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Conclusion: The Managerial Revolution in American Business
(Chandler, 1977)

General patterns of institutional growth
1
...

2
...

2
...
One (strategy) was defensive or negative and stemmed from a desire
for security--prevent sources of supplies or outlets for goods and
services from being cut off or to limit entry of new competitors into the
trade
...
2
...

3
...
Because the marketers normally had a number of suppliers,
they were rarely threatened by the possibility of having their stocks cut off
...
The basic strategy of growth for the mass marketers was, then, one of
productive expansion
...

5
...

6
...

7
...

8
...

9
...


The ascendancy of the manager

The United States: seed-bed of managerial capitalism
1
...

2
...

3
...

4
...
Describing and analyzing the history of the new institution and the ways in
which it has carried out its basic functions in different nations can help to

define the organizational imperatives of modern economies and reveal
much about the ways in which cultural attitudes, values, ideologies,
political systems, and social structure affect these imperatives
...


THE IMPACT OF THE CORPORATION ON CLASSICAL ECONOMIC
THEORY (Berle, 1965)

Peterson's neoclassical thesis
1
...

2
...
No significant change has occurred in the institution of "property" as
represented by stock held by stockholders, and the stock markets in
substantial measure retain their capital allocation function
...
In greater concentration, large corporations even more markedly dominate
the transportation, public utility and communications industries
...
Control is atomized among large stockholder lists ranging from a minimum
of several thousand to a maximum of more than a million
...
The total number of individual stockholders is estimated at between 17 and
20 million individuals (more probably the lower figure)
...
Nearly one-third of all personally-owned property, apparently, now consists
of stock, representing ownership of the corporate system
...
Only the balance — not more than 20 per cent at best — and probably
closer this year to 15 per cent — is derived from personal "savings
...
Since economic theory is in preponderant measure dependent upon
assumed motivations, to maintain an unchanged theory must involve
assumption that the motivations and possibilities of action thereon are
substantially similar under present conditions as those prevailing before its
development
...
Stockholders physically cannot, and by law are not permitted, to enter the
decision-making process
...
It is maintained, with truth, that the opinions of stockholders do have
influence
...

3
...

4
...


THE IMMUTABILITY OF CLASSICAL ECONOMIC PRINCIPLES
1
...
Federal trade administration,
Department of Justice enforcement, and supporting legal rules in many
fields does maintain a version of the competitive system (Private
enterprises are under a competitive system)

Competition
1
...

2
...

3
...

4
...

5
...
But the impact, the degree, and the results of these restraints
have changed
...
Classic (and neoclassical) theory assumes that this fact excludes
possibility of significant use of the corporate assets and mechanism for
social purposes
...
Though the profit motive is regnant, it is modified in application, timing and
direction by all manner of companion considerations
...
When a certain size and degree of market control has been attained, crude
following of classically assumed patterns would probably involve the
corporation in difficulties with the public, with labor, with the antitrust laws,
with legislative and executive authority — though they could make
immediate gains
...
Corporate size and concentration is here a powerful, probably a
determinative, element
...

5
...

6
...

7
...


STOCKHOLDERS DERIVE WHAT INFLUENCE THEY HAVE FROM
SOCIAL-POLITICAL, NOT FROM ENTREPKENEUKIAL , FACTORS

The Denial of Slavery in Management Studies (Cooke, 2003)

THE ABSENCE AND PRESENCE OF SLAVERY IN MANAGEMENT
LITERATURE

What the exemplars Burnham, Braverman and Chandler have in common is
the construction of a grand narrative, in which the emergence of management
as an activity and of managers as a group or class is a consequence of the
growth and increasing industrial sophistication of a globalizing capitalist
economy
...
First, for management to be modern, it has to take place within the
capitalist system
...
Second, for management to be management, the activities carried out in
its name have to be of a certain level of sophistication – for Chandler,
beyond the apparently simple harnessing of enslaved people’s seasonally
varying labour, for Burnham and Braverman in order to achieve wage
labourers’ submission to capitalist relations and processes of production
...
Third there has to be a group of people carrying out these management
activities who have a distinctive identity as managers
...


Four questions:
1
...
What does agency theory contribute to organizational theory?
3
...
What topics and contexts are fruitful for organizational researchers who
use agency theory?

Origins of agency theory
1
...

2
...
1
...

