When Is a Governmental Mandate not a Mandate? Predicting Organizational Compliance Under Semicoercive Conditions

Abstract

While institutional theorists have long viewed governmental mandates as a prototypical coercive pressure generating homogeneous organizational compliance, we suggest that such mandates are often subject to enforcement uncertainty, resulting in a pressure more aptly characterized as “semicoercive” and a compliance result more aptly characterized as heterogeneous. We advance and test a theoretical framework to predict the specific form of heterogeneous compliance in semicoercive contexts, with particular attention to the differential sensitivity of firms to pressures to comply, based on differences in their specific legal, political, and social context. We use the setting of a mandated corporate governance reform in China requiring listed Chinese firms to add independent directors and find general evidence of noncompliance and more specific evidence consistent with the predictions from our sociopolitical framework. We discuss the implications of our theoretical approach and findings for future research on institutional environments, governmental regulations, organizational compliance, and corporate governance.

The cost of conformity to good governance: Board design and compensation

“…Our findings indicate that both conformity and nonconformity to the good governance norm can be achieved through multiple board configurations, illustrating the discretionary nature of board designs and, thus, the presence of active agency (Oliver, 1991). These two distinct forces revealed through our empirical analysis have been explored in the classic debate on the tension between institutional and agentic forces in institutional theory (Zucker, 1991) and in research on the heterogeneity of corporate governance practices (Aguilera et al, 2018; Bell et al, 2014; Xie et al, 2021). Drawing on the notion of firm strategic choice being the product of both institutional and argentic forces, we deduce four archetypical board governance strategies jointly shaped by distinct combinations of conformity to good governance and agentic behavior in the form of governance discretion (see Figure 1 for details).…”

“…At the same time, the debate about what constitutes a well‐governed firm appears to have converged toward a set of global best‐practice recommendations for board structures and behaviors, labeled good governance , that are considered as both efficient and legitimate (Aguilera & Cuervo‐Cazurra, 2004; Cuervo, 2002; Van Essen et al, 2013). As a result, firms all over the world face intensifying isomorphic pressure to reconfigure their boards to conform with a set of governance practices that constitute a globally accepted good governance norm (Bell et al, 2014; Xie et al, 2021; Zattoni & Cuomo, 2008).…”

The influence of the country governance environment on corporate environmental, social and governance (ESG) performance

“…It is unlikely for regulatory quality to influence the social performance of companies because companies are often not accountable for their non-performance of social obligations, and social performance tends to not be enforced through laws and regulations (Tamvada, 2020). On the other hand, the governance practices of firms are often mandated by codes of conduct and regulations (Xie et al , 2021), thereby rationalising a significant influence of regulatory quality on corporate governance performance. Thus, we provide empirical validation to calls by researchers, most notably Mattingly (2017), for probing into the three pillars of ESG separately, appreciating their distinctiveness.…”

The impact of national political culture on the Global development of Entrepreneurial ecosystems

“…(Sartor and Beamish, 2020) State intervention through mandates in itself instead of the goal of general coherence of organizational action increases uncertainty. (Xie et al, 2021) When the state assumes the role of an investor, the uncertainty of the timing of financing of already started innovative projects is added.…”