Corporate Governance and Organisational Performance The Impact of Board Structure 1St Ed Edition Naeem Tabassum Full Chapter

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Naeem Tabassum · Satwinder Singh
Corporate
Governance and
Organisational
Performance
The Impact of Board
Structure
Corporate Governance and Organisational
Performance
“In today’s complex and fast-moving business world, corporate governance

practices are crucial for navigating change and managing new risks. Research
continue to show the positive impact that governance mechanisms can have on
business competitiveness. This thought-provoking book offers valuable insights
on the link between governance and organizational performance, while it high-
lights best practices that can easily be implemented by Boards.”
—H.E. Hamad Buamim, President & CEO, Dubai Chamber of Commerce &
Industry, Dubai, United Arab Emirates
“This methodologically sophisticated and controversial study disputes the corre-

lation between good corporate governance and financial performance in a pio-
neering study of Pakistan. Tick-box compliance cultures turn out to have little
value compared to long-term strategies to create value.”
—Geoffrey Jones, Isidor Straus Professor, Harvard Business School, Boston, USA
“Corporate Governance and Organizational Performance - The impact of

Board Structure is a timely piece of research conducted with an extensive and
in-depth analysis of data base of listed companies in Pakistan. The research is
also of critical contemporary relevance to fellow emerging economies around the
world that share similar political, economic, social, technological, and legal set-
ups with Pakistan. Several of these economies are vying to be a major player in
their respective regions. Lesson this research imparts is that companies that dil-
igently apply the principles of corporate governance in all fairness and transpar-
ency have the potential to outperform rivals. The study highlights how a Board is
structured and conducts, influences the market value of companies. This in turn
inspires investors’ lending and investing decisions. Policy recommendations of
the study are that a corporate sector comprising of companies that implement
the code of conduct of good governance, both, in letter and spirit could be the
future of Pakistan vis-à-vis emerging economies.”
—Rizwan Sayed, Tax Director—PWC London, former Sr. VP Faisal
Islamic Bank, Bahrain
“We know that good corporate governance is fundamental to organizational suc-
cess, yet why is this the case? Moreover, articulating what makes the difference
and why is less clear, until now. This book seeks to distil the wealth of wise com-
mentary about why good corporate governance matters into a tangible evidence
base. I will be using some of the ideas from this book in my own work as a Board
evaluator, independent NED (non-executive director), and keen observer of all
things corporate governance.”
—Lucy McClements, Independent NED, Consultant, and former
UK regulator, London, United Kingdom
Naeem Tabassum · Satwinder Singh
Corporate Governance
and Organisational
Performance
The Impact of Board Structure
Naeem Tabassum Satwinder Singh
London, UK Dubai Business School
University of Dubai
Dubai, United Arab Emirates
ISBN 978-3-030-48526-9 ISBN 978-3-030-48527-6 (eBook)

https://doi.org/10.1007/978-3-030-48527-6
© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer
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With deepest love and respect for family members past and present
certaines dettes sont difficiles à rembourser
Foreword
Corporate Governance is rightly regarded as one of the key issues of our

time. Business is a dominant force in the economic performance and
political life of all major nations. Corporate Governance can be studied
from different perspectives. There is a wealth of literature on business
ethics, much of which is concerned with Corporate Social Responsibility
(CSR). However, a great deal of this literature is concerned with ‘preach-
ing’ rather than teaching or research. The delivery of CSR programmes
depends on the system of Corporate Governance. Corporate Governance
has to deliver on both financial performance and on social responsibil-
ity. This book focuses on financial performance; however, many of its
findings also have implications for the delivery of social responsibility.
Strong financial performance can provide a springboard for investing in
CSR programmes. The converse also applies: strong CSR can enhance
company reputation and brand value and thereby improve financial
performance.
This book focuses on the structure of the Board. It examines the divi-
sion of powers between the chair of the Board and the Chief Executive
Officer (CEO), and how strictly this division is maintained. It consid-
ers the diversity of Board members (gender and nationality of directors),
access to external information and opinion through non-executive direc-
tors, and access to expertise through sub-committees. It shows that the
size, structure and composition of the Board are all crucial to the way in
which the firm is managed. On the other hand, however, it also sounds
a warning: the structure of the Board must be adapted to the business
vii
viii FOREWORD
environment of the firm. A Board structure that works well in one con-
text may not work so well in another. Managers and policymakers need
to identify the contingent factors determining the type of Board that is
most appropriate in each set of business circumstances. ‘One size fit all’
does not apply to the composition of a Board.
The information provided in this study is invaluable. The research
methodology sets a new standard for other researchers in the field. A
wide range of readers will benefit from studying this book. It addresses
important issues of general concern and does with an exceptional degree
of intellectual rigour.
Mark Casson
Director of the Centre for Institutions
and Economic History/Professor of Economics
University of Reading
Reading, UK
Preface
The work on which this monograph is based was first conducted as doc-
toral work and won the Brunel University Vice Chancellor’s first prize in
2018 for its originality and quality; however, this did not come around
easily. Several years ago, when Naeem—a professional accountant, as a
freshly minted MBA, also from Brunel—came around and started to dis-
cuss the topic, I was apprehensive, and warned of the difficulties and pit-
falls in this type of work. I am an economist by training, but also have an
honours First Degree in accountancy. My contention was that, if we were
to say anything meaningful, it would have to be based on solid factual
analysis, which can only be conducted if detailed time series data on key
accounting and Board structure variables could be collected. After delib-
erations, we agreed to take on the project and also decided to back-up
the findings with the help of a field survey, which was supposed to yield
qualitative insights to supplement the quantitative results. Sadly, owing
to time and financial constraints, we had to drop the latter and focus on
the data side of things only. The survey questionnaire we had drafted
came to be donated to another researcher working on the same topic in
Pakistan.
The fact that work had started to attract attention on its own per-
haps would not have been enough to coax us to publish it as a research
ix
x PREFACE
monograph.1 Our search showed that, to date, no work of this nature

has been shared in a monograph form with researchers, practitioners and
institutional agencies of Pakistan—an emerging economy that shares
most of its economic and social attributes with fellow emerging econ-
omies. The statistical analysis has yielded meaningful insights into the
link between Corporate Governance and performance (see Chapter 4).
Researchers seeking to pursue future work of this nature will find the
methodology adopted helpful. The framework applied in this work is
also sufficiently robust to be operationalized for future empirical works.
Managers will find plenty of useful advice to enhance performance.
Practitioners working in the field of advising firms would find the results
useful in their toolbox of consulting ideas and sermons. Much of the
existing research has been conducted in the Anglo-American context,
where firms have diffused ownership, capital markets are efficient, and
shareholder rights are strongly protected by various laws. In contrast,
institutional settings and the economic environment differ significantly in
emerging economies, and, as such, the findings of studies conducted in
developed countries are not generalizable. There is significant potential
for this research to benefit, notably those bearing similarities to Pakistan
in terms of their culture, political, social and economic structures.
We would have liked to see more robust links between CG and finan-
cial performance of firms than those that finally came around. The only
way to explain this conundrum is to borrow from Sir Mervyn King:
Good Corporate Governance is about ‘intellectual honesty’ and not just

sticking to rules and regulations, capital flowed towards companies that
practiced this type of good governance.
—Mervyn King (Chairman: King Report)
Furthermore, as a piece of advice for corporate sector of Pakistan vis-à-vis

emerging economies:
It is clear that good Corporate Governance makes good sense. The name
of the game for a company in the 21st Century will be conform while it
performs.
—Mervyn King (Chairman: King Report)
1A paper partially based on this work in British Journal of Management, is also now
gradually gaining momentum (cf. Singh S, Tabassum N, Darwish T, Batsakis G (2017),
‘Corporate Governance and Tobin’s Q as a Measure of Organizational Performance’
British Journal of Management. ISSN 1045-3172. DOI: 10.1111/1467-8551.12237.
PREFACE xi
And finally:
Global market forces will sort out those companies that do not have sound
Corporate Governance.
—Mervyn King S.C. (Chairman: King Report)
London, UK Naeem Tabassum

University of Dubai, UAE Satwinder Singh
Acknowledgements
In the Name of Allah, the Most Gracious and the Most Merciful, for giving
me the opportunity to achieve this success.
I am grateful to many people who have encouraged me through-
out the development of this text. First and foremost, I am thankful to
Professor Satwinder Singh, the co-author of this text and my supervisor,
for his outstanding support in a very professional and positive manner
during my Ph.D. journey at Brunel University, London. My thanks also
go to Rizwan Sayed, Lucy McClements and me ex-colleague Mrinal Ray
(Jack) for their wonderful feedback on this work.
I am grateful to all my family members, especially my wife Sehar and
lovely daughters, Iman and Sara, for their love, support and patience. I am
indebted to my daughter Sara for her ‘editorial skills’ (she changed one
word but is threatening to sue me if I do not give her any credit for it).
Dr. Naeem Tabassum
ACA, FCCA, MBA, Ph.D.
Chartered Accountant and Business Advisor
Naeem and Associates
London, UK
I owe deepest sense of debt to John Dunning (late) and Mark Casson
who were instrumental for my entry in the academic world at the
University of Reading, UK.
My sense of gratitude goes to my ex-colleagues, friends, and stu-
dents at Brunel University Business School Dean Thomas Betteridge,
xiii
xiv ACKNOWLEDGEMENTS
students Tamer Darwish, Fattaah Mohamed, and Georgios Batsakis.

Admin staff Narinder has been wonderfully helpful. At the University of
Dubai Business School, Professors Eesa M Bastaki, Geoffrey Gachino,
Amr Mortagy, Mohamed Osman, admin staff Munira and Manar have
always provided an invaluable support. Finally, raison d'être, son Gagan,
and spouse Madhu from whom I learnt that ‘it’s not where you are in
life, it’s who you have by your side that matters’.
Our publishing contacts at Palgrave Macmillan, Jessica Harrison and
Arun Kumar Anbalagan, and Keerthana Muruganandham—thanks to
you for being so understanding and helpful.
Professor Satwinder Singh

B.Com (Hons), M.A. (Econ), Ph.D. (Econ)
Professor of International Business and Strategy
University of Dubai, Business School
Dubai, UAE
Contents
1 Corporate Governance 1
Introduction 1
Corporate Governance (CG) 2
Defining Corporate Governance 3
Narrow View of CG 4
Broader View of CG 5
The Importance of CG 6
Enron 8
Parmalat 9
Palmer & Harvey 10
HIH Insurance 10
China Aviation Oil 11
Satyam Computers 11
Mehran Bank 12
The Rationale for This Study 12
References 14
2 Theories, Models and Mechanisms 17

Theories of CG 17
Agency Theory 18
Resource-Dependence Theory (RDT) 20
Stakeholder Theory 22
Stewardship Theory 24
xv
xvi CONTENTS
Transaction Cost Economics (TCE) Approach 25

Class and Managerial Hegemony 26
Social Contract Theory (SCT) 26
Legitimacy Theory 27
CG Models 28
Anglo-American Model 28
The German Model 29
The Japanese Model 29
Corporate Governance in Pakistan 30
Convergence of Corporate Governance Models 32
CG Mechanisms 33
Internal Mechanisms 34
External Mechanisms 34
Relationship Between Internal and External Mechanisms 35
Landmark CG Developments 37
The Cadbury Report 37
The OECD Principles 38
ASX Corporate Governance Council 38
The King Reports (South Africa) 39
The Sarbanes-Oxley Act, 2002 (US) 39
Code of Corporate Governance of Pakistan 40
Summary 40
References 41
3 Predictions of Corporate Governance Models 49