2
...
Risk sharing that arises when the principal and agent have different
attitudes toward risk
...
The focus of the theory is on determining the most efficient contract
governing the principal-agent relationship given assumptions about people
(e
...
, self-interest, bounded rationality, risk aversion), organizations (e
...
,
goal conflict among members), and information (e
...
, information is a
commodity which can be purchased)
...
Is a behavior-oriented contract (e
...
, salaries, hierarchical governance)
more efficient than an outcome-oriented contract (e
...
, commissions, stock

options, transfer of property rights, market governance)?

Agency theory
Positivist Agency Theory
1
...

2
...

2
...
When the contract between the principal and agent is outcome based,
the agent is more likely to behave in the interests of the principal
...
2
...


Principal-Agent Research
1
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2
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3
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4
...

5
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6
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7
...

the agent may claim to have certain skills or abilities when he or she is
hired
...
In the case of unobservable behavior the principal has two options
...
1
...
2
...

8
...
(Outcome uncertainty is positively related to behavior-based contracts
and negatively related to outcome-based contracts
...
The heart of principal-agent theory is the trade-off between (a) the cost of
measuring behavior and (b) the cost of measuring outcomes and
transferring risk to the agent
...
The risk aversion of the agent is positively related to behavior-based
contracts and negatively related to outcome-based contracts
...
The risk aversion of the principal is negatively related to behavior-based
contracts and positively related to outcome-based contracts
...
The goal conflict between principal and agent is negatively related to
behavior-based contracts and positively related to outcome-based
contracts
...
Programmability is defined as the degree to which appropriate behavior by
the agent can be specified in advance
...
Task programmabiiity is positively related to behavior-based contracts and
negatively related to outcome-based contracts
...
Outcome measurability is negatively related to behavior-based contracts
and positively related to outcome-based contracts
...
The

length

of

the

agency

relationship

is

positively

related

to

behavior-based contracts and negatively related to outcome-based
contracts
...
Clan control implies goal congruence between people and, therefore, the
reduced need to monitor behaviour or outcomes
...

Contributions of Agency Theory
1
...

2
...
g
...
g
...

3
...

4
...

5
...

6
...


Empirical Results
Results of the Positivist Stream
1
...


Results of the Principal-Agent Stream

Recommendations for Agency Theory Research
Focus on Information Systems, Outcome Uncertainty, and Risk

Key on Theory-Relevant Contexts
1
...

1
...
Substantial goal conflict between principals and agents, such that
agent opportunism is likely
1
...
Sufficient outcome uncertainty to trigger the risk implications of the
theory
1
...
Unprogrammed or team-oriented jobs in which evaluation of behaviors
is difficult
...


RESIDUAL CLAIMS AND DECISION PROCESSES
Residual Claims
1
...
We call these agents the residual
claimants or residual risk bearers
...
Having most uncertainty borne by one group of agents, residual claimants,
has survival value because it reduces the costs incurred to monitor
contracts with other groups of agents and to adjust contracts for the
changing risks borne by other agents and add to the survival value of
organisation
...
Initiation-generation of proposals for resource utilization and structuring of
contracts (decision management);
2
...
Implementation-execution of ratified decisions (management)
4
...
(control)

FUNDAMENTAL RELATIONS BETWEEN RISK-BEARING AND DECISION
PROCESSES
The Problem
1
...


2
...

3
...

4
...


Combination of Decision Management, Decision Control, and Residual Risk
Bearing
1
...

2
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3
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4
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5
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6
...
Moreover, when residual claims are restricted to decision agents, it is
generally rational for the residual claimant-decision makers to assign lower
values to uncertain cash flows than residual claimants would in
organizations where residual claims are unrestricted and risk bearing can
be freely diversified across organizations
...
Such a combining of decision and risk-bearing functions is efficient in small
noncomplex organizations because the benefits of unrestricted risk
sharing and specialization of decision functions are less than the costs that
would be incurred to control the resulting agency problems
...
Hypothesis: organizations, including large open corporations, large
professional partnerships, financial mutuals, and nonprofits, control the
agency problems that result from separation of decision management from
residual risk bearing by separating the management (initiation and
implementation) and control (ratification and monitoring) of decisions
...
Specific Knowledge and Diffusion of Decision Functions
2
...
Complex--specific knowledge relevant to different decisions knowledge which is costly to transfer across agents - is diffused
among agents at all levels of the organization
2
...
This generally means that efficient decision control, like efficient
decision management, involves delegation and diffusion of decision
control as well as separation of decision management and control at
different levels of the organization
...
Diffuse Residual Claims and Delegation of Decision Control
3
...
Having many residual claimants has advantages in large complex
organizations because the total risk of net cash flows to be shared is
generally large and there are large demands for wealth from residual
claimants to bond the payoffs promised to a wide range of agents and

to purchase risky assets
...
2
...

