Toward a More Humanistic Governance
Model: Network Governance Structures
Michael Pirson
Shann Turnbull
ABSTRACT. This conceptual article suggests a reex-
amination of current governance structures, specifically
those of unitary boards after the financial crisis of 2008.
We suggest that the existing governance structures are
based on an outdated paradigm of business, rooted in
economics. We propose an alternative paradigm, a more
humanistic paradigm, which allows conceiving alterna-
tive, network-oriented governance structures. As hier-
archical firms grow larger and more complex, the risk of
failure increases from biases, errors, and missing data in
communication and control systems. These problems
are exacerbated by information overload on senior
managers, directors, and their respective regulators. In
contrast to traditional corporate governance, network
governance introduces a division of power via multiple
boards, checks and balances, and active stakeholder
engagement. We argue that those features could have
prevented the stresses and failures of financial firms in
2008, since they were anticipated by both individuals
within firms and external commentators. However,
those exposed to risks possessed insufficient influence in
either governing and/or regulating firms to take cor-
rective action.
KEY WORDS: humanism, economism, corporate gover-
nance, cybernetics, decision making, network governance,
risk management
We are experiencing a global epidemic of institutional
failure that knows no bounds. We must seriously
question the concepts underlying the current struc-
tures of organization and whether they are suitable to
the management of accelerating societal and environ-
mental problems – and, even beyond that, we must
seriously consider whether they are the primary source
of those problems.
Hock (1999,p.6)
Introduction
According to BusinessWeek (Kalwarski, 2009), ‘‘10.2
trillion dollars have been lost in the US alone in the
past two years’’. Davies and Siew (2009) report that
45% of world’s wealth has been destroyed and three
of the largest bankruptcies in the US have occurred
in the past 2 years. Just as the majority of observers
thought lessons from Enron had been learned, crisis
has struck again. Massive government intervention
in the US and UK banking systems, and public
outrage at the missteps of executives has again
highlighted the weaknesses of mainstream corporate
governance systems. As the Association of Char-
tered Certified Accountants (ACCA, 2008) stated
‘‘Contrary to popular opinion the principal cause
of the crisis was not sub-prime mortgage defaults but
a failure of corporate governance’’. Similarly, the
‘‘widespread failure of corporate governance’’
(S1074, 2009) is cited as a reason why a Shareholder
Bill of Rights Act was introduced into US Congress
in May 2009. Likewise the OECD (2009) reports
‘‘severe shortcomings in corporate governance’’, and
together with other public policy makers is calling
for more comprehensive and tougher regulation
(Kirkpatrick, 2009).
In this article we will examine some of the
fundamental flaws of the dominant governance sys-
tem based on unitary boards, which is rooted in
an economistic understanding of individuals and
firms. To do so, we will first outline the genesis of
the governance structures based on economistic
assumptions about human nature and then sketch
out the characteristics of a humanistic governance
alternative. We then highlight the ensuing conse-
quences of economistic assumptions and point out
the resulting structural flaws for governance princi-
ples. We juxtapose these structural flaws with a more
Journal of Business Ethics (2011) 99:101–114 Ó Springer 2011
DOI 10.1007/s10551-011-0752-x