Introduction 49
Agency Perspective 50
Resource Dependence Perspective (RDP) 51
Stakeholder Perspective 51
Multi Theory Approach 52
Multi-theory Framework Adopted for This Research 55
Selected Key Studies 56
Hillman and Dalziel (2003) 57
Nicholson and Kiel (2004) 58
Levrau and Van den Berghe (2007) 59
Approach of This Research 61
Predictions of Our Proposed Models 63
Board Roles and Performance 63
Monitoring Role and Firm Performance (Board Meetings) 63
CONTENTS xvii
Resource-Dependence Role and Firm Performance

(Board Size) 65
Board Structure and Performance 66
Board Independence 67
CEO Duality (Board Leadership) 69
Board Diversity 71
Board Committees 73
Audit Committee Independence 76
Ownership Concentration 78
Summary 81
References 82
4 Research Design and Statistical Method 95

Introduction 95
Sample, Study Period, and Data Source 96
Sample Firms 96
Study Period 99
Data Source 99
Analytical Approach 100
Reasons for Panel Data 100
Types of Panel Data Analytic Models 101
Ordinary Least Squares (OLS) 102
Fixed Effects Model (Least Squares Dummy Variable Model) 102
Random Effects Models 103
Panel Data Specification Tests 104
Serial Correlation 104
Heteroscedasticity 104
Multicollinearity 105
Endogeneity 105
Operationalisation and Measurement of Variables 106
Independent Variables 106
Board Independence (BINDP) 110
CEO Duality (CEODUL) 110
Board Diversity (DIVERSE) 110
Board Committees (BCOMTS) 111
Audit Committee Independence (ACIND) 111
Dependent Variables—Performance Variables 111
Moderating Variables 115
Mediating Variables 116
xviii CONTENTS
Empirical Model 117

Summary 121
References 122
5 Empirical Results and Discussion 135

Introduction 135
Descriptive Statistics 136
Distribution of Sample Firms by Characteristics 136
Firm Performance Measures 136
Independent Variables 139
Control Variables 147
Correlation Analysis 150
Board Independence (BINDP) 150
CEO Duality (CEODUL) 154
Board Diversity (DIVERSE) 155
Audit Committee Independence (ACIND) 155
Board Committees (BCOMTS) 156
Board Size and Board Meetings 156
Ownership Concentration 157
Control Variables 157
Panel Data Specifications and Diagnostic Tests 158
Pooled OLS vs. Random and Fixed Effects 158
Random and Fixed Effects 159
Variance Inflation Factor (VIF) Test of Multicollinearity 161
Breusch-Pagan/Cool-Weisberg Test for Heteroscedasticity 163
Wooldridge Autocorrelation Test 163
Regression Analyses—Testing the Conceptual Framework 164
Board Size (Resource-Dependence Role) as the Mediator
of Tobin’s Q 164
Board Meetings (Monitoring Role) as the Mediator of TQ 176
of ROA 183
Board Meetings (Monitoring Role) as the Mediator of ROA 189
of ROE 194
Board Meetings (Monitoring Role) as the Mediator of ROE 198
Discussion 201
CONTENTS xix
Corporate Governance and Firm Performance

(Direct Effects) 202
Mediation Effects of Board Roles on Firm Performance 211
Moderating Effects of the SECP’s Code on Firm Performance 212
References 213
6 Summary and Implications of the Study 223

Prelude 223
Implications 225
Contribution 227
Application and Implications for Fellow Emerging Economies 228
Results Within the Framework of PESTLE Analysis
of Emerging Economies 228
Limitations 230
Avenues for Future Research 231
References 232
Appendices 235
References 273
Index 309
Abbreviations
ACCA Association of Chartered Certified Accountants

ADB Asian Development Bank
AMLA Anti-Money Laundering Act
ASX Australian Securities Exchange
CDC Central Depository Company
CDS Central Depository System
CEO Chief Executive Officer
CIPE Centre for International Private Enterprise
CSR Corporate Social Responsibility
FDI Foreign Direct Investment
GATT General Agreement on Tariffs and Trade
GDP Gross Domestic Product
GMM General Method of Moments
ICAP Institute of Chartered Accountants of Pakistan
IFC International Financial Corporation
IFRS International Financial Reporting Standards
IMF International Monetary Fund
IPR Intellectual Property Rights
IV Instrumental Variables
KSE Karachi Stock Exchange
OECD Organisation for Economic Co-operation and Development
OLS Ordinary Least Squares
PESTLE Political, Economic, Social, Technological, Legal and Environmental
PICG Pakistan Institute of Corporate Governance
RDT Resource Dependence Theory
ROA Return on Assets
xxi
xxii ABBREVIATIONS
ROE Return on Equity

ROSC Review of Observance of Standards & Codes
SBP State Bank of Pakistan
SCT Social Contract Theory
SECP Securities and Exchange Commission of Pakistan
SOE State-Owned Enterprise
TQ Tobin’s Q
TRIPS Trade Related Aspects of Intellectual Property Rights
UN United Nations
VIF Variance Inflation Factor
WB World Bank
WTO World Trade Organisation
List of Figures
Fig. 1.1 A model of corporate governance (Source Corporate

governance and the balance sheet model of the firm—adapted
from Ross et al. [2005]) 3
Fig. 2.1 Issues in agency theory (Source Adopted and modified
from Murthy [2007]) 19
Fig. 2.2 The resource-dependent view of firms (Source Authors own
elaboration) 21
Fig. 2.3 The firm and its stakeholders (Source Adopted from
Rodriguez et al. [2002]) 23
Fig. 2.4 The stewardship model of corporate governance 25
Fig. 2.5 Internal and external factors of corporate governance
environment (Source Muir and Saba [1995]) 35
Fig. 3.1 The multi-theoretical approach to corporate governance
(Source Christopher, 2010) 54
Fig. 3.2 Suggested theoretical framework of corporate governance
and firm performance 56
Fig. 3.3 Integrated model of board functions, antecedents and firm
performance (Source Hillman & Dalziel, 2003) 58
Fig. 3.4 Intellectual capital model of board (Source Nicholson & Kiel,
2004) 59
Fig. 3.5 Board effectiveness model (Source Levrau & Van den Berghe,
2007) 60
Fig. 3.6 An integrated model of board structure, board functions
and firm performance 61
xxiii
xxiv LIST OF FIGURES
Fig. 4.1 Research philosophy of the current research (Source Adopted

from Partington, 2008, cited in Paul, 2009) 96
Fig. 5.1 Mediation process (Source Baron and Kenny [1986]) 170
List of Tables
Table 2.1 Key differences between the Pakistan’s and

Anglo-American corporate governance 31
Table 4.1 Research sample 97
Table 4.2 Summary description of variables, data sources
and literature references 107
Table 5.1 Distribution of sample firms by characteristics 136
Table 5.2 Descriptive statistics of firm performance measures 137
Table 5.3 Firm performance—comparison of mean values
for pre- and post-2012 139
Table 5.4 Descriptive statistics of independent and mediating
variables for pre and post (2012) implementation
of revised code of corporate governance 140
Table 5.5 Descriptive statistics of board independence 141
Table 5.6 Descriptive statistics of CEO duality 142
Table 5.7 Descriptive statistics on board committees 143
Table 5.8 Descriptive statistics of audit committee independence 144
Table 5.9 Descriptive statistics of board size 145
Table 5.10 Descriptive statistics of board meetings 146
Table 5.11 Board characteristics—comparison of mean values
(pre- and post-2012) 146
Table 5.12 Descriptive statistics on control variables 147
Table 5.13 Descriptive statistics of firm size 148
Table 5.14 Descriptive statistics of firm leverage ratio 149
Table 5.15 Control variables—comparison of mean values
for pre- and post-2012 149
xxv
xxvi LIST OF TABLES
Table 5.16 Correlation matrix of financial performance and corporate

governance variables (2009–2015) 151
Table 5.19 Breusch-Pagan Lagrange Multiplier (LM) test 159
Table 5.20 Hausman specification test for TQ (Random vs. Fixed) 160
Table 5.21 Hausman specification test for ROA (Random vs. Fixed) 160
Table 5.22 Hausman specification test for ROE (Random vs. Fixed) 161
Table 5.23 Results of the Variance Inflation Factor (VIF) test 162
Table 5.24 Breusch-Pagan/Cook-Weisberg Test for Heteroscedasticity 163
Table 5.25 Wooldridge autocorrelation test 163
Table 5.26 Tobin’s Q regressions with board size (random
effects—main, mediating and moderating effects) 165
Table 5.27 Tobin’s Q regressions with board meetings (random
effects—main, mediating and moderating effects) 177
Table 5.28 ROA regression with board’s resource provision role:
random effects—main, mediating and moderating effects 184
Table 5.29 ROA regression with board’s monitoring role: random
effects—main, mediating and moderating effects 190
Table 5.30 ROE regression with Board’s resource provisioning role:
random effects—main, mediating and moderating effects 196
Table 5.31 ROE regression with Board’s monitoring role: random
effects—main, mediating and moderating effects 199
CHAPTER 1
Corporate Governance
This objective of this chapter is to introduce the concept of Corporate

Governance and define the concept in its narrow and broader outlook.
The chapter also explain the importance of CG and the rationale behind
this work. The discussion is organized under the following headings.
• Introduction
• Concept of Corporate Governance
• Definition of Corporate Governance
• Importance of Corporate Governance
• Rationale for This Study
• Motivation for This Study.
Introduction
We are living in an era of unprecedented globalisation that is transform-
ing the face of the world economy. A gradual lifting of trade barriers,
revolution in telecommunications, data processing and transportation
facilities have accelerated the pace of global inter-dependence turning the
world into an increasingly level playing field. Whereas there is no deny-
ing the positive impact of globalisation, its overall benefits remain une-
venly distributed across developed and emerging economies. Inadequate
development of Corporate Governance (CG) principles, particularly in
emerging economies, is seemingly an important factor that contributes
to this disparity. CG ‘is the whole system of controls, both financial and
© The Author(s) 2020 1

N. Tabassum and S. Singh, Corporate Governance and Organisational
Performance, https://doi.org/10.1007/978-3-030-48527-6_1
2 N. TABASSUM AND S. SINGH
otherwise, by which a company is directed and controlled’ (Cadbury,

1992). It involves a set of rules and relationships between the inter-
nal and external stakeholders of a company, aimed at creating an
environment in which the company can achieve its business objectives.
CG is a widely accepted tool in keeping businesses under control and
checks so as to prevent management from abusing their power and
corporate resources for personal benefit.
Evidence suggests that the degree to which companies comply with
good CG practices is an important factor in investors’ decision in choice
of companies. In 1996, McKinsey surveyed a large number of US inves-
tors, with the majority of respondents confirming they were willing to
pay a higher price for shares in companies that were well-governed,
responsive and proactive when it came to protecting the interests of
shareholders. In June 2002, McKinsey conducted a similar survey in
other parts of the world, including Asia, Europe and Latin America, with
respondents registering the same opinion as their American counterparts
in terms of being willing to pay premium for the shares and securities
of well-governed and transparent companies. Investors—both individ-
ual and institutional—are therefore recognised as being more likely to
risk their financial resources by making investments in companies with
a good record of CG achievements (Bushee, Carter, & Gerakos, 2014),
less information asymmetry and exploitation of the rights of minority
shareholders (Choe, Kho, & Stulz, 2005).
Corporate Governance practices have the potential to become a
powerful development tool for emerging economies seeking to achieve
national objectives. The importance of CG, for the commercial success
and ultimately (given the global hold of private enterprises) for the social
welfare of the world cannot be overstated. In the next section, we further
clarify the concept of CG.
Corporate Governance (CG)

The term ‘governance’ has its origin in Latin word gubernare, mean-
ing ‘to steer’, and has commonly been applied in the context of
the steering of a ship (Solomon, 2010). Corporate Governance,1 as
a term, is used as a proxy for authority and control in the context of
1 Henceforth we may use ‘governance’ to mean ‘Corporate Governance’.