4
...

4
...
separation of decision management and residual risk bearing is a
characteristic of nonprofit organizations and financial mutuals, large
and small, complex and non-complex
...
Common General Features of Decision Control Systems
...
1
...
1
...
Such hierarchical partitioning of the decision process makes it
more difficult for decision agents at all levels of the organization
to take actions that benefit themselves at the expense of
residual claimants
...
2
...
2
...
When agents interact to produce outputs, they acquire low-cost
information about colleagues, information not directly available
to higher level agents
...

5
...
Boards of directors
5
...
1
...


THE SPECTRUM OF ORGANIZATIONS
Open Corporations
1
...
1
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1
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Unrestricted common stock is attractive in complicated risky activities
where substantial wealth provided by residual claimants is needed to
bond the large aggregate payoffs promised to many other agents
...
3
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2
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2
...
The stock market
2
...
1
...

2
...
The market for takeovers
2
...
1
...
3
...
3
...
However, the board is not an effective device for decision control
unless it limits the decision discretion of individual top
managers
...
3
...
The decision processes of some open corporations seem to be
dominated by an individual manager, generally the chief
executive

officer

(absence

of

separation

of

decision

management and decision control)
...
3
...
Effective separation of top-level decision management and
control means that outside directors have incentives to carry out
their tasks and do not collude with managers to expropriate
residual claimants
...
Mutual Monitoring, Specific Knowledge, and Restricted Residual Claims
...
Large Professional Partnership
2
...
The boards of large professional partnerships are generally called
committees of managing partners rather than boards of directors
...
2
...


Financial Mutuals
1
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2
...
1
...

3
...

3
...
Because of the strong form of diffuse decision control inherent in the
redeemable residual claims of financial mutuals, however, their boards
are less important in the control process than the boards of open
non-financial corporations
...
In a nonprofit organization, however, there are no agents with alienable
rights in residual net cash flows and thus there are no residual claims
...
Nonprofit Boards
2
...
Nonprofit boards generally include few if any internal agents as voting
members, and nonprofit boards are often self-perpetuating, that is,

new members are approved by existing members
...
2
...

3
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4
...

5
...
Boards real power: legal authority; solidarity as a group; the more open the
CEO was to the board's ideas, the more opportunity the board had to
influence corporate decision-making,
2
...

3
...
These changes developed into a set of
widely-recognized best practices
...
In essence, these best practices enhanced the power of boards in relation
to management and other top executives
...
When such a "quiet approach" to remedying corporate governance sins
did not bring results, institutional investors sometimes used a public
approach
...
In the beginning of the new century two different governance-related crises
struck the American business scene
...
1
...

6
...
The second governance failure was the wave of fraud and misleading
accounting that occurred at companies like Enron, Tyco, and
WorldCom--all featured improper or fraudulent accounting practices
and inflation of the earnings of senior managers, and in the case of
Tyco, even a so-called independent director
...
An important question is whether the boards of these companies adopted
the best practices described above
...
These boards mostly followed the traditional approach in which the CEO

had great power
...
The directors in both instances were in thrall to their CEO

THE FINANCIAL MELTDOWN
1
...

2
...


TWENTY FIVE YEARS OF PROGRESS?
1
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2
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3
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4
...
1
...

4
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Those who are proposing particular changes understand and care
about only part of the system
...
The most beneficial changes have emanated from boards and their
advisors
...
Many of the ideas that emanated from shareholders were aimed at matters
which were specified in laws and corporate legal documents, but which
had little or no impact on how boards functioned
...
Improving communication and understanding between the two sides
(shareholders and directors) could reduce the danger that unintended
consequences will impede progress in improving governance reform
...
we need a better process for overseeing executive compensation, more
directors on boards who are both independent and knowledgeable,
improved communications between companies and longterm shareholders,
and finally, a re-examination of staggered boards
...
Improving corporate governance more rapidly not only requires a more
precise agreement about the purposes of the corporation, but also
requires that the major actors involved in governance have a forum in
which these issues can be explored and agreed upon
...


The new capitalist (Davis et al, 2007)

Lies, damn lies and statistics
1
...
We are also
owners of capital on which UK plc depends

A new take on shareholder value
1
...


No-one ever washed a rented car
1
...


What now?
1
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2
...


The Resource Dependence Role of Corporate Directors
(Hillman et al, 2000)

In this paper, we assert that because the two roles of directors, agency and
resource dependence are theoretically and practically distinct, the salient
attributes and characteristics used to examine board composition should
similarly be distinct
...


