The Governance Revolution

Chapter 1 How Our Governance System Began

Boards of directors and their perceived poor performance have been castigated for over 400 years. As economist Adam Smith wrote in The Wealth of Nations in 1776, corporate directors managed “other people’s money” and this conflict of interest meant directors were prone to “negligence and profusion.”

Yet the corporate form of organization and its use to raise and deploy capital has had an extraordinarily positive impact on global development. And every jurisdiction in the world requires that a board of directors be appointed in order to form a corporation and maintain it. To understand this apparent conundrum, we look first at how the corporation and its companion, the board, evolved. Its history is fascinating, ...