Norms, advice networks and economic governance

Transcription

1 Norms, advice networks and economic governance The case of conflicts among shareholders at the Commercial Court of Paris Paola Tubaro 1 Emmanuel Lazega 2 Lise Mounier 3 1 The Business School, University of Greenwich, London 2 Dauphine University, Paris 3 Centre National de la Recherche Scientifique, Paris 4 June 2010

2 Introduction Outline Outline 1 Introduction 2 Case study 3 Analysis 4 Discussion

3 Introduction Motivation and background Business and the governance of markets Two forms of governance: Exogenous / formal: public-sector agencies. Endogenous / informal: business actors. Joint governance combines the two. Our case: a consular Court in which judges are peer-elected businesspeople acting as unpaid volunteers. They represent both official judicial authorities and their industry of origin.

4 Introduction Motivation and background Business and the governance of markets Two forms of governance: Exogenous / formal: public-sector agencies. Endogenous / informal: business actors. Joint governance combines the two. Our case: a consular Court in which judges are peer-elected businesspeople acting as unpaid volunteers. They represent both official judicial authorities and their industry of origin.

5 Introduction Motivation and background Business and the governance of markets Two forms of governance: Exogenous / formal: public-sector agencies. Endogenous / informal: business actors. Joint governance combines the two. Our case: a consular Court in which judges are peer-elected businesspeople acting as unpaid volunteers. They represent both official judicial authorities and their industry of origin.

6 Introduction Motivation and background Business and the governance of markets Two forms of governance: Exogenous / formal: public-sector agencies. Endogenous / informal: business actors. Joint governance combines the two. Our case: a consular Court in which judges are peer-elected businesspeople acting as unpaid volunteers. They represent both official judicial authorities and their industry of origin.

7 Introduction Motivation and background Our approach The Court as an organisation: what impact on judicial decision-making; Social structures within the Court: effects of status, homophily, and interactions; Empirical data: social network survey and jurisprudential study; Analytical tools: social network analysis.

8 Introduction Motivation and background Our approach The Court as an organisation: what impact on judicial decision-making; Social structures within the Court: effects of status, homophily, and interactions; Empirical data: social network survey and jurisprudential study; Analytical tools: social network analysis.

9 Introduction Motivation and background Our approach The Court as an organisation: what impact on judicial decision-making; Social structures within the Court: effects of status, homophily, and interactions; Empirical data: social network survey and jurisprudential study; Analytical tools: social network analysis.

10 Introduction Motivation and background Our approach The Court as an organisation: what impact on judicial decision-making; Social structures within the Court: effects of status, homophily, and interactions; Empirical data: social network survey and jurisprudential study; Analytical tools: social network analysis.

11 Case study The Commercial Court of Paris (CCP) Commercial Courts in France Commercial Courts: French approach to business conflict resolution for five centuries. Judges are retired businesspeople, and junior professionals in search of status and social contacts. They work at the Court one day a week -often at their employer s expense. Paris: first Commercial Court, handling 12 % of litigation and bankruptcy cases every year.

12 Case study The Commercial Court of Paris (CCP) Commercial Courts in France Commercial Courts: French approach to business conflict resolution for five centuries. Judges are retired businesspeople, and junior professionals in search of status and social contacts. They work at the Court one day a week -often at their employer s expense. Paris: first Commercial Court, handling 12 % of litigation and bankruptcy cases every year.

13 Case study The Commercial Court of Paris (CCP) Commercial Courts in France Commercial Courts: French approach to business conflict resolution for five centuries. Judges are retired businesspeople, and junior professionals in search of status and social contacts. They work at the Court one day a week -often at their employer s expense. Paris: first Commercial Court, handling 12 % of litigation and bankruptcy cases every year.

14 Case study The Commercial Court of Paris (CCP) Commercial Courts in France Commercial Courts: French approach to business conflict resolution for five centuries. Judges are retired businesspeople, and junior professionals in search of status and social contacts. They work at the Court one day a week -often at their employer s expense. Paris: first Commercial Court, handling 12 % of litigation and bankruptcy cases every year.

