Power and Paradigms: The Dutch Response to Pressures for Shareholder Value

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.

Board Background Heterogeneity and Exploration‐Exploitation: The Role of the Institutionally Adopted Board Model

“…The most intuitive explanation could be that the strong shareholder protection in one‐tier systems fosters a short‐term focus on financial performance indicators opposed to employee protection (Kwee et al ., ; Moerland, ; Weimer and Pape, ) and, therewith, emphasizes exploitative activities. In turn, two‐tier boards associated with the Rhineland model generally face less shareholder pressure (Bezemer et al ., ). Associated legal and political systems emphasize the rights of other stakeholders (e.g., employees) that are generally more concerned with the long‐term well‐being of the firm rather than short‐term returns.…”

Where Institutional Logics of Corporate Governance Collide: Overstatement of Compliance in a Developing Country, Bangladesh

“…Amongst different ownership groups, independent institutional investors are more powerful in terms of uniformity of demand as they provide a significant amount of resources and can act independently of the insider's agenda (Almazan, Hartzell, & Starks, 2005). Prior research has demonstrated that independent institutional investors prefer an Anglo-American model as it emphasizes maximization of shareholder value (Bezemer et al, 2015;Chizema, 2008) and they take actions in line with an Anglo-American model to protect their legitimacy in a contested environment (Bates & Hennessy, 2010).…”

Changing words: How temporal consistency in a CEO's use of language toward shareholders and stakeholders affects CEO dismissal

“…Finally, future research should test whether the current findings generalize to non‐U.S. countries with different cultures, socioeconomic institutions, and governance models (Bezemer, Zajac, Naumovska, van den Bosch, & Volberda, ; He & Fang, ). Such research would advance our understanding of the impact of signaling on governance outcomes in various institutional settings.…”