1 CORPORATE GOVERNANCE 3
Fig. 1.1 A model of corporate governance (Source Corporate governance and

the balance sheet model of the firm—adapted from Ross et al. [2005])
public companies (Luo, 2007). Figure 1.1 portrays the essence of CG

in business environment; the left-hand side of the diagram depicts the
elements of a company’s internal CG whilst the right-hand side displays
the external elements of CG on the company. The management of the
company is shown as acting on behalf of the company’s shareholders
to decide where to direct the company’s financial and other operating
resources. The Board of Directors, as the most important component of
internal mechanism of CG, has the responsibility of advising and mon-
itoring management, hiring and firing, and senior management teams
(Jensen, 1993). The model highlights the separation between providers
and users of financial resources in a publicly traded firm, with this separa-
tion creating the need for suitable governance structures.
Defining Corporate Governance

The concept of CG, and the understanding of such, varies from firm to
firm, country to country, and even from scholar to scholar. Different
authors have defined the term CG in different ways and done so notably
in line with their own understanding, experience and interest in the sub-
ject. Some authors have defined the term in its narrow sense, whereas oth-
ers explain it in relation to its broader meanings (Abdullah & Page, 2009).
Despite the fact that CG has become a buzzword, its precise definition
remains blurred (Gillan, 2006). A survey of literature revealed an absence
of consensus as to what constitutes CG (Solomon, 2010). Following sec-
tion presents some of the commonly cited definitions in their narrow and
broad perspectives.
Narrow View of CG
In its narrowest sense, CG is defined as a system of relationships amongst
the internal actors of a firm, namely its Board of Directors, manage-
ment and shareholders. When defined in its narrow sense, the defini-
tion suggests that both the directors and management of the company
are only accountable to its shareholders (Cadbury, 1992; La Porta,
Lopez-de-Silanes, & Shleifer, 1999; Shleifer & Vishny, 1997). Sir Adrian
Cadbury, in his famous and widely recognised report The Financial
Aspects of Corporate Governance, defined CG as follows:
Corporate Governance is the system by which companies are directed and

controlled. Boards of directors are responsible for the governance of their
companies. The shareholders’ role in governance is to appoint the direc-
tors and the auditors and to satisfy themselves that an appropriate gov-
ernance structure is in place. The responsibilities of the directors include
setting the company’s strategic aims, providing the leadership to put them
into effect, supervising the management of the business and reporting to
shareholders on their stewardship. The Board’s actions are subject to laws,
regulations and shareholders in general meeting. (Cadbury, 1992: 14)
Similarly, Shleifer and Vishny (1997) define CG as “the ways in which

suppliers of finance to corporations assure themselves of getting return
on their investment”. CG has also been defined as “a set of mechanisms
through which outside investors (owners) protect themselves against expro-
priations by the insiders (managers)”. According to La Porta et al.
(1999), CG may be inferred as “a set of mechanisms through which outside
investors (owners) protect themselves against expropriations by the insiders
(managers)”.
The narrow view of CG is all about protecting the interest of those
who have supplied financial resources to the company.
Broader View of CG
The wider view of CG suggests taking a look beyond the interests of
investors and the company’s internal responsibilities. This view of CG
suggests that companies have a set of economic and social responsibilities
as well, towards other stakeholders in the company, including, for exam-
ple, employees, suppliers and the community. OECD has outlined this
perspective as follows:
Corporate Governance involves a set of relationships between a company’s

management, its Board, its shareholders and other stakeholders. Corporate
Governance also provides the structure through which the objectives of
the company are set, and the means of attaining those objectives and mon-
itoring performance are determined. (OECD, 2004: 11)
CG with a broader view has also been defined as:
The system of checks and balances, both internal and external to compa-
nies, which ensures that companies discharge their accountability to all
their stakeholders and act in a socially responsible way in all areas of their
business activity. (Solomon, 2010: 6).
In an elaborate attempt CG has also been defined as:
the private and public institutions, including laws, regulations and accepted
business practices, which together govern the relationship, in a market
economy, between corporate managers and entrepreneurs (‘corporate
insiders’) on one hand, and those who invest resources in corporations, on
the other. Investors can include suppliers of equity finance (shareholders),
suppliers of debt finance (creditors), suppliers of relatively firm-specific
human capital (employees) and suppliers of other tangible and intangible
assets that corporations may use to operate and grow. (Oman, 2001: 13)
Although there is no sole universal definition of CG, policymakers in dif-

ferent countries pursue the same objectives when seeking to grow public
trust and the confidence of investors (ICAEW, 2005). It is clear from
the definitions that good CG be founded on the principles of protec-
tion, accountability, transparency and disclosure. In its narrow outlook,
at the organisational level, CG creates trust between the suppliers of
finance and the company’s management; in its wider sense, CG creates
overall confidence at the aggregate economy level. In both cases, the end
goal is to protect shareholders whilst ensuring an efficient allocation of
resources for benefits of wider communities (OECD, 2004). This dual
objective makes CG more important and more difficult not only to
understand but also to apply to a wider group of stakeholders.
In this book, we argue that CG mechanism is a combination of both
internal and external factors put together to create an environment of
trust, ethics and moral values to direct and control the activities of com-
panies to create economic value for shareholders and to achieve a balance
between public and private interests.
The Importance of CG

McKinsey in 1996 surveyed a large number of US investors, and sub-
sequently found that investors were willing to pay a higher price for
shares in companies that were well-governed, responsive and proactive
in protecting the interest of shareholders. In a similar survey conducted
in 2002 in other parts of the world, including Asia, Europe and Latin
America, investors expressed similar sentiments, i.e. that they were will-
ing to pay premium for the shares and securities of well-governed and
transparent companies. This has also been confirmed in academic studies
(see, for example, Chen, Chen, & Chung, 2006). It has generally been
recognised that investors—individual and institutional—are more likely
to risk their financial resources by making investments in companies with
a good record of CG achievements (Bushee et al., 2014) and reduced
information asymmetry and exploitation of the rights of minority share-
holders (Choe et al., 2005). Good governance practices have the poten-
tial to become a powerful development tool, particularly in emerging
economies seeking to achieve goals of industrialisation.
Stressing the importance of good CG for domestic and international
economic activities, the OECD (2004) stated:
If countries are to reap the full benefits of the global capital market, and
if they are to attract long-term ‘patient’ capital, Corporate Governance
arrangements must be credible and well understood across borders. Even
if companies do not rely primarily on foreign sources of capital, adherence
to good Corporate Governance practices will help improve the confidence
of domestic investors, may reduce the cost of capital, and ultimately induce
more stable sources of financing. (OECD, 2004: 13)
Similarly, highlighting the importance of CG practices alongside

the need to improve and reform these practices at an international
level, Arthur Levitt, former Chair of the US Securities and Exchange
Commission has commented:
If a country does not have a reputation for strong Corporate Governance

practices, capital will flow elsewhere. If investors are not confident with
the level of disclosure, capital will flow elsewhere. If a country opts for lax
accounting and reporting standards, capital will flow elsewhere. All enter-
prises in that country – regardless of how steadfast a particular company’s
practices may be – suffer the consequences. Markets must now honor what
they perhaps, too often, have failed to recognise: markets exist by the grace
of investors.
The importance of sound CG is also evident when considering the rapid

development of reforms, best practice, and CG codes around the world,
including the Combined Code in the UK, Sarbanes-Oxley Act (SOX)
in the US, Principles and Recommendations of the ASX Corporate
Governance Council in Australia, the King III report in South Africa,
and G20/OECD Principles of Corporate Governance and the revised
Code of Corporate Governance in Pakistan.2 Jinarat and Quang (2003)
argue that the true importance of CG may be seen to lie in its ability to
effectively and efficiently deal with critical business issues. CG plays an
important role in creating value for shareholders. It serves as a mech-
anism in reducing perceived investment risk, and, as a result, investors
may demand lower rates of return on the capital they provide (Suchard,
Pham, & Zein, 2012). It is a key investment factor influencing institu-
tional investors’ decisions to invest in developing and emerging markets
(Gibson, 2003).
Whether or not a company considers CG to be important will in part
depend on how it thinks about it. If the company considers it as a com-
pliance issue for the company’s secretary to handle and the Board to sign
off on, then the company probably does not give it much weight. If, on
the other hand, it considers CG as strategic control framework within
2 Failure of some high-profile companies has been the driver behind many of these
reforms. Some well-known cases from around the world are: Enron (USA); BHS (UK);
Siemens (Germany); Parmalat (Italy); HIH Insurance (Australia); Satyam Computer
(India); Taj Company (Pakistan); Pakistan Railway (Pakistan).
which to set the company’s operational and behavioural standards for the
Board, the executive management and the wider staff, it will then be an
essential part of the company’s strategic corporate planning and execu-
tion. We believe that CG-orientated companies attempt to achieve not
only better performance but also access to low-cost financial resources,
combined with the propensity to attract and retain investors. This is par-
ticularly pertinent in the context of the emerging economies, such as
Pakistan, where companies compete fiercely for a limited pool of availa-
ble investible funds from lending institutions. Capital markets are under
developed, and financial institutions are not yet fully established in devel-
oping countries, which ultimately makes it doubly hard for companies to
obtain investment funding (McGee, 2009).
There are a number of high-profile corporate scandals and ultimate
collapses that have occurred despite the fact that accounting records
of these collapsed companies were subject to audit, and on the sur-
face seemed satisfactory. These scandals and consequent collapses not
only shook the capital markets around the world at the time when
they happened, they also had serious repercussion on the lives of inves-
tors, employees who lost their livelihood and savings invested in pen-
sion funds, contractors, and creditors who lent funds to the company.
Invariably, these collapses can be traced back to weak and sometime
blatantly corrupt CG practices. We highlight a selection of such cases.
Enron
Enron an energy company was founded in 1985 and it was one of the
top 10 companies in the USA based on its reported turnover published
in its accounts for the year ending December 2000. Enron’s bank-
ruptcy in December 2001 is hailed as the largest bankruptcy in the US
corporate history.3 Its spectacular fall can be gauged from the fact that
in October 2001 before the bankruptcy was announced, its share price
had plummeted from $90 to $0.50. Enron’s accounting practices were
anything but transparent and not in line with corporate governance
best practices. The company’s auditors Arthur Andresen (who also went
under with it) used fraudulent accounting practices to hide its mount-
ing losses. The company used special purpose entities (SPEs) structure
3 A celebrated documentary on it can be found at: https://www.youtube.com/
watch?v=_0vRuHn9MmI.
to hide its losses and mask liabilities. Enron showed billions of dollars
in profit while in reality it was rapidly losing money. The accounting
practices adopted by the company (and signed off by the auditors) main-
tained the fictitious rise in its share price but made it difficult for inves-
tors to understand how the company was making profit. The financial
irregularities at Enron resulting in its bankruptcy only show the impor-
tance of ethics, integrity, and honesty in corporate governance practices.
This much publicised failure emphasized the need for board of direc-
tors to act with honesty and integrity and external auditors to ask the
right questions to protect the interest of all stakeholders. Enron’s col-
lapse also stresses the need and importance of experienced non-executive
independent directors in the monitoring the activities of the execu-
tive directors. The Cadbury (1992) makes it clear that ‘Non-executive
directors should bring an independent judgement on issues of strategy,
performance, resources, including key appointments and standards of
conduct.’
Parmalat
Parmalat, an Italian company in dairy and food industries and a subsid-
iary of French multinational company Lactalis, was founded in 1961.
Despite becoming a spectacularly successful company, it collapsed in
2003 and has become Europe’s most prominent bankruptcy case study.
The company’s reach extended to 30 countries at its peak where it
acquired companies via debt financing. By the end of 2001, many of the
Parmalat’s acquired companies and divisions were making losses. The
company changed its financial strategy and moved to the use of com-
plex financial derivatives in an attempt to conceal its losses and financial
liabilities. In 2003, Parmalat found itself in serious financial difficulties
when it failed to honour bond payments, despite the fact that finan-
cial statements of the company were showing significant cash reserves.
Eventually, irregularities in its accounting records were discovered and
this highlighted an enormous black hole in its accounts. It was discov-
ered that €3.9 billion which were held in one of its subsidiary (Bonlat)
bank account with Bank of America in the Cayman Islands was forged
and did not exist. The company founder was found guilty of pro-
viding false and factious accounting information and deceiving the
investors. Similar to Enron, the downfall of Parmalat shows the impor-
tance of effective Corporate governance. It reinforces the belief to
establish strong risk-based monitoring within the company’s governance

structure to stop the abuse of power and the use of unethical and
fraudulent practices.
Palmer & Harvey

