This paper aims to analyse the governance structure of monasteries to gain new insights and apply them to solve agency problems of modern corporations. In an historic analysis of crises and closures it asks, if Benedictine monasteries were and are capable of solving agency problems. The analysis shows that monasteries established basic governance instruments very early and therefore were able to survive for centuries.
The paper uses a dataset of all Benedictine abbeys that ever existed in Bavaria, Baden‐Württemberg, and German‐speaking Switzerland to determine their lifespan and the reasons for closures. The governance mechanisms are analyzed in detail. Finally, it draws conclusions relevant to the modern corporation. The theoretical foundations are based upon principal agency theory, psychological economics, as well as embeddedness theory.
The monasteries that are examined show an average lifetime of almost 500 years and only a quarter of them dissolved as a result of agency problems. This paper argues that this success is due to an appropriate governance structure that relies strongly on internal control mechanisms.
Benedictine monasteries and stock corporations differ fundamentally regarding their goals. Additional limitations of the monastic approach are the tendency to promote groupthink, the danger of dictatorship and the life long commitment.
The paper adds new insights into the corporate governance debate designed to solve current agency problems and facilitate better control.
By analyzing monasteries, a new approach is offered to understand the efficiency of internal behavioral incentives and their combination with external control mechanisms in corporate governance.