15 Case study The Commercial Court of Paris (CCP) Commercial Courts in France Commercial Courts: French approach to business conflict resolution for five centuries. Judges are retired businesspeople, and junior professionals in search of status and social contacts. They work at the Court one day a week -often at their employer s expense. Paris: first Commercial Court, handling 12 % of litigation and bankruptcy cases every year.

16 Case study The Commercial Court of Paris (CCP) Why consular Courts? Alleged advantages of this solution: Business bears most of the costs of its own regulation; By their very origin, consular judges may know the business world better than career magistrates.

17 Case study The Commercial Court of Paris (CCP) Why consular Courts? Alleged advantages of this solution: Business bears most of the costs of its own regulation; By their very origin, consular judges may know the business world better than career magistrates.

18 Case study The Commercial Court of Paris (CCP) Particular interests and the general interest Possible conflict between judges public mission and the interests of their industries of origin. Some industries are more active than others in sending in their representatives: Banking/finance has one third of judges in the Paris Court. It is over-represented relative to its weight in the economy. It also has many more judges with formal legal education.

19 Case study The Commercial Court of Paris (CCP) Particular interests and the general interest Possible conflict between judges public mission and the interests of their industries of origin. Some industries are more active than others in sending in their representatives: Banking/finance has one third of judges in the Paris Court. It is over-represented relative to its weight in the economy. It also has many more judges with formal legal education.

20 Case study Advice networks at the CCP The interest of advice network data Because decisions are collective, sheer presence does not imply influence. Solutions often depend on how problems are initially defined or framed; In an organisation, some members have the status to impose their views from start; They thus shape the common approach to the problem and eventually its solution. Advice networks map who listens to whom.

21 Case study Advice networks at the CCP The interest of advice network data Because decisions are collective, sheer presence does not imply influence. Solutions often depend on how problems are initially defined or framed; In an organisation, some members have the status to impose their views from start; They thus shape the common approach to the problem and eventually its solution. Advice networks map who listens to whom.

22 Case study Advice networks at the CCP The interest of advice network data Because decisions are collective, sheer presence does not imply influence. Solutions often depend on how problems are initially defined or framed; In an organisation, some members have the status to impose their views from start; They thus shape the common approach to the problem and eventually its solution. Advice networks map who listens to whom.

23 Case study Advice networks at the CCP The interest of advice network data Because decisions are collective, sheer presence does not imply influence. Solutions often depend on how problems are initially defined or framed; In an organisation, some members have the status to impose their views from start; They thus shape the common approach to the problem and eventually its solution. Advice networks map who listens to whom.

24 Case study Advice networks at the CCP The interest of advice network data Because decisions are collective, sheer presence does not imply influence. Solutions often depend on how problems are initially defined or framed; In an organisation, some members have the status to impose their views from start; They thus shape the common approach to the problem and eventually its solution. Advice networks map who listens to whom.

25 Case study Fieldwork Empirical data Advice network data collected in 2000, 2002 and In 2005, a jurisprudential study to elicit the norms that guide judges decisions when they use discretionary power. This was done by asking them to comment on cases judged by another Court. Norms may indirectly convey particular industries values, interests and representations.

26 Case study Fieldwork Empirical data Advice network data collected in 2000, 2002 and In 2005, a jurisprudential study to elicit the norms that guide judges decisions when they use discretionary power. This was done by asking them to comment on cases judged by another Court. Norms may indirectly convey particular industries values, interests and representations.

27 Case study Fieldwork Empirical data Advice network data collected in 2000, 2002 and In 2005, a jurisprudential study to elicit the norms that guide judges decisions when they use discretionary power. This was done by asking them to comment on cases judged by another Court. Norms may indirectly convey particular industries values, interests and representations.

28 Case study Fieldwork Empirical data Advice network data collected in 2000, 2002 and In 2005, a jurisprudential study to elicit the norms that guide judges decisions when they use discretionary power. This was done by asking them to comment on cases judged by another Court. Norms may indirectly convey particular industries values, interests and representations.