The collapse of Palmer & Harvey in the UK is a recent case which has
raised a number of questions on the quality and integrity of audit report-
ing, accounting practices, and corporate governance practices of the
companies operating in the country (Garrow & Awolowo, 2018). The
company had debts of over £700m when it collapsed and went into
administration in November 2017. The company’s financial reports
indicated that the company was facing cash-flow problems. The inves-
tigation from The Work and Pensions Select Committee into the col-
lapse of Palmer & Harvey exposed that directors and shareholders had
received millions of pounds in cash from the grocery wholesalers and
paid out more than £80m on its borrowing. The investigation also dis-
covered that the company sustained its dividend payments to share-
holders despite the growing deficit of the company’s pension fund. The
Investigation Committee’s report also exposed the chairman of the com-
pany who took about £6m as a loan to buy shares in the company from
an employee benefit trust in 2006. According to the same report, the
chairman, along with his spouse also received £2.5m in dividends from
2009. The collapse of Palmer & Harvey is an example of the lack of
separation between control and ownership and misalignment between
directors’ remuneration with the company’s financial performance and
stakeholders’ interests.
HIH Insurance
The collapse of HIH one of Australia’s leading insurance provider was
an enormous event in the corporate history of the country. This collapse
has become one of the largest corporate failure of the country with debts
of over A$5bn. The company went into financial troubles in 2001 when
company had written its insurance policies cheaply and failed to put
enough provisions to meet future obligations. The collapse of the com-
pany is due to its poor strategy i.e. enormous debt and inability to repay
dues on it brought the company down. The collapse of HIH highlights
the growing importance of the Government, the Regulators, Auditors
and the role board of directors. The collapse also shows that financial
institutions with their complex rules and reporting requirements, are
more likely to collapse in the absence of effective corporate governance,
due diligence, and leadership.
China Aviation Oil

China Aviation Oil (CAO) is a Singapore based company with its ulti-
mate control in the hands of its Chinese State-Owned parent company.
The company got into financial trouble in 2004 and suffered a loss of
US500 million on its speculative oil derivates trading. The CEO of the
company was charged in Singapore for forgery, insider trading and failure
to disclose the true financial position of the company. CAO started trad-
ing options in 2002 and 2003 but the trading was not disclosed in the
financial statements. Then from March 28, 2003, CAO started trading
options on its own account. By not following the best accounting prac-
tices, CAO made a critical error in the valuation of options. CAO valued
options at intrinsic value and ignored time value of money. As men-
tioned, CAO is a state-owned subsidiary and may have suffered due to
state influence and poor corporate governance practices. It is not uncom-
mon in state owned businesses for CEOs to have all the power which
allow them to take decisions in the best interest of the state rather the
wider stakeholders of the company.
Satyam Computers
Satyam Computers was a well-known Indian company which, similar
to Enron, its poor corporate practices brought it down. The nature of
the fraud committed at Satyam were similar in nature with the decep-
tion that caused Enron to collapse. In both the companies, the CEO
and the senior management of the companies systematically overstated
profits and understated financial liabilities in order to make their com-
panies look more attractive and appear much healthier than they actu-
ally were. The company tried to hide losses from investors and reported
made up cash balances in the financial statements. Even though Satyam
Computers was bought by another Indian Tech company, the share-
holders of Satyam Computers lost a significant value of their stake
in the business.
Mehran Bank
Mehran Bank was incorporated in October 1991 as public limited com-
pany and the bank’s shares were quoted on Karachi and Lahore Stock
exchanges in Pakistan. The founder and Chief Operating Officer of the
bank was a retired employee of another bank in Pakistan. He founded the
bank with the help his political allies and supporters. Since its incorpo-
ration, there were serious doubts about the objectives of the bank. With
access to powerful connections, even the State Bank of Pakistan exercised
little control over scrutinizing Mehran Bank’s licence application. The
bank misappropriated billions of Rupees as loans and donations to fund
the election campaign run by the bank’s affiliates. This financial collapse
of the bank exposed weaknesses in the country’s Corporate Governance
practices and raised serious doubts over the fair and transparent func-
tioning of financial institutions. The impacts of this corporate fraud were
widespread and were felt at individual, organisational and national levels.
A selection of cases as briefly discussed above show the importance
of good CG practices for the long-term survival of the company to safe-
guard interests of a myriad of stakeholders who have stakes in the com-
pany. Good CG practices not only safeguard the stakeholders but also
safeguard the enormous resources of the company in which funds are
sunk to yield future profits and value to society.
The Rationale for This Study

The Anglo-American CG model is a suitable governance model for mar-
ket economies. However, the economies of the continental Europe and
Japan operate differently from the Anglo−American model (Aoki & Ki
Kim, 1995) and it is also true for developing economies and those in
transition. For example, in Pakistan, instead of diffused shareholding,
concentrated ownership and banks have played an exclusive role in the
development of CG structures. Aoki and Ki Kim (1995) have argued
that the coexistence of the substitute models for corporate control sug-
gest that possible “lessons” from developed economies, for developing
and transition economies are not so obvious. A unique angle to which
this book points out is the emphasis on understanding the true nature of
the CG practices in developing countries such as Pakistan. Developing
and transition economies often lack the supporting institutional set-ups
and human resources and expertise essential for the implementation of
a sound CG; the challenge for these countries is to adapt systems of CG

tuned to their own corporate sector realities and implementation capabil-
ities, public and private, for them to be able to create a culture of com-
pliance and enforcement (Iskander & Chamlou, 2000). It is essential for
authorities and companies in Pakistan to understand this challenge so
that they can respond positively to the pressures of good CG. This book
would help them realise that by refining the system of CG they could
win investors’ confidence and attract financial resources to help deliver
better performance and value for stakeholders. Appendix D at end of the
book presents a detailed context of this study which would help readers
further understand the nature of CG in Pakistan.
When the work on this project was first initiated, a review of the liter-
ature revealed that relatively little attention had thus far been dedicated
towards developing an understanding of the links between CG and firm
performance, particularly in the context of emerging economies. In the
context of developed countries as well, the relationship between CG and
firm performance remains uncertain and is characterised by a degree of
ambiguity since a large majority of studies have only examined direct links
between CG practices and performance (O’Connell & Cramer, 2010).
Furthermore, the existing literature provides evidence of an excessive reli-
ance on the use of Agency Theory as a perspective from which to under-
stand governance–performance relationships (Shleifer & Vishny, 1997).
Ambiguity and doubts surrounding these mixed findings are reported
in many studies (e.g., Carpenter, Geletkanycz, & Sanders, 2004; Daily,
Dalton, & Cannella, 2003; Ghoshal, 2005), which have similarly ques-
tioned the suitability of Agency Theory in answering and covering all
aspects of the relationships between CG and performance. There is no
shortage of studies (see. Aguilera, Williams, Conley, & Rupp, 2006; Pye
& Pettigrew, 2005; Roberts, McNulty, & Sitles, 2005) in which research-
ers established that the scope of Agency Theory as being too narrow
to understand and explain the dynamic nature of CG and the roles of
various governance systems for diverse types of organisations operating
under different political and economic settings. Therefore, many research
questions remain unanswered in terms of the true nature of CG, its

impacts on firm performance, the protection of shareholder interests, and
other issues in the context of both developed and emerging economies.
There is a dearth of empirical evidence due to a lack of research initia-
tives, but possibly more importantly due to the non-availability of reliable
data. This work is an attempt to address this gap.
There is significant potential for this research to benefit, notably those

bearing similarities to Pakistan in terms of their culture, political, social
and economic structures.
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CHAPTER 2
Theories, Models and Mechanisms
This chapter outlines the development of Corporate Governance

discipline and provides a review of the central theories concerned with
the Corporate Governance. The chapter compares and contrasts a
number of theoretical frameworks and mechanisms, both internal and
external, that are adopted in this study in an effort to understand the
relationship between the structure of corporate Boards and their links
with firm performance. The specific objective of the chapter is to gain an
understanding of:
• Theories of Corporate Governance

• Corporate Governance Models
• Convergence of Corporate Governance Models
• Corporate Governance Mechanisms
• Landmark Developments in Corporate Governance.
Theories of CG
The development of CG is linked closely with the economic develop-
ment and diverse governance mechanisms developed to accommodate
different forms of corporate structures designed to achieve economic

goals. A number of unique theoretical structures have been developed
in an effort to explain and understand CG, each of which consider
CG from different angles. The theoretical literature on the develop-
ment of CG, as based on a number of theories, has its roots in diverse
© The Author(s) 2020 17

