Since 1973 technological, political, regulatory, and economic forces have been changing the worldwide economy in a fashion comparable to the changes experienced during the nineteenth century Industrial Revolution. As in the nineteenth century, we are experiencing declining costs, increasing average (but decreasing marginal) productivity of labor, reduced growth rates of labor income, excess capacity, and the requirement for downsizing and exit. The last two decades indicate corporate internal control systems have failed to deal effectively with these changes, especially slow growth and the requirement for exit. The next several decades pose a major challenge for Western firms and political systems as these forces continue to work their way through the worldwide economy.

https://onlinelibrary.wiley.com/doi/pdf/10.1111/j.1540-6261.1993.tb04022.x

The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems

Recent thinking about top management has been influenced by alternative models of man.1 Economic approaches to governance such as agency theory tend to assume some form of homo-economicus, which depict subordinates as individualistic, opportunistic, and self-serving. Alternatively, sociological and psychological approaches to governance such as stewardship theory depict subordinates as collectivists, pro-organizational, and trustworthy. Through this research, we attempt to reconcile the differences between these assumptions by proposing a model based upon the subordinate's psychological attributes and the organization's situational characteristics.

https://www.jstor.org/stable/pdfplus/259223.pdf

Toward a stewardship theory of management

I would like to thank Jennifer A. Chatman, Margaret Neale, Elizabeth Weldon, Dawn lacobucci, and Oswald Werner for comments on earlier drafts. I would also like to thank Linda Pike for her tremendous help, as well as Robert I. Sutton and three anonymous reviewers. This study examines the structure of 105 work groups and management teams to address the question of whether conflict can be beneficial. Multiple methods were used to examine the effects of conflict on both individualand group-level variables to provide a more refined model of intragroup conflict. Results show that whether conflict was beneficial depended on the type of conflict and the structure of the group in terms of task type, task interdependence, and group norms. Relationship and task conflicts were negatively associated with individuals' satisfaction, liking of other group members, and intent to remain in the group. In groups performing very routine tasks, disagreements about the task were detrimental to group functioning. In contrast, in groups performing nonroutine tasks, disagreements about the tasks did not have a detrimental effect, and in some cases, such disagreements were actually beneficial. Contrary to expectations, norms encouraging open discussion of conflict were not always advantageous. The results suggest that while such norms were associated with an increase in the number and intensity of relationship conflicts, they did not increase members' ability to deal with the conflicts constructively. The model developed here contributes to an integrated perspective on organizational conflict.'

A Multimethod Examination of the Benefits and Detriments of Intragroup Conflict

Agency theory argues that shareholder interests require protection by separation of incumbency of roles of board chair and CEO. Stewardship theory argues shareholder interests are maximised by shared incumbency of these roles. Results of an empirical test fail to support agency theory and provide some support for stewardship theory.

Stewardship Theory or Agency Theory: CEO Governance and Shareholder Returns:

Top management teams make strategic decisions, and the products of their decision making influence organizational performance. However, a subtle paradox is embedded in this relationship. This study focuses on conflict as the crux of this paradox and provides evidence from two different samples of conflict's consistent yet contradictory effects on decision quality, consensus, and affective acceptance.

Distinguishing the Effects of Functional and Dysfunctional Conflict on Strategic Decision Making: Resolving a Paradox for Top Management Teams

All public corporations must make a choice regarding board leadership structure. Advocates of more effective corporate governance argue for independent board leadership; yet many firms choose instead to allow the CEO to serve as board chairperson (CEO duality). This study examines the differential financial implications of these choices for 141 corporations over a 6-year time period. Results indicate significant differences in performance between the two groups along a number of performance measures; more specifically, firms opting for independent leadership consistently outperformed those relying upon CEO duality.

CEO duality and organizational performance: A longitudinal analysis

Research notes and communications ceo duality and organizational performance: a longitudinal analysis

This longitudinal laboratory study of fast-advancing middle managers involved in strategic planning compared the effectiveness of dialectical inquiry, devil's advocacy, and consensus approaches to ...

Experiential effects of dialectical inquiry, devil's advocacy and consensus approaches to strategic decision making.

In its first report card on corporate governance, Business Week (Byrne and Melcher, 1996) ranked U.S. firms based on recommended best practices for independence, accountability, and board quality. Apple Computer, ATT Dayton, 1984; Waldo, 1985). The Business Week criteria fo r independence is "no more than two inside directors, no insiders on the board's audit, nominating, and compensation committees, no outside directors who directly or indirectly draw consulting, legal, or other fees from the company, and no interlocking directorships" (Byrne and Melcher, 1996: 98). Arguably, improvements in corporate board functioning ought to ultimately yield improvements in financial performance. Empirical research findings to date, however, have been inconsistent and conflicting. Studies of outsider ratios and firm performance have produced correlations ranging from a positive .33 (Pearce and Zahra, 1992) to a negative .15 and larger (Beatty and Zajac, 1994; Kaufman and Taylor, 1993; Zahra and Stanton, 1988). Some studies have found zero or near-zero effects (Buchholz and Ribbens, 1994; Rechner and Dalton, 1986). Moreover, other research has reported that a higher ratio of inside, not outside directors, is associated with higher R&D expenditures (Baysinger et al., 1991), greater likelihood of CEO dismissal in times of financial crises (Ocasio, 1994), and higher firm performance (Pearce, 1983). These studies argue that inside directors who have access to richer, fuller information about their firms are in a better position than outside directors to make decisions about many critical a reas of firm operation and performance. The purpose of this study was to (1) apply the quantitative technique of meta-analysis to the area of insider/outsider ratios on corporate boards and calculated composites of financial performance to arrive at a robust estimate of this relationship, and (2) examine the potential moderating effects of different operational definitions of monitoring and performance. In so doing, we hope to be able to uncover the reasons for the inconsistent results in this research stream, and test which theoretical framework holds with regards to board composition and firm performance. In the following sections we generate hypotheses based on the presumed link between director independence and performance, describe our methodology and analyses, summarize our results, and discuss the implications of our findings. MONITORING AND PERFORMANCE The separation of ownership and control first discussed by Berle and Means (1932) creates many situations in which the interests of managers and owners may not coincide. Agency theory is based on the notion that the delegation of managerial responsibilities by principals (owners) to agents (managers) requires the presence of mechanisms that either align the interests of principals and agents (such as stock ownership plans and performance contingent compensation) or monitor the performance of managers to insure that they use their knowledge and the firm's resources to generate the highest possible return for principles. More specifically, agency theory suggests that the best option for owners is to design contracts that align manager/owner interests. …

Paula L. Rechner

Papers

CEO duality and organizational performance: A longitudinal analysis

Research notes and communications ceo duality and organizational performance: a longitudinal analysis

Experiential effects of dialectical inquiry, devil's advocacy and consensus approaches to strategic decision making.

Board Composition and Financial Performance: A Meta-Analysis of the Influence of outside Directors

The Impact of CEO as Board Chairperson on Corporate Performance: Evidence vs. Rhetoric