Upper Echelon Theory and Ethical Behaviour: an Illustration of the Theory and a Plea for its Extension Towards Ethical Behaviour

Abstract

This paper gives an illustration of the Upper Echelon Theory and presents arguments for more research on the relationship between upper echelons, strategic choices, and ethical behaviour. Its central theme is: What is the effect of the Sarbanes-Oxley Act implementation on the composition of the Board of Directors of companies that are listed on a U.S. stock exchange? In this research we examined whether the composition of companies’ top management teams is influenced by the issue of ethical behaviour. We used a sample of fifty listed companies, containing the members of the Board of Directors registered in the period 2000 - 2005.The underlying question in this research is whether companies actually change the composition of their Board of Directors because they believe that personal characteristics, such as age, tenure, and specialisation, play an important role in decision making and hence in the degree of their ethical behaviour. In this paper we test three hypotheses. The conclusion is that two of our hypotheses support the Upper Echelon Theory.

Perceptions about Corporate Ethical Behaviour in the Founders’ Country of Origin and Ventures’ Admission into Impact‐Oriented Accelerator Programmes: Cross‐Country Evidence

“…, 2019; Sosik et al. , 2012; van der Zee and Swagerman, 2009), and there exist studies highlighting the role of the TMT in shaping the firm's ethical climate, even if they do not refer explicitly to upper echelon theory (Hannafey, 2003; Schroeder, 2002).…”

“…By extrapolation, we assume that this may extend to perceptions about corporate ethical behaviour in the founders' country of origin. After all, others have already established a relationship between ethical behaviour and upper echelon theory (Peters et al, 2019;Sosik et al, 2012;van der Zee and Swagerman, 2009), and there exist studies highlighting the role of the TMT in shaping the firm's ethical climate, even if they do not refer explicitly to upper echelon theory (Hannafey, 2003;Schroeder, 2002).…”

How Myopia Archetypes Lead to Non-Sustainability

“…If, on the one hand, the rules of corporate governance, from the Cadbury Code [47] to the Sarbanes-Oxley Act [48], aim at stimulating the adoption of codes of self-discipline and favouring more ethical management behaviour [49], other institutional rules, in particular in the environmental area, constrain firms to adapt their behaviour, as for example in the case of the European market for emission permits, which obliges firms to act in line with the principles of sustainable growth [50]. Moreover, larger, publicly-quoted firms are asked to increase their sustainability and to publish their results in the economic, environmental and social domains.…”