N. Tabassum and S. Singh, Corporate Governance and Organisational
Performance, https://doi.org/10.1007/978-3-030-48527-6_2
disciplines, including accounting, finance, law, economics and international

business (Solomon, 2010). Although the concept of CG has recently come
to prominence, theories underpinning its development date from much
earlier (Mallin, 2007). Therefore, some theories are recognised as being
more suitable, applicable and relevant to some countries than others.
The following section presents a summary account of essential theo-
ries linked to the development of CG systems and practices around the
world.
Agency Theory
A large amount of CG literature—notably in both developed and devel-
oping economies—has been built around the concept of Agency Theory.
Agency Theory was first introduced by Alchian and Demsetz (1972),
which was then further developed by Jensen and Meckling (1976: 308),
who explained Agency Theory as “a contract under which one or more
persons (the principal(s)) engage another person (the agent) to perform
some service on their behalf which involves delegating some decision making
authority to the agent”.
The theory is based on the concept of a separation within public
companies between shareholders (principals) and executive manage-
ment (agents) due to the company’s diffused ownership structure (Berle
& Means, 1932; Jensen & Meckling, 1976). The theory assumes that,
when both parties in the Agency relationship seek to maximise their own
utility, there is good reason to believe that the agent is unlikely to act in
the best interests of the principal (Jensen & Meckling, 1976). The the-
ory is primarily concerned with two issues that can arise in an Agency
relationship: the first arises when the parties in the relationship have
conflicting goals, and it is costly and difficult for the principal to mon-
itor and confirm both the agent’s actual actions and whether or not the
agent has followed the Agency contract correctly; the second issue relates
to the management of risk when the principal and agent have different
views and attitudes towards risk management. The theory also assumes
that those agents who normally control and possess internal and supe-
rior information may afford less importance to the owner’s interest and
engage in selfish behaviour (Fama & Jensen, 1983). Figure 2.1 illustrates
the various issues involved in the Agency relationship.
An Agency relationship gives agents incentive to expropriate the assets
of their firm by undertaking self-profiting projects with the potential to
2 THEORIES, MODELS AND MECHANISMS 19
Fig. 2.1 Issues in agency theory (Source Adopted and modified from Murthy
[2007])
yield personal benefits. Unless there are appropriate control mechanisms

in place centred on restricting the agent from behaving in self-interested
manner, the self-interested behaviour of the agent will increase the
Agency costs involved in writing and enforcing contracts (Fama &
Jensen, 1983; Jensen & Meckling, 1976; Shleifer & Vishny, 1997).
Agency theorists have designed several governance systems—both
internal and external—in an effort to reduce conflicts of interests
between parties and the Agency costs involved in a principal-agent rela-
tionship. Agency Theory views CG systems—particularly the Board
of Directors—as being an essential element of the governance system
in ensuring that problems resulting from the principal-agent relation-
ship are controlled (Mallin, 2007). The theory offers a useful frame-
work focused on understanding the monitoring function of the Board,
which requires that Boards play a ‘watchdog’ role since their fiduciary
duty is to protect the interest of shareholders (Bainbridge, 1993; Berle
& Means, 1932; Hillman & Dalziel, 2003). The monitoring func-
tion of the Board can reduce Agency costs inherent in the separation
of ownership and control, and, thus, improve firm performance (Fama,
1980; Mizruchi, 1983; Zahra & Pearce, 1989). Agency Theory advo-
cates a separate leadership structure, Board independence, and various
Board committees as optimal monitoring devices to reduce Agency costs

whilst also maximising the value of firms. The focus of Agency Theory is
directed towards determining the optimal contracts requiring implemen-
tation to control and influence the self-interested behaviour of the agent
(Eisenhardt, 1989).
A large amount of the existing literature on CG has emerged from
Agency Theory, yet the theory is subject to growing criticism and
remains problematic for researchers (Filatotchev, Jackson, & Kakajima,
2013). Globerman, Peng, and Shapiro (2011) argue that, for better
understanding of CG practices, researchers need to understand the insti-
tutional frameworks within which firms operate. Building on the existing
literature, Filatotchev et al. (2013) argue that the relationship between
the Board of Directors and firm performance may differ depending on
the legal system and institutional characteristics of any given country.
Agency Theory is more relevant to the Anglo-Saxon models of CG. The
specific conditions assumed under these models are the exception, rather
than the norm, for a large part of the world, including countries in the
South Asian region, which tend to feature high concentration of owner-
ship in listed companies (La Porta, Lopez-de-Silanes, & Shleifer, 1999).
Resource-Dependence Theory (RDT)

Resource-Dependence Theory (RDT) suggests that companies largely
depend on their external environment, particularly other organisations,
for their economic success—and, in some cases, for their survival. The
theory provides a hypothetical view in which the Board of Directors is a
critical resource for companies (Hillman, Cannella, & Paetzold, 2000).
The core of the theory suggests that, in a highly competitive business
environment, companies seek to control the uncertainty of external fac-
tors by ensuring that adequate internal resources are available and put in
place to deal with the competition (Barney, 2007). The main claim of
the theory is that companies seek to achieve control over their environ-
ment by overcoming their weaknesses and exploiting their opportunities.
From this perspective, RDT suggests that directors have a critical role
to play in connecting the firm with its external environment by securing
the resources required by the firm to successfully compete in its business
environment (Pfeffer & Salancik, 1978) and to enhance organisational
performance (Daily, Dalton, & Cannella, 2003).
2 THEORIES, MODELS AND MECHANISMS 21
The Board of Directors is an important mechanism for absorbing

critical elements of environmental uncertainty into the firm (Yusoff &
Alhaji, 2012). Emphasising the importance of the Board’s composi-
tion, Pearce and Zahra (1992) highlight the importance of the Board
of Directors beyond its traditional monitoring tasks, which are normally
viewed only from an Agency Theory perspective. In contrast to Agency
Theory, RDT suggests that a company’s Board is a strategic resource
linking the company to its external environment and providing access to
various external resources. According to RDT, the role of the Board is
centred in bringing resources to the firm, such as information, skills and
access to key suppliers, buyers and policymakers, in addition to business
legitimacy (Gales & Kesner, 1994; Hillman et al., 2000). In this sense,
the theory presents a strategic view of CG and views corporate Boards as
the linchpin between a company and the resources it needs to achieve its
strategic objectives (Barney, 2007; Tricker, 2012).
Figure 2.2 shows that firms use resources that are dependent upon the
external environment; turning them into output to create shareholder
wealth through better performance.
This theory is important when seeking to garner understanding
into the need for CG mechanisms, particularly the role of the Board of
Directors. RDT suggests that good CG is achieved when Board mem-
bers are appointed based on their knowledge, expertise and business
links to help firms cope successfully with uncertainties in their business
Fig. 2.2 The resource-dependent view of firms (Source Authors own

elaboration)
environment. From the RDT perspective, a Board that is structured in

