Governance strategy: a property right approach turning governance into action
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Governance strategy: a property right approach turning governance into action Sven-Olof Collin
Published online: 5 July 2007 Springer Science+Business Media B.V. 2007
Abstract Corporate governance (CG) needs to acknowledge the intentional part of governance, where an actor of governance uses the set of corporate governance mechanisms in order to influence the agent to create a performance that will satisfy the interest of the principal. This paper offers a conception of this activity through the concept of governance strategy. The concept is based on a property right approach and derived within the context of agency theory, stressing the interest and the capacity of the principal. It is applied to two empirical organisations seldom investigated in CG research: the organisation of multinational corporations in a business group and the organisation of a riding school in a democratic not-for-profit association, thereby extending the relevance of the concept from corporate governance to organizational governance. The empirical analysis indicates the relevance of the conception and suggests further extension through hypotheses of governance strategy related to environmental influence, accessibility of governance mechanisms and momentum of mechanisms. Keywords Agency theory Corporate governance Governance strategy Property rights
The project is financed by The Bank of Sweden Tercentenary Foundation. An earlier version was presented at the Academy of Management Conference, Atlanta. Georgia, August 11–16, 2006. The paper has benefited from comments by Elin Smith, Kristianstad University and two anonymous reviewers. David Harrison at Proper English AB contributed with language editing. S.-O. Collin (&) Department of Business Studies, Kristianstad University, Kristianstad 291 88, Sweden e-mail: [email protected]
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1 Introduction Corporate governance (CG) is a research theme that has rather intensely been on the research agenda for more than two decades. The intensity in research could partly be explained by the attention the subject has received in practice, especially in the United States and in United Kingdom, and especially concerning the governance problems of their listed corporations with dispersed ownership structures. The effect of this orientation has been that CG research has (a) focused on large corporations characterised by dispersed and weak owners, presumed to be subject to opportunistic agents, and (b) adopted a strong nomothetic research approach, where one dependent variable is correlated with several independent variables. This orientation has led to an image of the principal as only one part of the system that constitutes the corporate governance of the corporation, on the same level of importance as the capital market, the managerial labour market, and the board of directors with regard to influence on the corporation and its management. This is therefore a view that approaches environmental determinism (Eisenhardt 1989). Less attention has been paid to CG in organ
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