Power and Paradigms: The D utch Response to Pressures for Shareholder Value

Pieter‐Jan Bezemer · Edward J. Zajac · Ivana Naumovska · Frans A. J. Van Den Bosch · Henk Volberda

28 citations0/0 files storedCorporate Governance An International Review

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Corporate Finance and Governance Corporate Social Responsibility Reporting Management and Organizational Studies

Abstract

Abstract Manuscript Type Empirical Research Question/Issue In recent years, research aimed at identifying and relating the antecedents and consequences of diffusing organizational practices/ideas has turned its attention to debating the international adoption and implementation of the Anglo‐American model of corporate governance, i.e., a shareholder value orientation (SVO). While financial economists characterize the adoption of an SVO as necessary and performance‐enhancing, behavioral scientists have disputed such claims, invoking institutional contingencies in the appropriateness of an SVO. Our study seeks to provide some resolution to the debate by developing an overarching sociopolitical perspective that links the antecedents and consequences of the adoption of the contested practice of SVO. Research Findings/Insights We test our framework using extensive longitudinal data from 1992–2006 from the largest listed corporations in the Netherlands. We find a negative relationship between SVO adoption and subsequent firm performance, although this effect is attenuated when accompanied by greater SVO alignment among major owners and a firm's visible commitment to an SVO. Theoretical/Academic Implications This study extends prior research on the diffusion of contested organizational practices that has taken a sociopolitical perspective by offering an original contingency perspective that addresses how and why the misaligned preferences of corporate owners will affect (i) a company's inclination to espouse an SVO, and (ii) the performance consequences of such misalignment. Practitioner/Policy Implications This study suggests that, when board members are considering the adoption of new ideas/practices (e.g., SVO), they should consider the contextual fitness of the idea/practice with the firm's owners and their interests.

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References

1983The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields 2004The iron cage revisited institutional isomorphism and collective rationality in organizational fields 1983The Iron Caged Revisited : Institutional Isomorphism and Collective Rationality in Organizational Fields 2005Bad Management Theories Are Destroying Good Management Practices 1987The Adolescence of Institutional Theory 2001Value Maximisation, Stakeholder Theory, and the Corporate Objective Function 2004Stakeholder Theory and “The Corporate Objective Revisited”2000Maximizing shareholder value: a new ideology for corporate governance

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