an attempt to exercise control over its external environment is likely to
be fully equipped and well diversified (Burton, 1991), with a majority
of non-executive outside directors helping the company gain access to
vital resources (Johnson, Daily, & Ellstrand, 1996) and business legiti-
macy (Hillman et al., 2000). Rashid (2015) argues that there are many
qualities of independent directors that can add value to the firm. This
theory supports the appointment of directors to multiple Boards because
of their opportunities to gather information and network in various ways.
Williamson (1988) suggests that a firm can reduce the transaction costs
associated with environmental interdependency through environmental
connections or network governance.
Stakeholder Theory
Although company management is driven by a number of objectives,
the main objective of any commercial organisation is to create wealth
(value) for its shareholders. Therefore, a company’s management would
usually only adopt a view that supports and creates wealth for its share-
holders (Barney, 2007). However, this narrow focus on the maximisation
of shareholder wealth could have a negative impact on the interests of
other stakeholders in the company: it must be considered that companies
are an inherent part of the society in which they operate, and they also
have legal, social and ethical responsibilities to safeguard the interests of
everyone with a stake in them (Coyle, 2010).
Stakeholder Theory offers a wider view of companies, and considers
the interests of other stakeholders, such as customers, employees, dis-
tributors, suppliers, government and communities. McDonald and Puxty
(1979) argued that companies are no longer the instruments of share-
holders alone, and that they exist within communities, and, as such, have
responsibilities to those communities. The theory is rooted in the man-
agement discipline and has developed gradually following the work of
Freeman (1984). The theory suggests that companies are not merely a
pool of resources put together solely for the ultimate benefit of share-
holders, but that they are also vehicles for achieving social purposes
(Kanter, 2011). There are a number of different groups that are both
involved and participate in the success of a company, with each group
entitled to obtain its fair share of benefits from the company’s success
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soupir et laissa tomber sa tête sur sa poitrine: c’était encore une
feuille qui tombait de l’arbre enchanté de ses espérances.
Le général Franceschetti profita de cette heure de
découragement pour lui donner le conseil de ne point débarquer
dans les Calabres et de se rendre directement à Trieste, afin de
réclamer de l’Autriche l’asile qu’elle lui avait offert. Le roi était dans
un de ces instans de lassitude extrême et d’abattement mortel où le
cœur s’affaisse sur lui-même: il se défendit d’abord, et puis finit par
accepter. En ce moment, le général s’aperçut qu’un matelot, couché
dans des enroulemens de câbles, se trouvait à portée d’entendre
tout ce qu’il disait; il s’interrompit et le montra du doigt à Murat.
Celui-ci se leva, alla voir l’homme et reconnut Luidgi; accablé de
fatigue, il s’était endormi sur le pont. La franchise de son sommeil
rassura le roi, qui d’ailleurs avait toute confiance en lui. La
conversation interrompue un instant se renoua donc: il fut convenu
que, sans rien dire des nouveaux projets arrêtés, on doublerait le
cap Spartivento, et qu’on entrerait dans l’Adriatique; puis le roi et le
général redescendirent dans l’entrepont.
Le lendemain 8 octobre, on se trouvait à la hauteur du Pizzo,
lorsque Joachim, interrogé par Barbara sur ce qu’il fallait faire,
donna ordre de mettre le cap sur Messine; Barbara répondit qu’il
était prêt à obéir, mais qu’il avait besoin d’eau et de vivres; en
conséquence, il offrit de passer sur la felouque de Cicconi, et d’aller
avec elle à terre pour y renouveler ses provisions; le roi accepta;
Barbara lui demanda alors les passeports qu’il avait reçus des
puissances alliées, afin, disait-il, de ne pas être inquiété par les
autorités locales. Ces pièces étaient trop importantes pour que
Murat consentît à s’en dessaisir; peut-être le roi commençait-il à
concevoir quelque soupçon: il refusa donc. Barbara insista; Murat lui
ordonna d’aller à terre sans ces papiers; Barbara refusa
positivement; le roi, habitué à être obéi, leva sa cravache sur le
Maltais; mais en ce moment, changeant de résolution, il ordonna aux
soldats de préparer leurs armes, aux officiers de revêtir leur grand
uniforme; lui-même leur en donna l’exemple: le débarquement était
décidé, et le Pizzo devait être le golfe Juan du nouveau Napoléon.
En conséquence, les bâtimens se dirigèrent vers la terre. Le roi
descendit dans une chaloupe avec vingt-huit soldats et trois
domestiques, au nombre desquels était Luidgi. Arrivé près de la
plage, le général Franceschetti fit un mouvement pour prendre terre,
mais Murat l’arrêta: «C’est à moi de descendre le premier,» dit-il; et il
s’élança sur le rivage. Il était vêtu d’un habit de général, avait un
pantalon blanc avec des bottes à l’écuyère, une ceinture dans
laquelle étaient passés deux pistolets, un chapeau brodé en or, dont
la cocarde était retenue par une ganse formée de quatorze brillans;
enfin il portait sous le bras la bannière autour de laquelle il comptait
rallier ses partisans: dix heures sonnaient à l’horloge du Pizzo.
Murat se dirigea aussitôt vers la ville, dont il était éloigné de cent
pas à peine, par le chemin pavé de larges dalles disposées en
escalier qui y conduit. C’était un dimanche; on allait commencer la
messe, et toute la population était réunie sur la place lorsqu’il y
arriva. Personne ne le reconnut, et chacun regardait avec
étonnement ce brillant état-major, lorsqu’il vit parmi les paysans un
ancien sergent qui avait servi dans sa garde de Naples. Il marcha
droit à lui, et lui mettant la main sur l’épaule: «Tavella, lui dit-il, ne me
reconnais-tu pas?» Mais comme celui-ci ne faisait aucune réponse:
«Je suis Joachim Murat; je suis ton roi, lui dit-il: à toi l’honneur de
crier le premier vive Joachim!» La suite de Murat fit aussitôt retentir
l’air de ses acclamations; mais le Calabrais resta silencieux, et pas
un de ses camarades ne répéta le cri dont le roi lui-même avait
donné le signal; au contraire, une rumeur sourde courait par la
multitude. Murat comprit ce frémissement d’orage. «Eh bien! dit-il à
Tavella, si tu ne veux pas crier vive Joachim, va au moins me
chercher un cheval, et de sergent que tu étais, je te fais capitaine.»
Tavella s’éloigna sans répondre; mais au lieu d’accomplir l’ordre qu’il
avait reçu, il rentra chez lui et ne reparut plus. Pendant ce temps, la
population s’amassait toujours sans qu’un signe amical annonçât à
Murat la sympathie qu’il attendait. Il sentit qu’il était perdu s’il ne
prenait une résolution rapide. «A Monteleone!» s’écria-t-il en
s’élançant le premier vers la route qui conduisait à cette ville. «A
Monteleone! répétèrent en le suivant ses officiers et ses soldats. Et
la foule, toujours silencieuse, s’ouvrit pour les laisser passer.
Mais à peine avait-il quitté la place, qu’une vive agitation se
manifesta. Un homme nommé Georges Pellegrino sortit de chez lui
armé d’un fusil et traversa la place en courant et en criant: Aux
armes! Il savait que le capitaine Trenta Capelli, qui commandait la
gendarmerie de Cosenza, était en ce moment au Pizzo, et il allait le
prévenir. Le cri aux armes eut plus d’écho dans cette foule que n’en
avait eu celui de vive Joachim. Tout Calabrais a un fusil, chacun
courut chercher le sien, et lorsque Trenta Capelli et Pellegrino
revinrent sur la place, ils trouvèrent près de deux cents hommes
armés. Ils se mirent à leur tête et s’élancèrent aussitôt à la poursuite
du roi; ils le rejoignirent à dix minutes de chemin à peu près de la
place, à l’endroit où est aujourd’hui le pont. Murat en les voyant venir
s’arrêta et les attendit.
Trenta Capelli s’avança alors le sabre à la main vers le roi.—
Monsieur, lui dit celui-ci, voulez-vous troquer vos épaulettes de
capitaine contre des épaulettes de général? Criez vive Joachim! et
suivez moi avec ces braves gens à Monteleone.
—Sire, répondit Trenta Capelli, nous sommes tous fidèles sujets
du roi Ferdinand, et nous venons pour vous combattre et non pour
vous accompagner: rendez-vous donc si vous voulez prévenir
l’effusion du sang.
Murat regarda le capitaine de gendarmerie avec une expression
impossible à rendre; puis, sans daigner lui répondre, il lui fit signe de
la main de s’éloigner, tandis qu’il portait l’autre à la crosse de l’un de
ses pistolets. Georges Pellegrino vit le mouvement.
—Ventre à terre, capitaine! ventre à terre! cria-t-il. Le capitaine
obéit, aussitôt une balle passa en sifflant au-dessus de sa tête et alla
effleurer les cheveux de Murat.
—Feu! ordonna Franceschetti.
—Armes à terre! cria Murat; et, secouant de sa main droite son
mouchoir, il fit un pas pour s’avancer vers les paysans; mais au
même instant une décharge générale partit: un officier et deux ou
trois soldats tombèrent. En pareille circonstance, quand le sang a
commencé de couler, il ne s’arrête pas; Murat savait cette fatale
vérité, aussi son parti fut-il pris, rapide et décisif. Il avait devant lui
cinq cents hommes armés, et derrière lui un précipice de trente
pieds de hauteur: il s’élança du rocher à pic sur lequel il se trouvait
tomba dans le sable, et se releva sans être blessé, le général
Franceschetti et son aide-de-camp Campana firent avec le même
bonheur le même saut que lui, et tous trois descendirent rapidement
vers la mer, à travers un petit bois qui s’étend jusqu’à cent pas du
rivage, et qui les déroba un instant à la vue de leurs ennemis. A la
sortie de ce bois, une nouvelle décharge les accueillit; les balles
sifflèrent autour d’eux, mais n’atteignirent personne, et les trois
fugitifs continuèrent leur course vers la plage.
Ce fut alors seulement que le roi s’aperçut que le canot qui l’avait
déposé à terre était reparti. Les trois navires qui composaient sa
flottille, loin d’être restés pour protéger son débarquement, avaient
repris la mer et s’éloignaient à pleines voiles. Le Maltais Barbara
emportait non-seulement la fortune de Murat, mais encore son
espoir, son salut, sa vie: c’était à n’y pas croire à force de trahison.
Aussi le roi prit-il cet abandon pour une simple manœuvre, et, voyant
une barque de pêcheur tirée au rivage sur des filets étendus, il cria à
ses deux compagnons:—La barque à la mer.
Tous alors commencèrent à la pousser pour la mettre à flot, avec
l’énergie du désespoir, avec les forces de l’agonie. Personne n’avait
osé franchir le rocher pour se mettre à leur poursuite; leurs ennemis,
forcés de prendre un détour, leur laissaient quelques instans de
liberté. Mais bientôt des cris se firent entendre: Georges Pellegrino,
Trenta Capelli, suivis de toute la population du Pizzo, débouchèrent
à cent cinquante pas à peu près de l’endroit où Murat, Franceschetti
et Campana s’épuisaient en efforts pour faire glisser la barque sur le
sable. Ces cris furent immédiatement suivis d’une décharge
générale. Campana tomba: une balle venait de lui traverser la
poitrine. Cependant la barque était à flot: le général Franceschetti
s’élança dedans; Murat voulut le suivre, mais il ne s’était point
aperçu que les éperons de ses bottes à l’écuyère s’étaient
embarrassés dans les mailles du filet. La barque, cédant à
l’impulsion donnée par lui, se déroba sous ses mains, et le roi tomba
les pieds sur la plage et le visage dans la mer. Avant qu’il eût eu le
temps de se relever, la population s’était ruée sur lui: en un instant
elle lui arracha ses épaulettes, sa bannière et son habit, et elle allait
le mettre en morceaux lui-même, si Georges Pellegrino et Trenta
Capelli, prenant sa vie sous leur protection, ne lui avaient donné le
bras de chaque côté, en le défendant à leur tour contre la populace.
Il traversa ainsi en prisonnier la place qu’une heure auparavant il
abordait en roi. Ses conducteurs le menèrent au château; on le
poussa dans la prison commune, on referma la porte sur lui, et le roi
se trouva au milieu des voleurs et des assassins, qui, ne sachant
pas qui il était, et le prenant pour un compagnon de crimes,
l’accueillirent par des injures et des huées.
Un quart d’heure après, la porte du cachot se rouvrit, le
commandant Mattei entra: il trouva Murat débout, les bras croisés, la
tête haute et fière. Il y avait une expression de grandeur
indéfinissable dans cet homme à demi nu, et dont la figure était
souillée de boue et de sang. Il s’inclina devant lui.
—Commandant, lui dit Murat, reconnaissant son grade à ses
épaulettes, regardez autour de vous, et dites si c’est là une prison à
mettre un roi!
Alors une chose étrange arriva: ces hommes du crime, qui,
croyant Murat un de leurs complices, l’avaient accueilli avec des
vociférations et des rires, se courbèrent devant la majesté royale,
que n’avaient point respectée Pellegrino et Trenta Capelli, et se
retirèrent silencieux au plus profond de leur cachot. Le malheur
venait de donner un nouveau sacre à Joachim.
Le commandant Mattei murmura quelques excuses, et invita
Murat à le suivre dans une chambre qu’il venait de lui faire préparer;
mais, avant de sortir, Murat fouilla dans sa poche, en tira une
poignée d’or, et la laissant tomber comme une pluie au milieu du
cachot:
—Tenez, dit-il en se retournant vers les prisonniers, il ne sera pas
dit que vous avez reçu la visite d’un roi, tout captif et découronné
qu’il est, sans qu’il vous ait fait largesse.
—Vive Joachim! crièrent les prisonniers.
Murat sourit amèrement. Ces mêmes paroles, répétées par un
pareil nombre de voix, il y a une heure, sur la place publique, au lieu
de retentir dans une prison, le faisaient roi de Naples! Les résultats
les plus importans sont amenés parfois par des causes si minimes,
qu’on croirait que Dieu et Satan jouent aux dés la vie ou la mort des
hommes, l’élévation ou la chute des empires.
Murat suivit le commandant Mattei: il le conduisit dans une petite
chambre qui appartenait au concierge, et que celui-ci céda au roi. Il
allait se retirer lorsque Murat le rappela:
—Monsieur le commandant, lui dit-il, je désire un bain parfumé.
—Sire, la chose est difficile.
—Voilà cinquante ducats; qu’on achète toute l’eau de Cologne
qu’on trouvera. Ah! que l’on m’envoie des tailleurs.
—Il sera impossible de trouver ici des hommes capables de faire
autre chose que des costumes du pays.
—Qu’on aille à Monteleone, et qu’on me ramène ici tous ceux
qu’on pourra réunir.
Le commandant s’inclina et sortit.
Murat était au bain lorsqu’on lui annonça la visite du chevalier
Alcala, général du prince de l’Infantado et gouverneur de la ville. Il
faisait apporter des couvertures de damas, des draps et des
fauteuils. Murat fut sensible à cette attention, et il en reprit une
nouvelle sérénité.
Le même jour, à deux heures, le général Nunziante arriva de
Saint-Tropea avec trois mille hommes. Murat revit avec plaisir une
vieille connaissance; mais au premier mot, le roi s’aperçut qu’il était
devant un juge, et que sa présence avait pour but, non pas une
simple visite, mais un interrogatoire en règle. Murat se contenta de
répondre qu’il se rendait de Corse à Trieste en vertu d’un passeport
de l’empereur d’Autriche, lorsque la tempête, et le défaut de vivres
l’avaient forcé de relâcher au Pizzo. A toutes les autres questions,
Murat opposa un silence obstiné; puis enfin, fatigué de ses
instances:—Général, lui dit-il, pouvez-vous me prêter des habits, afin
que je sorte du bain?
Le général comprit qu’il n’avait rien à attendre de plus, salua le
roi et sortit. Dix minutes après, Murat reçut un uniforme complet; il le
revêtit aussitôt, demanda une plume et de l’encre, écrivit au général
en chef des troupes autrichiennes à Naples, à l’ambassadeur
d’Angleterre et à sa femme, pour les informer de sa détention au
Pizzo. Ces dépêches terminées, il se leva, marcha quelque temps
avec agitation dans la chambre; puis enfin, éprouvant le besoin d’air,
il ouvrit la fenêtre. La vue s’étendait sur la plage même où il avait été
arrêté.
Deux hommes creusaient un trou dans la sable, au pied de la
petite redoute ronde. Murat les regarda faire machinalement.
Lorsque ces deux hommes eurent fini, ils entrèrent dans une maison
voisine, et bientôt ils en sortirent portant entre leurs bras un cadavre.
Le roi rappela ses souvenirs, et il lui sembla en effet qu’il avait, au
milieu de cette scène terrible, vu tomber quelqu’un auprès de lui;
mais il ne savait plus qui. Le cadavre était complétement nu; mais à
ses longs cheveux noirs, à la jeunesse de ses formes, le roi
reconnut Campana: c’était celui de ses aides-de-camp qu’il aimait le
mieux. Cette scène, vue à l’heure du crépuscule, vue de la fenêtre
d’une prison; cette inhumation dans la solitude, sur cette plage, dans
le sable, émurent plus fortement Murat que n’avaient pu le faire ses
propres infortunes. De grosses larmes vinrent au bord de ses yeux
et coulèrent silencieusement sur sa face de lion. En ce moment le
général Nunziante rentra et le surprit les bras tendus, le visage
baigné de pleurs. Murat entendit du bruit, se retourna, et voyant
l’étonnement du vieux soldat:—Oui, général, lui dit-il, oui, je pleure.
Je pleure sur cet enfant de vingt-quatre ans, que sa famille m’avait
confié, et dont j’ai causé la mort; je pleure sur cet avenir vaste, riche
et brillant, qui vient de s’éteindre dans une fosse ignorée, sur une
terre ennemie, sur un rivage hostile. O Campana! Campana! si
jamais je remonte sur le trône, je te ferai élever un tombeau royal.
Le général avait fait préparer un dîner dans la chambre attenante
à celle qui servait de prison au roi: Murat l’y suivit, se mit à table,
mais ne put manger. Le spectacle auquel il venait d’assister lui avait
brisé le cœur; et cependant cet homme avait parcouru sans froncer
le sourcil les champs de bataille d’Aboukir, d’Eylau et de la
Moskowa!
Après le dîner, Murat rentra dans sa chambre, remit au général
Nunziante les diverses lettres qu’il avait écrites, et le pria de le
laisser seul. Le général sortit.
Murat fit plusieurs fois le tour de sa chambre, se promenant à
grands pas et s’arrêtant de temps en temps devant la fenêtre, mais
sans l’ouvrir. Enfin il parut surmonter une répugnance profonde,
porta la main sur l’espagnolette et tira la croisée à lui. La nuit était
calme, on distinguait toute la plage. Il chercha des yeux la place où
était enterré Campana: deux chiens qui grattaient la tombe la lui
indiquèrent. Le roi repoussa la fenêtre avec violence, et se jeta tout
habillé sur son lit. Enfin, craignant qu’on attribuât son agitation à une
crainte personnelle, il se dévêtit, se coucha et dormit, ou parut
dormir toute la nuit.
Le 9 au matin, les tailleurs que Murat avait demandés arrivèrent.
Il leur commanda force habits, dont il prit la peine de leur expliquer
les détails avec sa fastueuse fantaisie. Il était occupé de ce soin,
lorsque le général Nunziante entra. Il écouta tristement les ordres
que donnait le roi: il venait de recevoir des dépêches télégraphiques
qui ordonnaient au général de faire juger le roi de Naples, comme
ennemi public, par une commission militaire. Mais celui-ci trouva le
roi si confiant, si tranquille, et presque si gai, qu’il n’eut pas le
courage de lui annoncer la nouvelle de sa mise en jugement; il prit
même sur lui de retarder l’ouverture de la commission militaire
jusqu’à ce qu’il eût reçu une dépêche écrite. Elle arriva le 12 au soir.
Elle était conçue en ces termes:
Naples, 9 octobre 1815

