Global Environmental Governance

Mechanism Design Lessons from Corporate Governance

Thursday, January 10, 2013

Why is productive environmental governance so hard, and what might be learned from how corporate governance mechanisms address related problems? The present article addresses these questions, both in principle and in application to global fisheries. It does so first by reviewing how efficient governance mechanisms also create distributional effects, and are thus susceptible to unproductive political gaming. It then argues that, because the propensity for such gaming increases with the diversity of distributional preferences, mechanisms that have productively governed fisheries at a local scale may be politically infeasible at a global scale. Finally, it concludes by arguing that (i) these small-scale mechanisms share common characteristics with monitoring as a form of governance in business associations, (ii) information requirements and distributional conflict for such mechanisms become untenable as business associations scale to the corporate form, and (iii) corporate governance may thus rely more heavily on a type of assurance contract that, given its relatively weak reliance on monitoring and potentially stronger resistance to distributional interests, might also find productive applications in global environmental governance.

To download the full article, please visit SSRN.

Through 20 years of experience in business, policy, and academic research and teaching, Dino Falaschetti (PhD, MBA, CPA) managed Fortune 100 audit-engagements and corporate finance operations, created insightful business analytics and litigation support strategies, and helped develop productive policies for the White House and state legislatures...
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