Purpose: identification of the original concept of compulsory governance structure. Design/methodology/approach: institutions that legally compel owners to entrust the governance of the firm to an independent outsider were sought. Their features were subjected to a cluster analysis in a form of Czekanowski's diagram. Based on Coase theorem, a definition is proposed. Findings: the compulsory governance structure is a regulatory mechanism aimed at neutralizing the social cost for stakeholders caused by ineffective firm. It introduces an external manager to the firm, who under special powers aims to remove the causes of inefficiency. During compulsory governance structure collateral transaction costs are internalized by the firm and transformed into additional coordination costs. The second finding is an observation that firm’s ineffectiveness might be measured by the level of stakeholders transaction costs. Research limitations/implications: relying solely on manifestations of compulsory governance structure in Poland. Originality/value: identification of a new research unit called compulsory governance structure and noting the relationship between firm ineffectiveness and stakeholders transaction costs.
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