Organizational governance: alternative models and some considerations for ethics in organizations

This paper reviews and discusses alternative models of organizational governance. To this purpose we follow the Milgrom's model (1988) defining a principal-agent framework where the principal can implement a decision according two possible alternative methods: the application of rules or the managerial discretion. The paper points out that managerial discretion always result in improved firm's performance with a principal complying with the organizational goals. Nevertheless, some reforms, especially in the public organizations, have been addressed to limit managerial discretion introducing more rules to template the managers' behavior. Disappointing results for some national reforms suggest-as policy implication- to invest in a greater development of ethical culture within organizations.