After presenting the resource dependence taxonomy we explore the role of
resource dependence by examining the changing nature of board composition
in an industry undergoing a major environmental change
...
In the resource dependence role, directors serve to connect the firm with
external factors which generate uncertainty and external dependencies
...
One potential result of linking the firm with external environmental factors
and reducing uncertainty is a reduction in transaction costs associated
with the firm’s external linkages
...
One of the basic propositions of resource dependence theory is that the
need for environmental linkage is a direct function of the levels and types
of dependence facing an organization
...
Using the classification scheme of insiders and outsiders, one might
reason

that

as

environmental

dependencies

and

environmental

uncertainty increase, the need for external linkages increases and more
outsiders would be needed on the board
...
These differences (among directors) reflect the heterogeneity of resources
such as expertise, skill, information and the potential linkages to other
external constituencies
...
While each inside director may have specific types of expertise as well as
specific relationships or linkages with environmental contingencies, the
primary resource each provides is internally focused
...


3
...
The composition of the board may be strategically altered in order to
provide the benefits of reduced uncertainty for firms in a different
environment and to facilitate strategic change
...
Also, if directors act to link the firm with its external environment and the
environment shifts significantly, the effectiveness of linkages may need to
be re-evaluated
...
That is, while the four categories developed above capture the central
resources and linkages that contribute to the resource dependence role,

the relative need for directors in each category will vary based on the
environment
...
If the composition of boards is a reflection of the external environment,
then, as a firm’s environment changes, board composition should change
as well
...
In addition, if directors serve to reduce environmental uncertainty, the
importance of individual attributes will be differentially affected by changes
in the environment
...

1
...
1
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2
...
1
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3
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1
...

4
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1
...


Discussion and conclusion
1
...

2
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3
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The court system greatly affects board behavior
...
Pension funds are a second institutional force pressuring boards to get
more involved
...
The market for corporate control is a third major institutional force
pressuring boards to become more involved
...
Researchers simply do not know what boards' roles are in the strategic
decision-making process, nor do we know what influences that
involvement
...
The Institutional Perspective
2
...
The key idea behind institutionalization is that much organizational
action reflects a pattern of doing things that evolves over time and
becomes legitimated within an organization and an environment
(Pfeffer, 1982)
...
2
...

2
...
The institutional perspective is a relatively deterministic theoretical
framework that places great emphasis on environmental norms and
the weight of firm history as explanations of organizational actions
...
The Strategic Choice Perspective
3
...
The strategic choice perspective (Andrews, 1986; Child, 1972) focuses
on the actions organizational members take to adapt to an
environment as an explanation for organizational outcomes
...
An Integration of the Two Perspectives

Hypothesis
1
...
1
...

2
...
1
...

3
...
1
...

4
...
1
...

5
...
1
...

6
...

7
...


Agency theory
1
...
Agents accept the responsibility
of managing a principal's investments (wealth), because they perceive the
possibility of gaining more utility with this opportunity than by accepting
other opportunities
...
In stewardship theory, the model of man is based on a steward whose
behavior is ordered such that pro-organizational, collectivistic behaviors
have higher utility than individualistic, self-serving behaviors
...
A steward protects and maximizes shareholders' wealth through firm
performance, because, by so doing, the steward's utility functions are
maximized
...
The steward's opportunity set is constrained by the perception that the
utility gained from pro-organizational behavior is higher than the utility that
can be gained through individualistic, self-serving behavior
...
Stewardship theorists argue that the performance of a steward is affected
by whether the structural situation in which he or she is located facilitates
effective action
...
The essential assumption underlying the prescriptions of stewardship
theory is that the behaviors of the executive are aligned with the interests
of the principals
...
Stewardship theorists focus on structures that facilitate and empower
rather than those that monitor and control
...
In the governance contract between owners and executives, owners must
decide how much risk they are willing to assume with their wealth
...
Risk-averse owners will most likely perceive that executives are
self-serving and will prefer agency governance prescriptions
...
Motivation
1
...
In agency theory, the focus is on extrinsic rewards: tangible,
exchangeable commodities that have a measurable "market" value
...
2
...

1
...
Proposition 1: People who are motivated by higher order needs are
more likely to become stewards in principal-steward relationships than
are people who are not motivated by higher order needs
...
4
...

2
...
1
...