«Ferdinand, par la grâce de Dieu, etc., avons décrété et
décrétons ce qui suit:
Art. 1er, Le général Murat sera traduit devant une
commission militaire, dont les membres seront nommés par
notre ministre de la guerre.
Art. 2. Il ne sera accordé au condamné qu’une demi-heure
pour recevoir les secours de la religion.
Signé Ferdinand.»
Un autre arrêté du ministre contenait les noms des membres de

la commission; c’étaient:
Giuseppe Fasculo, adjudant, commandant et chef de

l’état-major, président;
Laffaello Scalfaro, chef de la légion de la Calabre
inférieure;
Latereo Natali, lieutenant-colonel de la marine royale;
Gennaro Lanzetta, lieutenant-colonel du corps du génie;
W. T., capitaine d’artillerie;
François de Vengé, idem;
Francesco Martellari, lieutenant d’artillerie;
Francesco Froio, lieutenant au 3e régiment;

Giovanni della Camera, procureur-général au tribunal
criminel de la Calabre inférieure;
Et Francesco Papavassi, greffier.
La commission s’assembla dans la nuit. Le 13 octobre, à six

heures du matin, le capitaine Stratti entra dans la prison du roi, il
dormait profondément: Stratti allait sortir, lorsqu’en marchant vers la
porte il heurta une chaise; ce bruit réveilla Murat.—Que me voulez-
vous, capitaine? demanda le roi.
Stratti voulut parler, mais la voix lui manqua.
—Ah! ah! dit Murat, il paraît que vous avez reçu des nouvelles de
Naples?...
—Oui, sire, murmura Stratti.
—Qu’annoncent-elles? dit Murat.
—Votre mise en jugement, sire.
—Et par qui l’arrêt sera-t-il prononcé, s’il vous plaît? Où trouvera-
t-on des pairs pour me juger? Si l’on me considère comme un roi, il
faut assembler un tribunal de rois; si l’on me considère comme un
maréchal de France, il me faut une cour de maréchaux, et si l’on me
considère comme général, et c’est le moins qu’on puisse faire, il me
faut un jury de généraux.
—Sire, vous êtes déclaré ennemi public, et comme tel vous êtes
passible d’une commission militaire; c’est la loi que vous avez
rendue vous-même contre les rebelles.
—Cette loi fut faite pour des brigands, et non pour des têtes
couronnées, monsieur, dit dédaigneusement Murat. Je suis prêt, que
l’on m’assassine, c’est bien; je n’aurais pas cru le roi Ferdinand
capable d’une pareille action.
—Sire, ne voulez-vous pas connaître la liste de vos juges?
—Si fait, monsieur, si fait; ce doit être une chose curieuse: lisez,
je vous écoute.
Le capitaine Stratti lut les noms que nous avons cités. Murat les
entendit avec un sourire dédaigneux.
—Ah! continua-t-il lorsque le capitaine eut achevé, il paraît que
toutes les précautions sont prises.
—Comment cela, sire?
—Oui, ne savez-vous pas que tous ces hommes, à l’exception du
rapporteur Francesco Froio, me doivent leurs grades; ils auront peur
d’être accusés de reconnaissance, et, moins une voix peut-être,
l’arrêt sera unanime.
—Sire, si vous paraissiez devant la commission, si vous plaidiez
vous-même votre cause?
—Silence, monsieur, silence..... dit Murat. Pour que je
reconnaisse les juges que l’on m’a nommés, il faudrait déchirer trop
de pages de l’histoire; un tel tribunal est incompétent, et j’aurais
honte de me présenter devant lui; je sais que je ne puis sauver ma
vie, laissez-moi sauver au moins la dignité royale.
En ce moment, le lieutenant Francesco Froio entra pour
interroger le prisonnier, et lui demanda ses noms, son âge, sa patrie.
A ces questions, Murat se leva avec une expression de dignité
terrible: —Je suis Joachim Napoléon, roi des Deux-Siciles, lui
répondit-il, et je vous ordonne de sortir.—Le rapporteur obéit.
Alors Murat passa un pantalon seulement, et demanda à Stratti
s’il pouvait adresser des adieux à sa femme et à ses enfans. Celui-
ci, ne pouvant plus parler, répondit par un geste affirmatif; aussitôt
Joachim s’assit à une table, et écrivit cette lettre[9]:
«Chère Caroline de mon cœur,

»L’heure fatale est arrivée, je vais mourir du dernier des
supplices; dans une heure tu n’auras plus d’époux, et nos
enfans n’auront plus de père: souvenez-vous de moi et
n’oubliez jamais ma mémoire.
»Je meurs innocent, et la vie m’est enlevée par un
jugement injuste.
»Adieu, mon Achille; adieu, ma Lætitia; adieu, mon
Lucien; adieu, ma Louise.
»Montrez-vous dignes de moi; je vous laisse sur une terre
et dans un royaume pleins de mes ennemis: montrez-vous
supérieurs à l’adversité, et souvenez-vous de ne pas vous
croire plus que vous n’êtes, en songeant à ce que vous avez
été.
»Adieu, je vous bénis. Ne maudissez jamais ma mémoire.
Rappelez-vous que la plus grande douleur que j’éprouve
dans mon supplice est celle de mourir loin de mes enfans,
loin de ma femme, et de n’avoir aucun ami pour me fermer
les yeux.
»Adieu, ma Caroline; adieu, mes enfans; recevez ma
bénédiction paternelle, mes tendres larmes et mes derniers
baisers.
»Adieu, adieu; n’oubliez pas votre malheureux père.
»Pizzo, ce 15 octobre 1815.
»Joachim MURAT.»
Alors il coupa une boucle de ses cheveux et la mit dans la lettre:

en ce moment le général Nunziante entra; Murat alla à lui et lui tendit
la main:—Général, lui dit-il, vous êtes père, vous êtes époux, vous
saurez un jour ce que c’est que de quitter sa femme et ses fils.
Jurez-moi que cette lettre sera remise.
—Sur mes épaulettes, dit le général[10] en s’essuyant les yeux.