29 Case study Judges interventionism One norm: judges willingness to interfere with the decisions of a board The case: minority shareholders of a firm wanted to postpone the General Assembly and appoint an expert to scrutinize a refinancing operation decided by the board. Conflicting legal principles: should the Court protect the common interest of the company (above the parties), or rather ensure the independence of its board?

30 Case study Judges interventionism One norm: judges willingness to interfere with the decisions of a board The case: minority shareholders of a firm wanted to postpone the General Assembly and appoint an expert to scrutinize a refinancing operation decided by the board. Conflicting legal principles: should the Court protect the common interest of the company (above the parties), or rather ensure the independence of its board?

31 Case study Judges interventionism Judges responses Most Parisian judges would have supported the request of minority shareholders in this particular case. However, less than half would give preference to the common interest of a company more generally.

32 Analysis Modeling approach The stochastic actor-based approach Variable of interest is selection of advice ties by judges; Probabilities to observe ties are estimated (as in other models for qualitative variables); The model also accounts for dependency between network ties; Dynamic perspective: each state depends on the previous one and the first observation is taken as given; The model is actor-oriented in that it assumes that judges choose to change their own ties to others.

33 Analysis Modeling approach The stochastic actor-based approach Variable of interest is selection of advice ties by judges; Probabilities to observe ties are estimated (as in other models for qualitative variables); The model also accounts for dependency between network ties; Dynamic perspective: each state depends on the previous one and the first observation is taken as given; The model is actor-oriented in that it assumes that judges choose to change their own ties to others.

34 Analysis Modeling approach The stochastic actor-based approach Variable of interest is selection of advice ties by judges; Probabilities to observe ties are estimated (as in other models for qualitative variables); The model also accounts for dependency between network ties; Dynamic perspective: each state depends on the previous one and the first observation is taken as given; The model is actor-oriented in that it assumes that judges choose to change their own ties to others.

35 Analysis Modeling approach The stochastic actor-based approach Variable of interest is selection of advice ties by judges; Probabilities to observe ties are estimated (as in other models for qualitative variables); The model also accounts for dependency between network ties; Dynamic perspective: each state depends on the previous one and the first observation is taken as given; The model is actor-oriented in that it assumes that judges choose to change their own ties to others.

36 Analysis Modeling approach The stochastic actor-based approach Variable of interest is selection of advice ties by judges; Probabilities to observe ties are estimated (as in other models for qualitative variables); The model also accounts for dependency between network ties; Dynamic perspective: each state depends on the previous one and the first observation is taken as given; The model is actor-oriented in that it assumes that judges choose to change their own ties to others.

37 Analysis Variables Variables Endogenous network effects account for dependency between network ties and feedback effects: Locally: reciprocity, transitivity, three-cycles; Globally: degree-related effects (activity, popularity). Attributes of actors Internal Court structure: Chamber co-membership, Seniority. External pressures: bankers with legal education; Norms: Interventionism in boards. Attributes drive network dynamics in various ways: ego effect: judges with attribute seek more advice; alter effect: judges with attribute are more sought out for advice; similarity effect: judges similar on attribute seek advice from each other.

38 Analysis Variables Variables Endogenous network effects account for dependency between network ties and feedback effects: Locally: reciprocity, transitivity, three-cycles; Globally: degree-related effects (activity, popularity). Attributes of actors Internal Court structure: Chamber co-membership, Seniority. External pressures: bankers with legal education; Norms: Interventionism in boards. Attributes drive network dynamics in various ways: ego effect: judges with attribute seek more advice; alter effect: judges with attribute are more sought out for advice; similarity effect: judges similar on attribute seek advice from each other.

39 Analysis Variables Variables Endogenous network effects account for dependency between network ties and feedback effects: Locally: reciprocity, transitivity, three-cycles; Globally: degree-related effects (activity, popularity). Attributes of actors Internal Court structure: Chamber co-membership, Seniority. External pressures: bankers with legal education; Norms: Interventionism in boards. Attributes drive network dynamics in various ways: ego effect: judges with attribute seek more advice; alter effect: judges with attribute are more sought out for advice; similarity effect: judges similar on attribute seek advice from each other.