2
...
Proposition 4: People who are high in value commitment are more
likely to become stewards in principal-steward relationships than are
people who are low in value commitment
...
Use of power
3
...
Institutional power is defined as being vested in the principal by virtue

of his or her position in the organization (basis of influence in agency
theory)
...
2
...

3
...
Personal power, an inherent part of the individual in the context of the
interpersonal relationship, is not affected by position
...
4
...

3
...
Personal power is the basis of influence in a principal-steward
relationship
...
6
...


Situational factors
1
...
1
...

1
...
The management philosophy of an organization creates a context in
which the choice of agency or stewardship relationships is made by
principals and managers
...
3
...

2
...
1
...

2
...
Power distance: Proposition 8; People in a low power distance culture
are more likely to develop principal-steward relationships than are
people who are in a high power distance culture

The choice between agency and stewardship relationships
1
...
1
...

1
...
Second, the situational characteristics have an influence on the
choice
...
3
...

1
...

2
...

3
...

4
...

5
...

Attracting and retaining cross-border stockholders therefore requires adapting
and applying international best practices
...


Households, not institutions, are the ultimate beneficiaries for most institutional
investing
...


These institutional owners are more demanding and less patient than
individual holders; they look for company competitiveness and clamor for
change when firms fall short
...
American equity holdings abroad multiplied more than five-fold between
1990 to 1997, from $110 billion to $600 billion
2
...
S
...
The revenue from privatizations in emerging economies rose from less
than $5 billion annually in the late 1980s to more than $20 billion in recent
years
...
Even China committed in 1997 to privatizing a third of its state-owned
enterprises
...
The globalization of equity investments has been aided as well by the
deregulation of many domestic stock markets
...


Cross-Border Stock Exchange Listings
1
...


The Cross-Border Advantage
1
...

2
...

3
...
Company

managers

in

emerging

economies

also

enjoy

higher

price-earnings ratios when their government imposes fewer restrictions on
foreign investing in their economies
...
As a result of these developments, stock markets are increasingly driven
more by international trends, less by domestic economics
...
Still, the globalization glass is nowhere near even half full, and even
greater market interdependence can be expected as it further fills
...
For corporate executives, then, access to the globalizing equity market can
be enhanced by listing their own stocks abroad and reducing restrictions
on investors at home
...
Rather than gazing on legions of small domestic holders whose
dissatisfaction with poor performance could be disregarded, company
managers now see a world community of professional investors whose
dissatisfaction cannot be ignored
...
Pioneered by American public retirement systems, activism means that
disgruntled holders advise companies what to do when they do not like
what they see
...
The transformation of equity holdings from individual to institutional and
the subsequent movement toward international is generating a first wave
of global investor activism
...
The globalization of equity markets means that company managers
everywhere will come under increasing pressure from both domestic and
foreign activism as investors learn to exercise the political muscle residing
in their accumulating wealth
...
The impact of the cross-border activism is already evident in scattered
contests for control of the executive suite
...
As an indirect form of investor activism, global institutions are pressing for
world standards for corporate disclosure and governance
...
The rising tide of international investor activism is placing private
enterprise on notice
...
Although company managers may be tempted as short-term measures to
erect defenses against the shareholder activism, such as poison pills and
staggered boards, an enduring and more productive response calls for
greater focus on shareholder value, improved disclosure of information,
and stronger governing boards
...
Preemptive leadership is valued, for it is generally easier for companies to
make changes before angry institutions demand them
...
The globalization of institutional investing is placing a premium on
personalizing relations between executives and investors across national
boundaries
...
Company managers are wise to create them now since such relationships
may be even more critical for communicating the company's strategy and
promise to foreign investors
...
The rapid expansion of institutional cross-border investing, however,
places a premium on executive talents that make for effective company

leadership across national boundaries
...
Anticipating the strategic moves of global competitors is critical, as is
understanding how investors evaluate those moves compared with one's
own
...
Company executives also require a capacity to present the company's
strategy to a constitutionally skeptical audience
...
Effective leadership with international investors also requires revamping
the firm to collaborate better with the investor
...
Stock analysts and money managers appraise not only the company and
its top management team but also its major operating divisions
...
Organizational leadership requires as well the remaking of the firm to
highlight its units' contributions to total shareholder return
...
International institutions tend to be less risk averse than company
managers and domestic owners in many countries, and as firms reach out
for global holders, leadership also calls for increasing a company's
willingness to take strategic risks
...
Global investors also like to see top management performance
incentivized around shareholder return
...

6
...


Corporate convergence
1
...

2
...

3
...


