Governing Finance.
Gordon L Clark, Centre
for Employment, Work and Finance, Oxford University Centre for the Environment,
South Parks Rd., Oxford OX1 3QY, UK and Labor and Worklife Program, Harvard Law
School, Harvard University, Cambridge MA 02138, USA.
Contact. gordon.clark@ouce.ox.ac.uk
Abstract.
Financial institutions rule-the-world: they can price all kinds of
tangible assets from corporate capacity to urban infrastructure and are in the
market for intangible assets like brand imagine and reputation. From the smallest unit of activity to
whole nations, financial institutions price expected returns while discounting
and distributing the risks of adverse outcomes. While the regulation of financial institutions and markets
is the subject of extensive research and policy practice, it is apparent that
regulation often comes second to governance: that is, regulation is often there
to clean-up unanticipated failures of governance in the internal management and
performance of private financial institutions. In part, this is because of the economic scale and
geographical scope of financial institutions compared to nation-state
regulators. In this paper, I
develop a three-part argument about the nature and significance of the
ÒgovernanceÓ issue noting what is distinctive about financial institutions and
markets as well as the problems of interest-alignment and the conflict over expertise
and representation. To illustrate
my argument, a set of examples are noted with the penultimate section devoted
to an assessment of the issue in relation to emerging themes in globalization. Here, it is suggested that the governance
of financial institutions may be more important than the nation-state
regulation of financial markets for the development of the global economy.
Acknowledgements. This paper was written for the Second Global Conference on
Economic Geography organised, in part, by Henry Yeung from the National
University of Singapore. It is
based on a series of research programmes focusing upon the competence of UK
pension fund trustees, the governance of leading pension and financial
institutions, and the evolution of financial markets in Europe, the UK and the
USA. Here, I have been helped by
the support of the National Association of Penison Funds, Watson Wyatt
Worldwide, and the European Science Foundation. I would particularly like to thank my collaborators in these
projects including Emiko Caerlewy-smith, John Marshall, Mike Orszag and Roger
Urwin, and Dariusz Wojcik. I would
also like to thank Adam Dixon, Ashby Monk, and Louis Pauly for their
forbearance in listening to my thoughts on these issues over the past year.