Corporate governance options for the local subsidiaries of multinational enterprises

Kiel, Geoffrey C., Hendry, Kevin P., & Nicholson, Gavin J. (2006) Corporate governance options for the local subsidiaries of multinational enterprises. Corporate Governance: An International Review, 14(6), pp. 568-576.

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While the corporate governance literature generally focuses on the parent legal entity, many organisations are now multinational enterprises (MNEs) with subsidiaries that are most often legal entities in their host countries. Despite the strengthening of corporate governance regimes internationally, the boards of these subsidiaries are in many instances perfunctory. This paper examines the question of whether developments in corporate governance theory and practice can add value for the local subsidiaries of MNEs. This paper provides a theoretical basis for evaluating governance models in MNEs. The paper commences with a review of the key concepts from the MNE and conglomerates literature with respect to core MNE strategies. The paper then discusses what the "governance roles" are that must be performed in MNE subsidiaries. We propose four governance frameworks for subsidiary corporations. These frameworks are: (1) Direct Control; (2) Dual Reporting; (3) Advisory Board; (4) Local Board. We consider the strengths and weaknesses of each model in relation to international strategy theory. We conclude with recommendations for the conditions under which the various models may be appropriate and practical guidelines for the utilisation of corporate governance theory to improve MNE performance.

Impact and interest:

15 citations in Scopus
10 citations in Web of Science®
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ID Code: 5076
Item Type: Journal Article
Refereed: Yes
Additional URLs:
Keywords: corporate governance, multinational enterprises, subsidiary companies
DOI: 10.1111/j.1467-8683.2006.00531.x
ISSN: 1467-8683
Subjects: Australian and New Zealand Standard Research Classification > LAW AND LEGAL STUDIES (180000) > LAW (180100)
Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > ACCOUNTING AUDITING AND ACCOUNTABILITY (150100) > Auditing and Accountability (150102)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Copyright Owner: Copyright 2006 Blackwell Publishing
Copyright Statement: The definitive version is available at
Deposited On: 27 Oct 2006 00:00
Last Modified: 21 Jun 2017 14:39

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