Could the 2008 US financial crisis be avoided with network governance?
"Banks failed in 2008 because individuals with knowledge of risks were not connected to individuals who had the incentive and power to take corrective action. Evidence of this problem is provided by reports from the Lehman liquidator and The Financial Crisis Inquiry Commission. Improved commu...
| Main Authors: | , |
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| Institution: | ETUI-European Trade Union Institute |
| Format: | TEXT |
| Language: | English |
| Published: |
Fordham University Schools of Business
2011
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| Subjects: | |
| Online Access: | https://www.labourline.org/KENTIKA-19135944124919531269-Could-the-2008-uS-financial-cr.htm |
| Summary: | "Banks failed in 2008 because individuals with knowledge of risks were not connected to individuals who
had the incentive and power to take corrective action. Evidence of this problem is provided by reports
from the Lehman liquidator and The Financial Crisis Inquiry Commission. Improved communications
and control within and between banks, their regulators, and stakeholders can be achieved with network
governance. Lawmakers and/or regulators can introduce network governance by requiring bank
shareholders to amend corporate constitutions to introduce a division of power with checks and balances
from stakeholders who can take on the role of supplementary and/or co-regulators. Such decentralized
regulatory architecture is how simple living creatures sustain their existence in complex, dynamic and
unpredictable environments without suffering communication errors and/or overload. The natural science
of communication and control identified in 1948 by Wiener explains why centralized control and
communication systems are not found in nature. This science of regulatory systems explains why
regulators and large firms fail to reliably manage, regulate or govern complexity. Examples of large
network governed firms provide evidence that they obtain sustainable operating advantages over business
cycles. This indicates how natural systems provide design criteria to enhance the efficacy of business
operations, governance and regulation." |
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| Physical Description: | 25 p. Digital |