One spectrum you can map governance failures onto is too-weak/too-strong. For example publicly traded firms often fail by excessive aggregation of power into the hands of the senior executives. Since there’s no meaningful oversight because the shareholders are highly fragmented, disinterested, and not particularly loyal. So over time more and more governance decisions default to senior management; and thenbad things can happen.
I’ve been thinking about this through the example domain of condo associations; using the examples Evan Mckenzie posts on his blog. The too-hot examples in that sphere are condo managers who become little dictators. I don’t doubt there is a great comedy movie waiting to be made about them.
Much more common I suspect are the failures of governance the too-cool kind. Since I first read Evan he has come to be concerned that these associations often (almost always) a financial time-bomb. That almost none of these associations are prepared to deal with the huge costs that will arise shortly when their infrastructure requires costly repairs. There are millions of these, because for example on my house is a two unit condo. Though of course some of them approach the size of small cities.
Our little garage roof is an example of a financial time bomb. We should have fixed 20 years ago but now it’s rotten and the whole thing will need to come off before it collapses onto the cars. This ain’t going to be cheap and nobody I know is interested in volunteering to project manage the job. A lot of these places were built on the cheap and sold fast, and in some of the big cities they sold off portions of the public housing stock to their poor residents. When those roof fails the residents won’t have my resources to deal with the problem. It’s a failure of my imagination that I can’t see the comedy movie waiting to be made about too little governance.
The in the condo associations the worse case scenarios of weak governance failures often require that the state step in. If the condo is forced to fix the roof and then can’t pay for it the courts will put them in receivership and the receiver will send the owners a bill that will bankrupt them. Here’s another example: the timesharing association was so weak that they didn’t pay their taxes and so the state sold the property. Apparently they are still disputing who ought to have been notified before the sale happened, the association board, or the horde of people who bought tiny time share slices?