Global Competitiveness
1
...
Institutional owners are increasingly comparing companies with the best
performers anywhere, and if firms are to attract the investors they require
for a fair pricing of their stock, they will have to be competitive with the best
in their class
...
Integrate social context into the Transaction Cost Economics perspective
by explaining how social mechanisms influence the costs of transacting
exchanges
...
Exchange conditions characterized by needs for high adaptation, high
coordination, and high safeguarding influence the emergence of structural
embeddedness
...
How structural embeddedness provides the foundation for social
mechanisms, such as restricted access, macro-cultures, collective
sanctions, and reputations, to coordinate and safeguard exchanges in
network governance
...
we show how social mechanisms interact to create an exchange system
where coordination and cooperation among autonomous parties for
customized exchanges is not only possible but probable
...
are
affected by actors' dyadic (pairwise) relations and by the structure of the
overall network of relations" (Granovetter, 1992: 33)
...
These contracts are socially — not
legally—binding
...
They form a subset in which they exchange frequently with each other but
relatively rarely with other members
...
By "persistent" we mean that network members work repeatedly with each
other over time
...
We use "structured" to indicate that exchanges within the network are
neither random nor uniform but rather are patterned, reflecting a division of
labor, and we use the phrase "autonomous firm" in order to highlight the
potential for each element of the network to be legally independent
...
"Implicit and open-ended contracts" refers to means of adapting,
coordinating, and safeguarding exchanges that are not derived from
authority structures or from legal contracts
...
To enhance cooperation on shared tasks, the network form of governance
relies more heavily on social coordination and control, such as
occupational socialization, collective sanctions, and reputations, than on
authority or legal recourse
...
In the TCE perspective three exchange conditions—uncertainty, asset
specificity, and frequency—determine which governance form is more
efficient
...
Frequency is important for three reasons
...
1
...

2
...
Second, frequent interactions establish the conditions for relational
and structural embeddedness, which provide the foundation for social
mechanisms to adapt, coordinate, and safeguard exchanges
effectively
...
3
...


Four conditions necessary for network governance to emerge and thrive:

1
...
1
...

1
...

2
...
1
...

2
...
how to safeguard these exchanges, since customizing products or
services makes both seller and buyer more vulnerable to shifts in
markets
...
3
...

2
...
With customized goods or services, exchange parties may try to
reduce their dependency on one another
...
Complex Tasks Under Intense Time Pressure
3
...
Network governance facilitates integrating multiple autonomous,
diversely skilled parties under intense time pressures to create
complex products or services
...
Frequent Exchanges Among Parties
4
...
Frequency also transforms the orientation that parties have toward an
exchange and the amount of informal control that can be exerted over
exchanges
...
Interaction Effects of Exchange Conditions
5
...
A combination of specific conditions is required for network
governance to emerge and to thrive as an organizational form offering
comparative advantages over markets and hierarchies
...
2
...


Structural embeddedness as a foundation for social mechanism
1
...

2
...


Network governance: social mechanisms as solutions to exchange
problems

1
...


Restricted Access to Exchanges in the Network
1
...

2
...

3
...

4
...
Ceteris paribus, restricted access
enhances the likelihood of network governance emerging and thriving in
rapidly changing markets for complex, customized fasts
...
Proposition 3b: Restricted access enhances safeguarding of customized
exchanges in rapidly changing markets
...


Macro-culture
1
...
Ceteris paribus, macro-culture
enhances the likelihood of network governance emerging and thriving in
rapidly changing markets for complex, customized tasks
...
Collective sanctions involve group members punishing other members
who violate group norms, values, or goals and range from gossip and
rumors to ostracism (exclusion from the network for short periods or
indefinitely) and sabotage; these sanctions are employed in network
governance
...
Proposition 5; The use of collective sanctions facilitates safeguarding
customized exchanges for parties
...


reputation
1
...
Ceteris paribus, the more important reputations are, the
greater the likelihood of network governance emerging and thriving in
rapidly changing markets for complex, customized tasks
...
Proposition 7a: Multiple social mechanisms of restricted access,
macro-culture, collective sanctions, and reputation interact to decrease the
coordination costs of and to enhance the safeguarding of customized
exchanges
...

2
...
The more congruent the content of multiple social
mechanisms for collaboration and sharing of information, the greater the
likelihood of network governance emerging and thriving in rapidly changing
markets for complex, customized tasks
...


Linkages between firm innovation strategy, suppliers, product
innovation, and business performance Insights from resource
dependence theory (Jajja et al, 2017)

Alignment has the potential to enhance a firm’s competitiveness in areas
including product development lead time, responsiveness to market change,
and the delivery of products that offer greater value than those of competitors
...