40 Analysis Advice network data The advice network Figure: The advice network at wave 1, n=228. Size of nodes is proportional to the number of incoming advice ties.

41 Analysis Advice network data The advice network: Bankers-Lawyers Figure: The advice network at waves 1,2, and 3. Four-sided polygons = bankers-lawyers, Eight-sided polygons = others.

42 Analysis Advice network data The advice network: Interventionism in boards Figure: The advice network at waves 1,2, and 3. Blue = Interventionists, Red = Non Interventionists, White = Non response.

43 Estimates Period 1 ( ) Period 2 ( ) Rate parameter (2.32) (15.45) Outdegree (density) (0.14) (0.49) Reciprocity 0.43 (0.15) (0.44) Transitive triplets 0.14 (0.03) 0.39 (0.06) 3-cycles (0.10) (0.45) Indegree - popularity (sqrt) 0.37 (0.02) 0.28 (0.06) Outdegree - popularity (sqrt) (0.06) (0.07) Outdegree - activity (sqrt) (0.02) (0.04) Chamber co-membership 1.43 (0.06) 1.99 (0.29) Seniority alter 0.04 (0.01) (0.01) Seniority ego 0.02 (0.01) (0.02) Seniority similarity (0.19) (0.71) BankLaw alter 0.18 (0.06) 0.03 (0.11) BankLaw ego (0.07) (0.14) BankLaw similarity 0.08 (0.07) 0.01 (0.15) Interv. Boards alter 0.12 (0.06) 0.15 (0.07) Interv. Boards ego 0.04 (0.06) 0.03 (0.16) Interv. Boards similarity (0.08) 0.05 (0.17) Interv. Boards ego x BankLaw alter 0.04 (0.06) (0.26) BankLaw ego x Interv. Boards alter (0.08) (0.28) Table: Estimates (standard errors in parentheses). If a parameter value is positive, then there is a higher probability of moving toward a network where the corresponding variable has a higher value; and the opposite if it is negative. Skip comment

44 Estimates Period 1 ( ) Period 2 ( ) Rate parameter (2.32) (15.45) Outdegree (density) (0.14) (0.49) Reciprocity 0.43 (0.15) (0.44) Transitive triplets 0.14 (0.03) 0.39 (0.06) 3-cycles (0.10) (0.45) Indegree - popularity (sqrt) 0.37 (0.02) 0.28 (0.06) Outdegree - popularity (sqrt) (0.06) (0.07) Outdegree - activity (sqrt) (0.02) (0.04) Chamber co-membership 1.43 (0.06) 1.99 (0.29) Seniority alter 0.04 (0.01) (0.01) Seniority ego 0.02 (0.01) (0.02) Seniority similarity (0.19) (0.71) BankLaw alter 0.18 (0.06) 0.03 (0.11) BankLaw ego (0.07) (0.14) BankLaw similarity 0.08 (0.07) 0.01 (0.15) Interv. Boards alter 0.12 (0.06) 0.15 (0.07) Interv. Boards ego 0.04 (0.06) 0.03 (0.16) Interv. Boards similarity (0.08) 0.05 (0.17) Interv. Boards ego x BankLaw alter 0.04 (0.06) (0.26) BankLaw ego x Interv. Boards alter (0.08) (0.28) Table: Estimates (standard errors in parentheses). If a parameter value is positive, then there is a higher probability of moving toward a network where the corresponding variable has a higher value; and the opposite if it is negative. Skip comment