—Allons, allons, du courage, général, dit Murat; nous sommes
soldats, nous savons ce que c’est que la mort. Une seule grâce:
vous me laisserez commander le feu, n’est-ce pas? Le général fit
signe de la tête que cette dernière faveur lui serait accordée; en ce
moment le rapporteur entra, la sentence du roi à la main. Murat
devina ce dont il s’agisssait:—Lisez, monsieur, lui dit-il froidement, je
vous écoute.—Le rapporteur obéit. Murat ne s’était pas trompé; il y
avait eu, moins une voix, unanimité pour la peine de mort.
Lorsque la lecture fut finie, le roi se retourna vers Nunziante:—
Général, lui dit-il, croyez que je sépare, dans mon esprit, l’instrument
qui me frappe de la main qui le dirige. Je n’aurais pas cru que
Ferdinand m’eût fait fusiller comme un chien; il ne recule pas devant
cette infamie! c’est bien, n’en parlons plus. J’ai récusé mes juges,
mais non pas mes bourreaux. Quelle est l’heure que vous désignez
pour mon exécution?
—Fixez-la vous-même, sire, dit le général.
Murat tira de son gousset une montre sur laquelle était le portrait
de sa femme; le hasard fit qu’elle était tournée de manière que ce fut
le portrait et non le cadran qu’il amena devant ses yeux; il le regarda
avec tendresse:
—Tenez, général, dit-il en le montrant à Nunziante, c’est le
portrait de la reine, vous la connaissez; n’est-ce pas qu’elle est bien
ressemblante?
Le général détourna la tête. Murat poussa un soupir et remit la
montre dans son gousset.
—Eh bien! sire, dit le rapporteur, quelle heure fixez-vous?
—Ah! c’est juste, dit Murat en souriant, j’avais oublié pourquoi
j’avais tiré ma montre en voyant le portrait de Caroline.—Alors il
regarda sa montre de nouveau, mais cette fois du côté du cadran.—
Eh bien! ce sera pour quatre heures, si vous voulez; il est trois
heures passées, c’est cinquante minutes que je vous demande, est-
ce trop, monsieur?
Le rapporteur s’inclina et sortit. Le général voulut le suivre.
—Ne vous reverrai-je plus, Nunziante? dit Murat.
—Mes ordres m’enjoignent d’assister à votre mort, sire; mais je
n’en aurai pas la force.
—C’est bien, général, c’est bien; je vous dispense d’être là au
dernier moment; mais je désire vous dire adieu encore une fois et
vous embrasser.
—Je me trouverai sur votre route, sire.
—Merci. Maintenant laissez-moi seul.
—Sire, il y a là deux prêtres.—Murat fit un signe d’impatience.—
Voulez-vous les recevoir? continua le général.
—Oui, faites-les entrer.
Le général sortit. Un instant après les deux prêtres parurent au
seuil de la porte; l’un se nommait don Francesco Pellegrino: c’était
l’oncle de celui qui avait causé la mort du roi; et l’autre don Antonio
Masdea.
—Que venez-vous faire ici? leur dit Murat.
—Vous demander si vous voulez mourir en chrétien.
—Je mourrai en soldat. Laissez-moi.
Don Francesco Pellegrino se retira. Sans doute, il était mal à
l’aise devant Joachim. Quant à Antonio Masdea, il resta sur la porte.
—Ne m’avez-vous pas entendu? dit le roi.
—Si fait, répondit le vieillard; mais permettez-moi, sire, de ne pas
croire que c’est votre dernier mot. Ce n’est pas pour la première fois
que je vous vois et que je vous implore; j’ai déjà eu l’occasion de
vous demander une grâce.
—Laquelle?
—Lorsque votre majesté vint au Pizzo, en 1810, je lui demandai
25,000 francs pour faire achever notre église; votre majesté m’en
envoya 40,000.
—C’est que je prévoyais que j’y serais enterré, répondit en
souriant Murat.
—Eh bien! sire, j’aime à croire que vous ne refuserez pas plus
ma seconde prière que vous ne m’avez refusé la première. Sire, je
vous le demande à genoux.
Le vieillard tomba aux pieds de Murat.
—Mourez en chrétien!
—Cela vous fera donc bien plaisir? dit le roi.
—Sire, je donnerais le peu de jours qui me restent pour obtenir
de Dieu que son esprit vous visitât à votre dernière heure.
—Eh bien! dit Murat, écoutez ma confession: Je m’accuse, étant
enfant, d’avoir désobéi à mes parens; depuis que je suis devenu un
homme, je n’ai jamais eu autre chose à me reprocher.
—Sire, me donnerez-vous une attestation que vous mourez dans
la religion chrétienne?
—Sans doute, dit Murat; et il prit une plume et écrivit:
«Moi, Joachim Murat, je meurs en chrétien, croyant à la sainte
Eglise catholique, apostolique et romaine.» Et il signa.
—Maintenant, mon père, continua le roi, si vous avez une
troisième grâce à me demander, hâtez-vous, car dans une demi-
heure il ne serait plus temps. En effet, l’horloge du château sonna en
ce moment trois heures et demie.
Le prêtre fit signe que tout était fini.—Laissez-moi donc seul, dit
Murat. Le vieillard sortit.
Murat se promena quelques minutes à grands pas dans la
chambre; puis il s’assit sur son lit et laissa tomber sa tête dans ses
deux mains. Sans doute, pendant le quart d’heure où il resta ainsi
absorbé dans ses pensées, il vit repasser devant lui sa vie tout
entière, depuis l’auberge d’où il était parti jusqu’au palais où il était
entré; sans doute, son aventureuse carrière se déroula pareille à un
rêve doré, à un mensonge brillant, à un conte des Mille et une Nuits.
Comme un arc-en-ciel, il avait brillé pendant un orage, et comme un
arc-en-ciel, ses deux extrémités se perdaient dans les nuages de sa
naissance et de sa mort. Enfin il sortit de sa contemplation intérieure
et releva son front pâle, mais tranquille. Alors il s’approcha d’une
glace, arrangea ses cheveux: son caractère étrange ne le quittait
pas. Fiancé de la mort, il se faisait beau pour elle.
Quatre heures sonnèrent.
Murat alla lui-même ouvrir la porte.
Le général Nunziante l’attendait.
—Merci, général, lui dit Murat: vous m’avez tenu parole;
embrassez moi, et retirez-vous ensuite, si vous le voulez.
Le général se jeta dans les bras du roi en pleurant et sans
pouvoir prononcer une parole:
—Allons, du courage, lui dit Murat; vous voyez bien que je suis
tranquille.
C’était cette tranquillité qui brisait le courage du général! il
s’élança hors du corridor et sortit du château en courant comme un
insensé.
Alors le roi marcha vers la cour: tout était prêt pour l’exécution.
Neuf hommes et un caporal étaient rangés en ligne devant la porte
de la chambre du conseil. Devant eux était un mur de douze pieds
de haut; trois pas avant ce mur était un seuil d’un seul degré: Murat
alla se placer sur cet escalier, qui lui faisait dominer d’un pied à peu
près les soldats chargés de son exécution. Arrivé là, il tira sa montre,
baisa le portrait de sa femme, et les yeux fixés sur lui, il commanda
la charge des armes. Au mot feu! cinq des neuf hommes tirèrent:
Murat resta debout. Les soldats avaient eu honte de tirer sur leur roi;
ils avaient visé au-dessus de sa tête.
Ce fut peut-être en ce moment qu’éclata le plus magnifiquement
ce courage de lion qui était la vertu particulière de Murat. Pas un trait
de son visage ne s’altéra, pas un muscle de son corps ne faiblit;
seulement, regardant les soldats avec une expression de
reconnaissance amère:
—Merci, mes amis, leur dit-il; mais, comme tôt ou tard vous serez
obligés de viser juste, ne prolongez pas mon agonie. Tout ce que je
vous demande, c’est de viser au cœur et d’épargner la figure.
Recommençons.
Et avec la même voix, avec le même calme, avec le même
visage, il répéta les paroles mortelles les unes après les autres, sans
lenteur, sans précipitation, et comme il eût commandé une simple
manœuvre; mais cette fois, plus heureux que la première, au mot
feu! il tomba percé de huit balles, sans faire un mouvement, sans
pousser un soupir, sans lâcher la montre qu’il tenait serrée dans sa
main gauche[11].
Les soldats ramassèrent le cadavre, le couchèrent sur le lit, où
dix minutes auparavant il était assis, et le capitaine mit une garde à
la porte.
Le soir, un homme se présenta pour entrer dans la chambre
mortuaire: la sentinelle lui en refusa l’entrée; mais cet homme
demanda à parler au commandant du château. Conduit devant lui, il
lui montra un ordre. Le commandant le lut avec une surprise mêlée
de dégoût; puis, la lecture achevée, il le conduisit jusqu’à la porte
qu’on lui avait refusée.
—Laisser passer le seigneur Luidgi, dit-il à la sentinelle. La
sentinelle présenta les armes à son commandant. Luidgi entra.
Dix minutes s’étaient à peine écoulées, lorsqu’il sortit tenant à la
main un mouchoir ensanglanté. Dans ce mouchoir était un objet que
la sentinelle ne put reconnaître.
Une heure après, un menuisier apporta le cercueil qui devait
renfermer les restes du roi. L’ouvrier entra dans la chambre; mais
presque aussitôt il appela la sentinelle avec un accent indicible
d’effroi. Le soldat entrebâilla la porte pour regarder ce qui avait pu
causer la terreur de cet homme. Le menuisier lui montra du doigt un
cadavre sans tête.
A la mort du roi Ferdinand, on retrouva dans une armoire secrète
de sa chambre à coucher cette tête conservée dans de l’esprit-de-
vin[12].
Huit jours après l’exécution du Pizzo, chacun avait déjà reçu sa
récompense: Trenta Capelli était fait colonel, le général Nunziante
était créé marquis, et Luidgi était empoisonné.
PA S C A L B R U N O .
Ces détails m’étaient d’autant plus précieux, que je comptais,

dans quelques mois, partir pour l’Italie et visiter moi-même les lieux
qui avaient servi de théâtre aux principales scènes que nous venons
de raconter. Aussi, en reportant le manuscrit du général T., usai-je
largement de la permission qu’il m’avait donnée de mettre à
contribution ses souvenirs sur les lieux qu’il avait visités. On
retrouvera donc, dans mon voyage d’Italie, une foule de détails
recueillis par moi, il est vrai, mais dont je dois les indications à son
obligeance. Cependant mon consciencieux cicérone m’abandonna à
la pointe de la Calabre, et ne voulut jamais traverser le détroit.
Quoique exilé deux ans à Lipari et en vue de ses côtes, il n’avait
jamais mis le pied en Sicile, et craignait, en sa qualité de Napolitain,
de ne pouvoir se soustraire, en m’en parlant, à l’influence de la haine
que les deux peuples ont l’un pour l’autre.
Je m’étais donc mis en quête d’un réfugié sicilien, nommé
Palmieri, que j’avais rencontré autrefois, mais dont j’avais perdu
l’adresse, et qui venait de publier deux excellens volumes de
souvenirs, afin de me procurer, sur son île si poétique et si inconnue,
ces renseignemens généraux et ces désignations particulières qui
posent d’avance les bornes milliaires d’un voyage, lorsqu’un soir
nous vîmes arriver, faubourg Montmartre, no 4, le général T. avec
Bellini, auquel je n’avais pas songé, et qu’il m’amenait pour
compléter mon itinéraire. Il ne faut pas demander comment fut reçu
dans notre réunion tout artistique, où souvent le fleuret n’était qu’un
prétexte emprunté par la plume ou le pinceau, l’auteur de la
Somnambule et de la Norma. Bellini était de Catane: la première
chose qu’avaient vue ses yeux en s’ouvrant, étaient ces flots qui,
après avoir baigné les murs d’Athènes, viennent mourir

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Corporate Governance and

Organisational Performance: The

“In today’s complex and fast-moving business world, corporate governance

“This methodologically sophisticated and controversial study disputes the corre-

“Corporate Governance and Organizational Performance - The impact of

ISBN 978-3-030-48526-9 ISBN 978-3-030-48527-6 (eBook)

Corporate Governance is rightly regarded as one of the key issues of our

monograph.1 Our search showed that, to date, no work of this nature

Good Corporate Governance is about ‘intellectual honesty’ and not just

Furthermore, as a piece of advice for corporate sector of Pakistan vis-à-vis

London, UK Naeem Tabassum

students Tamer Darwish, Fattaah Mohamed, and Georgios Batsakis.

Professor Satwinder Singh

2 Theories, Models and Mechanisms 17

Transaction Cost Economics (TCE) Approach 25

3 Predictions of Corporate Governance Models 49

Resource-Dependence Role and Firm Performance

4 Research Design and Statistical Method 95

Empirical Model 117

5 Empirical Results and Discussion 135

Corporate Governance and Firm Performance

6 Summary and Implications of the Study 223

ACCA Association of Chartered Certified Accountants

ROE Return on Equity

Fig. 1.1 A model of corporate governance (Source Corporate

Fig. 4.1 Research philosophy of the current research (Source Adopted

Table 2.1 Key differences between the Pakistan’s and

Table 5.16 Correlation matrix of financial performance and corporate

This objective of this chapter is to introduce the concept of Corporate

© The Author(s) 2020 1

otherwise, by which a company is directed and controlled’ (Cadbury,

Corporate Governance (CG)

1 Henceforth we may use ‘governance’ to mean ‘Corporate Governance’.

Fig. 1.1 A model of corporate governance (Source Corporate governance and

public companies (Luo, 2007). Figure 1.1 portrays the essence of CG

Defining Corporate Governance

Corporate Governance is the system by which companies are directed and

Similarly, Shleifer and Vishny (1997) define CG as “the ways in which

Corporate Governance involves a set of relationships between a company’s

CG with a broader view has also been defined as:

In an elaborate attempt CG has also been defined as:

Although there is no sole universal definition of CG, policymakers in dif-

The Importance of CG

Similarly, highlighting the importance of CG practices alongside

If a country does not have a reputation for strong Corporate Governance

The importance of sound CG is also evident when considering the rapid

3 A celebrated documentary on it can be found at: https://www.youtube.com/

establish strong risk-based monitoring within the company’s governance

Palmer & Harvey

China Aviation Oil

The Rationale for This Study

a sound CG; the challenge for these countries is to adapt systems of CG

There is significant potential for this research to benefit, notably those

Gillan, S. L. (2006). Recent Developments in Corporate Governance: A

Theories, Models and Mechanisms

This chapter outlines the development of Corporate Governance

• Theories of Corporate Governance

© The Author(s) 2020 17

disciplines, including accounting, finance, law, economics and international

yield personal benefits. Unless there are appropriate control mechanisms

Board committees as optimal monitoring devices to reduce Agency costs

Resource-Dependence Theory (RDT)

The Board of Directors is an important mechanism for absorbing

ACCA Association of Chartered Certified Accountants

ROE Return on Equity

The Importance of CG

The Rationale for This Study