H1
...


H2
...


H3
...


H4
...


H5
...


H6
...


Theoretical implications:
1
...

2
...

3
...

4
...

5
...

6
...
This is
presumably a reflection of their commitment to innovation and of the
motivation of the buyer in choosing to partner with them
...
First, they highlight the importance of innovation focused organizations
identifying and developing the right suppliers to help achieve innovation
goals
...
A related issue is that organizations should not only select suppliers that
have complementary resources to support innovation goals, they should
ensure that the necessary supporting infrastructure is in place
...
Older companies are able to innovate more effectively than newer ones
...

4
...

5
...
Foreign collaboration brings investment, and new technologies
and management processes that can enable product innovation
...


Maximizing shareholder value: a new ideology for corporate
governance (Lazonick and O'Sullivan, 2000)
It is imperative that we understand the evolution and impact of the quest for
shareholder value in the United States over the past two decades
...

In the name of ‘creating shareholder value’, the past two decades have
witnessed a marked shift in the strategic orientation of top corporate managers
in the allocation of corporate resources and returns away from ‘retain and
reinvest’ and towards ‘downsize and distribute’
...

While US corporate managers became focused on downsizing their
labourforces in the 1980s and 1990s, they also became focused on distributing
corporate revenues in ways that supported the price of their companies’
stocks
...

If corporate managers cannot allocate resources and returns to maintain the
value of the shareholders’ assets, then the ‘free cash flow’ should be
distributed to shareholders who can then allocate these resources to their most
efficient alternative uses
...
Specifically, we explore three widely
recognized

additional

theoretical

perspectives:

resource

dependence,

managerial hegemony, and institutional theory
...
The implications of this study are that researchers who limit their
perspective to the monitoring role of the board based strictly on agency
theory may lose some of the richness that alternative roles of governance
provide
...
This is in contrast to an agency theory perspective where emphasis is
placed on the board acting as an independent and an effective monitor
over management’s actions
2
...

3
...


Institutional theory
1
...
Board members may come from similar backgrounds and thus be less
inclined to challenge each other or the management (homogeneous)
...
In essence, institutional theory emphasizes how governance mechanisms
fulfill ritualistic roles that help legitimize the interactions among the various
actors within the corporate governance mosaic
...
AC members will act to conform to other institutions and that ACs will tend
over time to become similar to others within the same industry
...
The auditor’s view of the scope and nature of these responsibilities will
vary depending on which of the governance perspectives described above
the auditor subscribes to
...
A focus on the agency perspective would lead the auditor to focus on
control activities such as segregation of duties and the independence and
expertise of monitoring mechanisms such as the AC in ensuring sound
financial reporting
...
In contrast, a focus on resource dependence would lead the auditor to
consider the company’s mechanisms for developing sound strategies and
controlling business risks
...
A managerial hegemony perspective held by the auditor would lead to a
focus on the selection process and activities of members of the board and
the AC
...
Auditors may employ greater professional skepticism if they perceive that
top management controls the selection process to promote members who
are closely aligned to them
...
An AC that is in effect under the management’s thumb may pay
perfunctory attention to the mechanisms such as the effectiveness of the
whistle-blower program resulting in a corporate culture that is detrimental
to achieving sound controls and effective financial reporting
...
Institutional theory would lead the auditor to focus on whether formal
mechanisms are in place to comply with rules and regulations
...
With respect to effectiveness of internal controls, an AC that is consistent
with the predictions of the institutional theory will focus on ritualistically
following a “checklist” approach to internal controls, rather than getting at
the “substance” of whether controls are effective and not being overridden
by management
...
If the board with industry expertise is engaged in providing strategic
support to management, the company may be more likely to overcome its
financial difficulties than companies that do not offer a resource
dependency focus on the board
...
Going-concern opinions represent significant risks to the company and the
capital markets; incorrect assessment of a firm’s going-concern status
results in high costs to the firm, the auditor, and market participants
...
For audit practice, examining the issue from a managerial hegemony
perspective, it is also important for auditors to exhibit professional
skepticism toward a reorganization plan that management proposes
...
From an institutional theory perspective, management desires to send a
signal to stakeholders that the reorganization effort is serious
...
Agency and resource-dependent theories are not mutually exclusive, as
discussed above
...

6
...

7
...