45 Estimates Period 1 ( ) Period 2 ( ) Rate parameter (2.32) (15.45) Outdegree (density) (0.14) (0.49) Reciprocity 0.43 (0.15) (0.44) Transitive triplets 0.14 (0.03) 0.39 (0.06) 3-cycles (0.10) (0.45) Indegree - popularity (sqrt) 0.37 (0.02) 0.28 (0.06) Outdegree - popularity (sqrt) (0.06) (0.07) Outdegree - activity (sqrt) (0.02) (0.04) Chamber co-membership 1.43 (0.06) 1.99 (0.29) Seniority alter 0.04 (0.01) (0.01) Seniority ego 0.02 (0.01) (0.02) Seniority similarity (0.19) (0.71) BankLaw alter 0.18 (0.06) 0.03 (0.11) BankLaw ego (0.07) (0.14) BankLaw similarity 0.08 (0.07) 0.01 (0.15) Interv. Boards alter 0.12 (0.06) 0.15 (0.07) Interv. Boards ego 0.04 (0.06) 0.03 (0.16) Interv. Boards similarity (0.08) 0.05 (0.17) Interv. Boards ego x BankLaw alter 0.04 (0.06) (0.26) BankLaw ego x Interv. Boards alter (0.08) (0.28) Table: Estimates (standard errors in parentheses). If a parameter value is positive, then there is a higher probability of moving toward a network where the corresponding variable has a higher value; and the opposite if it is negative. Skip comment

46 Estimates Period 1 ( ) Period 2 ( ) Rate parameter (2.32) (15.45) Outdegree (density) (0.14) (0.49) Reciprocity 0.43 (0.15) (0.44) Transitive triplets 0.14 (0.03) 0.39 (0.06) 3-cycles (0.10) (0.45) Indegree - popularity (sqrt) 0.37 (0.02) 0.28 (0.06) Outdegree - popularity (sqrt) (0.06) (0.07) Outdegree - activity (sqrt) (0.02) (0.04) Chamber co-membership 1.43 (0.06) 1.99 (0.29) Seniority alter 0.04 (0.01) (0.01) Seniority ego 0.02 (0.01) (0.02) Seniority similarity (0.19) (0.71) BankLaw alter 0.18 (0.06) 0.03 (0.11) BankLaw ego (0.07) (0.14) BankLaw similarity 0.08 (0.07) 0.01 (0.15) Interv. Boards alter 0.12 (0.06) 0.15 (0.07) Interv. Boards ego 0.04 (0.06) 0.03 (0.16) Interv. Boards similarity (0.08) 0.05 (0.17) Interv. Boards ego x BankLaw alter 0.04 (0.06) (0.26) BankLaw ego x Interv. Boards alter (0.08) (0.28) Table: Estimates (standard errors in parentheses). If a parameter value is positive, then there is a higher probability of moving toward a network where the corresponding variable has a higher value; and the opposite if it is negative. Skip comment

47 Estimates Period 1 ( ) Period 2 ( ) Rate parameter (2.32) (15.45) Outdegree (density) (0.14) (0.49) Reciprocity 0.43 (0.15) (0.44) Transitive triplets 0.14 (0.03) 0.39 (0.06) 3-cycles (0.10) (0.45) Indegree - popularity (sqrt) 0.37 (0.02) 0.28 (0.06) Outdegree - popularity (sqrt) (0.06) (0.07) Outdegree - activity (sqrt) (0.02) (0.04) Chamber co-membership 1.43 (0.06) 1.99 (0.29) Seniority alter 0.04 (0.01) (0.01) Seniority ego 0.02 (0.01) (0.02) Seniority similarity (0.19) (0.71) BankLaw alter 0.18 (0.06) 0.03 (0.11) BankLaw ego (0.07) (0.14) BankLaw similarity 0.08 (0.07) 0.01 (0.15) Interv. Boards alter 0.12 (0.06) 0.15 (0.07) Interv. Boards ego 0.04 (0.06) 0.03 (0.16) Interv. Boards similarity (0.08) 0.05 (0.17) Interv. Boards ego x BankLaw alter 0.04 (0.06) (0.26) BankLaw ego x Interv. Boards alter (0.08) (0.28) Table: Estimates (standard errors in parentheses). If a parameter value is positive, then there is a higher probability of moving toward a network where the corresponding variable has a higher value; and the opposite if it is negative. Skip comment

48 Discussion Selection of advisors at the Court Endogenous status effects: rising demand for judges who are already much sought out for advice. Exogenous covariates: Internal structure: Chamber co-members are more likely to seek advice from one another. Bank/Finance: mixed evidence but still pointing to a status effect (more likely to receive, and less likely to send out, advice requests); Interventionism in boards: not a majority view but those who hold it are increasingly more likely to be selected as advisors. Time heterogeneity: due to changing network composition and cycles of centralization/decentralization. Also, possible impact of political changes between periods (law reform project failed).

