CRITICAL SUMMARY OF TOWARD A BEHAVIORAL THEORY OF BOARDS AND CORPORATE GOVERNANCE
Strategic Management and Corporate Governance (DBA830D GRD)
Key concepts and arguments
This paper tries to give an alternative framework on how knowledge and research on governance can be envisioned. It criticizes dominant economic theory, particularly the agency theory, to have neglected actual board behavior and emphasized an ideal construct and the relationship of this to corporate performance.
The framework put forward is basically based on behavioral science. Particularly, this paper posited that:
1. behavioral theory of boards and corporate governance can focus on the interactions and behavioral processes among and between actors in and around the boardroom rather than on the outcomes of boards,
2. that behavioral perspective will conceptualized the corporation as a nexus of coalitions of stakeholders without any a priori assumptions of organizational goals and objectives, and
3. a behavioral theory of boards and governance emphasize board members contribution in dealing with the complexity and associated uncertainty related to strategic decisions and the search for existing or new knowledge to solve organizational problem.
Since it is challenging the dominant economic framework in looking at corporate governance, the core concepts look at the board people interacting with each other, coalescing, networking, making consensus in governing an organization particularly in the decision processes and communication strategies within and between organisms in a social system (Behavioral Science, Wikipedia) like the corporation. And since it is not based on an economic platform, economic performance was expected not to be ...
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... influence policies and decision of the board.
What are their strategies to influence decision? What are their strategies of communication? Other stakeholders may be a big factor in the coalition building or cooperation building within and outside of the Board. These stakeholders maybe used by the board to influence or pressure other members in the board to join a certain coalition.
Stakeholder theory can also be combined with behavioral theory to pursue this line of research. Again if this is coalition building, which is a political process, within the board and among stakeholders conflict theory can also be used as a framework.
References:
Gioia, D.A. & Pitre, E. (1990). Multiparadigm perspective on theory building. Academy of Management Review. 15(4), 584-602.
Behavioral Sciences, Wikipedia, retrieved June 7, 2010. url: http://ow.ly/288C3
Ralph Nader, Mark Green and Joel Seligman, in an excerpt from Taming the Giant Corporation (1976, found in Honest Work by Ciulla, Martin and Solomon), take the current role of the company board of directors and suggest changes that should be made to make the board to be efficient. They claim the current makeup of the board does not necessarily do justice to the company because “in nearly every large American business…there exists a management autocracy” (Nader, Green and Seligman, 1976, p.570). The main resolution they present is to make the board more democratic with the betterment of the company as its first priority. Currently the board no longer oversees operations, or elects top company executives and they are no longer involved in the business operations to the extent they should be. Nadar, Green and Seligman argue that that all of these things need to be changed. For a corporation so large to be successful there must be separation of powers just as there is in any current government system ( p.571). They claim this is the only and best way to success (Nader, Green and Seligman, 1976, p.570-571).
“This perspective reveals conditions that the stakeholder considers valuable or beneficial… the customer, a regulatory body, or the board of directors of the company,” (Balestrero & Udo, 2014, p. 251). Measuring success for stakeholders, while dynamic, does tend to
An organization I am familiar with is Walgreens pharmacy. Stakeholders involved in the strategic planning process for this company are the local population, the local government where the store is located, shareholders, employees, customers, suppliers and investors. However, the role they play in regards to their level of input and importance is not equal to each other. Case in point, customers should be involved in the strategic planning process insomuch as their patronage being an endpoint and their input into what needs, wants and values they ascribe to a product or service being the outline of a company’s service direction. However, their input will likely be a suggestion as for where the company should look to go, whereas the input of the CEO, shareholders and employees will hold more weight in accomplishing the mission and vision of the company.
According to Carroll (2009), stakeholders are any individual or a group who are associated with an organization and has mutual influences. He also claims that the stakeholders can influence or be influenced by any actions, decisions, policies, and goals of the organization. Clarkson (1995) defines primary stakeholders as a group or an individual who has high level of independencies and play a essential role in the survival of the organization whereas secondary stakeholders also have interactivity with the organization; however, they are not participated in transactions and without them, the organization still can survive. From this classification, we can easily identify a range of different stakeholders as primary or secondary in terms of their
The political analysis of an organization begins with the identification of the stakeholders “groups that have a shared ‘stake’ that is affected by what the organization is and how it carries out its activities (Ancona et al., 2005: M-2, 35)” The CEO of Dynacorp is ultimately responsible for the turnaround of the company and its success versus its competition. The front end of the company is divided into three geographic areas. Carl Greystone, Executive Vice President of US Customer Operations, manages the largest of the geographic areas (Dynacorp Revisited, 2005: M-2, 86-87). The geographic areas are divided further into regions; Ben Walker is a Vice President overseeing the Northeast Region and reports to Greystone (Dynacorp Revisited, 2005: M-2, 87).