8
...
Organizations attempt to reduce others’
power over them, often attempting to increase their own power over others
...
Pfeffer (1976: 39) suggests three reasons why organizations may engage
in M&As: “First, to reduce competition by absorbing an important
competitor [sic] organization; second, to manage interdependence with
either sources of input or purchasers of output by absorbing them; and
third, to diversify operations and thereby lessen dependence on the
present organizations with which it exchanges
...
Although environmental inter-dependency is a significant predictor of
M&As, empirical studies also suggest that it is not the only predictor
...
There is strong support that mergers occur between firms that depend on
one another (e
...
, buyers/suppliers, competitors) as a mechanism to
reduce dependence
...
In addition, the magnitude of the dependency predicts the likelihood of
M&As
...
Unlike mergers, inter-organizational relationships only provide partial
absorption of the inter-dependencies
...
Although these firm relationships represent only partial absorption, unlike
mergers, they are also more likely to occur between firms with mutual
interdependence (e
...
, buyers/suppliers), and power vis-à-vis external
dependencies accrues through such actions
...
Although RDT is less commonly used to study boards than agency theory,
empirical evidence to date suggests that it is a more successful lens for
understanding boards
...
It’s not just the number, but the type of directors on the board that matters
...
Pfeffer and Salancik (1978) suggest that directors bring four benefits to
organizations: (a) information in the form of advice and counsel, (b) access
to channels of information between the firm and environmental
contingencies, (c) preferential access to resources, and (d) legitimacy
...
Both early in the life cycle and in stages of decline, empirical research
supports RDT
...
Boards can manage environmental dependencies and should reflect
environmental needs
...
Strong support also has accrued for the four benefits directors can bring to
firms: advice and counsel, channels of information flow, preferential
access to resources, and legitimacy
...
The

dynamic

nature

of

boards

(i
...
,

changing

composition

as

environmental needs change) appears to be a nearly normative
convention, although this has received little empirical testing
...
Firms actively seek to “create” their environment by trying to shape
government regulations that produce a more favorable environment
...
On net, empirical research supports the underlying relationship between
government dependency and political action
...
Not only is the absolute level of dependency a predictor of engaging in
political action, but similar environmental dependencies are predictors of
similar firm responses
...
Although the topic of “created environment” is perhaps the most
overlooked by management scholars, research in this area supports the
following: (a) political action correlates with the degree of environmental

dependency the firm faces, (b) firms facing the same environment are
likely to choose the same forms of political behavior to manage it, and (c)
performance benefits accrue to firms that create linkages with the political
environment
...
Poor firm performance may be attributed to a misalignment of
organizational behavior with the environment
...
(a) intraorganizational power is affected by external dependencies and (b)
executive succession can reduce environmental dependencies have
received empirical support
...
Scholars find the degree of environmental uncertainty or dependence is
likely to affect the rate of executive turnover and tenure, as well as the type
of new executive selected
...
Although RDT seems well positioned to enhance the executive succession
discourse, it has not been widely used to explain turnover events
...


Audit committee cash compensation and propensity of firms to beat
earnings by a large margin: Conditional effects of CEO power and
agency risks (Rickling and Sharma, 2017)

The failure of audit committees amongst the Enron-type string of scandals led
the US Congress to pass the Sarbanes-Oxley Act (SOX), which mandated
audit committees to be comprised entirely of independent directors as well as
the disclosure of the presence of a financial expert
...


Pending
...


Make them a lot of money in the short run and led to a slight temporary
increase in homeownership, but at great cost to society as a whole
...


The rating agencies, which should have checked the growth of these toxic
instruments, instead gave them a seal of approval, which encouraged
others-including pension funds looking for safe places to put money that
workers had set aside for their retirement-in the United States and overseas, to
buy them
...


(for Alan Greenspan) Greenspan aggravated the situation by allowing banks to
engage in ever-riskier lending and encouraging people to take out
variable-rate mortgages, with payments that could-and did-easily explode,
forcing even middle-income families into foreclosure
...


Innovation that would have helped people and countries manage the other
important risks they face were actually resisted
...


Agency--in today’s world scores of people are handling money and making
decisions on behalf of others--and the increased importance of ‘externalities’
...
But in theory, markets are
supposed to provide this discipline
...
The relationship between lender and
borrower was broken
...


The financial system is now so intertwined and central to the economy that a
failure of one large institution can bring down the whole system
...


“Moral hazard”-- that is, incentives to repay are weakened if mortgage owners
know that there is some chance they will be helped out if they don’t repay
...


Had foreign institutions not bought as much of its toxic instruments and debts,
the situation here might have been far worse (for the US)



---