Governance and managing through the cycle

On my website www.corporategovernanceadvisory.com, I have recently reviewed a piece of research by Thomas Clarke of UST in Sydney entitled Cycles of Crisis and Regulation: The Enduring Agency and Stewardship Problems of Corporate Governance (2004).   Clarke considers the role of corporate governance throughout the business cycles and the inevitable failure to self-regulate in good times, resulting in regulatory action.  This paper really reasonated as many practicioners have commented about the stark contrast of governance/risk management/business risk-taking pre- and post-financial crisis and the firm's inability to get the balance between growth and risk governance right. 

I have just now come across another piece about governance and the business cycles entitled Enterprise Governance: Risk and Performance Management through the Business Cycle, by Wim A. Van der Stede in the May 2009 edition of CMA Management.  Van der Stede is a Professor of Accounting and Financial Management at LSE and an accomplished researcher. Clarke and Van der Stede share some views in common.  

Van der Stede talks about "an inverse relationship between scruitny and performance...".  He then adds: "In the aftermath of a crisis, we hear calls for government action.... Everyone is eager to listen to risk managers.... But when the crisis has passed and the boom times return, the tone changes... and the appetite for scrutiny of all kinds quickly wanes...".   Whereas Clarke positions his research squarely in the context of governance theory (i.e., shareholder-driven activity versus stewardship driven behaviours), Van der Stede choses instead to propose enterprise governance as a construct umbrella under which sits corporate and also business governance, respectively seeking reliable scrutiny and sustainable performance.  

There is a lot of scope here to explore further the relationship between business growth, re-trenchment/re-structuring, and the role of corporate governance to manage the volatility of business performance throughout the cycle, including in financial firms today.