the primary corporate functions; the undertaking of socially
responsible behaviours.
In conclusion, the acceptance of the "systemic value" perspective requires that corporate
governance is structured into three interrelated aspects:
- The legal and institutional aspect, aimed to preserve the different formal relations;
- The strategic and operational aspect, aimed to orientate the choices of the economic
management of the company;
- The ethical and social aspect, or the subjective scale of corporate governance.
Therefore, the orientation to the systemic value in its different aspects seems to be the logic
that can better orientate the company management to face the current situation of economic
and financial crisis characterising the beginning of the third millennium.
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