Why Do Companies Engage in the Creation of Private Governance?

We would like to congratulate Philipp Richter on a new outstanding publication.

Together with co-authors from the Chair of Responsible Management at IHI Zittau, his new article, published in the Journal of Business Ethics, deals with a central development in modern corporate governance: companies are increasingly voluntarily committing to social and environmental rules - and going one step further. They not only comply with these standards, but also develop and shape them themselves as part of so-called private governance initiatives (e.g. standards, certifications or industry-wide self-regulation).

The study systematically examines why companies choose this path of self-regulation. Based on a comprehensive analysis of existing research, we show which governance, strategy and context factors motivate companies to assume responsibility beyond state regulation.

Key learnings from our study:

• Strategic motivation: private governance often serves to manage risk, build legitimacy and deal with uncertainty in global markets.

• Governance matters: Corporate governance structures, networks and industry contexts play a crucial role in the emergence of such initiatives.

• Normative + economic: Social and ecological goals are relevant, but are usually combined with economic and governance-related considerations.

Outlook - key research directions:
Our research agenda points in particular to

• a stronger focus on decision-making processes within companies (boards of directors, top management, individual stakeholders),

• the effectiveness of private governance in interaction with state regulation,

• and the long-term effects of private rules on corporate behavior and social outcomes.

Are you interested in private governance, ESG strategies or new forms of corporate governance? Feel free to contact us if you have any questions, see points of contact for research or teaching or would like to think about the topic further together.

The link to the article can be found here.