Corporate Governance: The Chaotic Power of Financial Giants

Abstract

Theorists and practitioners of economics and business slowly beginning to understand the complexity of the corporate system, which today, for better or for worse rules the planet. One proof of that, is the fact that each of 29 financial corporations classified as SIFIs (Systemically Important Financial Institutions) work with an average consolidated assets of around $ 1.82 trillion for banks and $ 0.61 trillion for the insurance companies. For comparison USA GDP is around 15 trillion dollars, and Brazil's GDP, 7th world power, around $ 1.4 trillion. What is more, in recent years, the first in depth research on the worldwide corporate control network was published by the Swiss Federal Institute of Technology, which identified 147 groups that control 40% of the global corporate system. 75% of them were banks. A basic conclusion is unavoidable: over so many years of corporate concentration, through mergers and acquisitions, have created giants which present new management challenges. This is by far the main process that generates the present global instability and disorganization. It is worthwhile to systematize what recent research is showing, because if the 2008 crisis had any advantage it was to shed some light on the mechanisms. The paper shows, that so called corporate governance is basically chaotic power of giant corporations.