Does the failure of the Pure Economic Model imply that it is impossible to establish a clear link between corporate governance and economic performance? Is corporate governance determined solely by political, social, and legal considerations, without any tie to corporate profitability? An economic calculation should be able to explain why, all else equal, a corporation with an inadequate model of corporate governance performs less well than an apparently well-governed corporation. Even if corporate governance does not have a direct effect on corporate results, the choice of governance model and its implementation must have an impact on costs, with more or less costs generated for a given level of efficiency. In this way, at least, corporate governance and economic performance are necessarily tied.

We want to stress the necessity of establishing a clear link between corporate governance and economic performance. On the one hand, as we have already shown in Chapter 1, economic performance is fundamental to the legitimacy of corporate governance. On the other hand, it is not acceptable to point out the difficulties of an existing theory (the PEM) without providing an alternative that builds on what has already been demonstrated. Rather than casting off the economic approach, therefore, we should try to integrate it as a critical dimension of analysis and show how it fits in with the other dimensions of legitimate governance in modern liberal society.