49 Discussion Selection of advisors at the Court Endogenous status effects: rising demand for judges who are already much sought out for advice. Exogenous covariates: Internal structure: Chamber co-members are more likely to seek advice from one another. Bank/Finance: mixed evidence but still pointing to a status effect (more likely to receive, and less likely to send out, advice requests); Interventionism in boards: not a majority view but those who hold it are increasingly more likely to be selected as advisors. Time heterogeneity: due to changing network composition and cycles of centralization/decentralization. Also, possible impact of political changes between periods (law reform project failed).

50 Discussion Selection of advisors at the Court Endogenous status effects: rising demand for judges who are already much sought out for advice. Exogenous covariates: Internal structure: Chamber co-members are more likely to seek advice from one another. Bank/Finance: mixed evidence but still pointing to a status effect (more likely to receive, and less likely to send out, advice requests); Interventionism in boards: not a majority view but those who hold it are increasingly more likely to be selected as advisors. Time heterogeneity: due to changing network composition and cycles of centralization/decentralization. Also, possible impact of political changes between periods (law reform project failed).

51 Discussion Selection of advisors at the Court Endogenous status effects: rising demand for judges who are already much sought out for advice. Exogenous covariates: Internal structure: Chamber co-members are more likely to seek advice from one another. Bank/Finance: mixed evidence but still pointing to a status effect (more likely to receive, and less likely to send out, advice requests); Interventionism in boards: not a majority view but those who hold it are increasingly more likely to be selected as advisors. Time heterogeneity: due to changing network composition and cycles of centralization/decentralization. Also, possible impact of political changes between periods (law reform project failed).

52 Discussion Conclusions Complexity of joint governance arrangements We mapped advice networks at the Court to understand the cognitive and social processes underlying judicial decision-making. These processes shape influences and support the spread of norms and values in the institution. Our results show that influences can be subtle: not only representation, but also persuasion through advice ties. In particular, adherence to interventionism plays a major role in driving the dynamics of the advice network. Joint governance solutions are multifaceted systems of norms, values and interests.

53 Discussion Conclusions Complexity of joint governance arrangements We mapped advice networks at the Court to understand the cognitive and social processes underlying judicial decision-making. These processes shape influences and support the spread of norms and values in the institution. Our results show that influences can be subtle: not only representation, but also persuasion through advice ties. In particular, adherence to interventionism plays a major role in driving the dynamics of the advice network. Joint governance solutions are multifaceted systems of norms, values and interests.

54 Discussion Conclusions Complexity of joint governance arrangements We mapped advice networks at the Court to understand the cognitive and social processes underlying judicial decision-making. These processes shape influences and support the spread of norms and values in the institution. Our results show that influences can be subtle: not only representation, but also persuasion through advice ties. In particular, adherence to interventionism plays a major role in driving the dynamics of the advice network. Joint governance solutions are multifaceted systems of norms, values and interests.

55 Discussion Conclusions Complexity of joint governance arrangements We mapped advice networks at the Court to understand the cognitive and social processes underlying judicial decision-making. These processes shape influences and support the spread of norms and values in the institution. Our results show that influences can be subtle: not only representation, but also persuasion through advice ties. In particular, adherence to interventionism plays a major role in driving the dynamics of the advice network. Joint governance solutions are multifaceted systems of norms, values and interests.

56 Discussion Conclusions Complexity of joint governance arrangements We mapped advice networks at the Court to understand the cognitive and social processes underlying judicial decision-making. These processes shape influences and support the spread of norms and values in the institution. Our results show that influences can be subtle: not only representation, but also persuasion through advice ties. In particular, adherence to interventionism plays a major role in driving the dynamics of the advice network. Joint governance solutions are multifaceted systems of norms, values and interests.