One method of engaging the stakeholder is through the Stakeholder Analysis. It is an important method that can be used to identify key personnel for support. The initial step is to identify who the stakeholders are, then work out their power, influence and interest, that would be focused on. The final step involves developing a good understanding of the most important stakeholders to know how they are likely to respond to the organizational ideologies. This helps to work out the plans on how to win their support.
One of the major factors that effect any decision are the stakeholders. Stakeholders are defined as anyone who has interest or concern regarding the any aspect of the organization. Stakeholder can very between internal and external parties. According to definition, stakeholders can be just about anyone, but it depends solely on the type of organization
Hence, the stakeholders which are described as those who are affected by the organisation performance ,actions and duties and those actions includes employees, clients, local community and investors as well. The theory of stakeholders also suggests that it is the responsibility of firm to make sure no rights of stakeholders are dishonoured and make decisions in the interest of stakeholders which is also the purpose of stakeholder theory to make more profit and balancing it while considering its stakeholders (Freeman 2008 pp. 162-165). In the other words organisation must also operates in a more socially accountable approach by carrying out corporate social responsibility as (CSR) activities.
Evan, W. M., & Freeman, R. E. (1988). A stakeholder theory of the modern corporation: Kantian
The political frame relies on the assumption that organizations are alliances of unique people and interest groups. The people are unique due to their different views of the world, their morals, faith and activities and the information they have given these characteristics. The political frame also assumes that all key decisions arise from the need to allocate scarce resources such as time, money and information. These scarce resources and differences amongst people are what make conflict the core of organizational dynamics and make power such a crucial asset. Finally, the political frame assumes that all objectives and conclusions are e...
Stakeholder analysis is important for successful implementation of projects and/or strategic activities within any organisation. It is used to analyse the stakeholders in order to understand them and classify them according to their power, influence and interest. Stakeholders are people who have an interest in a commercial entity including those within the organisation and outside. These include the boss, senior executives, customers, suppliers, government, your co-workers, the team and others. All these people are important in the implementation and success of strategy.
To a certain extent, the tenure of service also has impact on the effectiveness of non-executive directors. Feldman (1992) is of the view that a board that services a business well today may not be qualified to lead it five years from now as markets and products evolve. Therefore, the appointments of non-executive directors should be for a specific term and new members should be appointed as and when needed. One suggestion is that by serving for more than ten years, the board member tends to become too close to senior management to provide objective oversight (Ahwireng-Obeng, Mariano and Viedge, 2005). However, this could provide the in-depth knowledge and institutional memory that a new board member has to work hard to acquire (Fleming, 1998 cited in Ahwireng-Obeng, Mariano and Viedge, 2005).
With this stakeholder analysis, the following research question will be answered: “Which stakeholders are involved in the process and which are the most critical?” According to Newcombe (2003), the stakeholder analysis has become a recognized technique for determining how stakeholders interact with organizations. A broad definition
Corporate governance is the framework designed to facilitate direction and performance of companies. Dees, Lumpkin, Eisner & McNamara (2012) itemized the primary participants as (1) the shareholders, (2) the management (led by the CEO), and (3) the board of directors (BOD)” (p. 330). Effective corporate governance can attribute to improved financial performance, customer satisfaction and growth for corporations.
That reminded me from the case study the director how to plays round of the company to succeed this Colombian Memorial Hospital. External control view of leadership, situations in which external forces where the leader has limited influence determine the organization 's success. Strategy, the ideas, decisions, and actions that enable a firm to succeed. competitive advantage firm 's resources and capabilities that enable it to overcome the competitive forces in its industries. Operational effectiveness, Performing similar activities better than rivals. Intend strategy, strategy in which organizational decisions are determined only by analysis. Realize strategy, strategy in which organizational decisions are determined by both analysis and unforeseen environmental developments, unanticipated resource limitations, and changes from managerial preferences. Strategy analysis studies of firms ' external and internal environments, and there with organizational vision and goals. Strategy formulation, decisions made by firms regarding investments, commitments, and other aspects of operations that create and sustain competitive advantage.