Filling the Governance Gap
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Feb 3, 2014

Filling the Governance Gap

By Jessica Love

Photo: Brayden King

The importance of private regulation has risen in the face of cash-strapped and gridlocked governments. Just how (and how well) activists and NGOs are poised to fill the governance gap is the topic of this year's Kellogg School / Aspen Institute Business and Society Leadership Summit. Kellogg School faculty have published four white papers in advance of the summit, which will occur in Evanston on Feb 27–28. One, by Daniel Diermeier, is included as part of our February issue of Kellogg Insight. The three additional articles are as follows:

“Can privately regulated corporations that are under tremendous pressure to cut costs and expand revenues always be expected to act in ways that safeguard society and the environment?” So asks Brayden King, an associate professor of management and organizations. Too often, he finds, the answer is no. King explains why private regulation has its limits.

American companies, take note: the idea of “corporate separateness”—that a firm is not legally responsible for the actions of its suppliers—has long defined corporate thinking here in the states. But the idea doesn’t square well with a European model that extends firms more responsibility, nor is it suited to the public’s increasingly high expectations for corporate citizenship. Caroline Kaeb, a visiting assistant professor of law at Northwestern University (with a courtesy appointment at the Kellogg School), explains.

Over the past few decades, managers have gotten better at squeezing the slack out of supply chains. But with efficiency has come vulnerability: a single unforeseen event has never had more power to wreck havoc on a firm’s operations—and on its reputation. Sunil Chopra, a professor of managerial economics and decision sciences, offers concrete advice on how companies can move away from a single-minded focus on efficiency without giving up all they’ve gained.