The theory of the corporate life cycle

There appears to be a widespread management belief that the corporation is endowed with an inbuilt elixir for survival and growth, despite recent corporate declines.In this article, the author outlines and illustrates the operation of one of the newest theories on corporate activity—the corporate life cycle— and its use as a planning aid in determining where the company is and where it is going and as a relationary tool in predicting corporate trends for comparison with corporate objectives and the future operating environment.     

From organization development to corporate development at Trebor

This article is a case history of a medium-sized, family-owned business where the corporate planning activity has been taken over by the Executive Board, which is concerned with a careful definition and dissemination of company strategy and with focusing action in the form of long-term planning projects. The organizational learning approach is evolutionary and incremental, involving—as in the Japanese style of management— many levels in project development.     

CAPITAL,LABOR, AND THE FIRM: A STUDY OF GERMAN CODETERMINATION

Under the German corporate governance system of codetermination, employees are legally allocated control rights over corporate assets through seats on the supervisory board—that is, the board of nonexecutive directors. The supervisory board oversees the management board—the board of executive directors—approves or rejects its decisions, and appoints its members and sets their salaries. We empirically investigate the implications of this sort of labor participation in corporate decision making. We find that companies with equal representation of employees and shareholders on the supervisory board trade at a 31% stock market discount as compared with companies where employee representatives fill only one‐third of the supervisory board seats. We show that under equal representation, management board compensation provides incentives that are not conducive to furthering shareholders' interests, possibly because labor maximizes a different objective function than shareholders. We document that, under equal representation, companies have longer payrolls than their one‐third representation peers have. Finally, we provide evidence that shareholders respond to the allocation of control rights to labor by linking supervisory board compensation to firm performance and by leveraging up the firm. (JEL: G32, G34)     

The social regulation of corporate social irresponsibility: Reviewing the contribution of corporate reputation

Whilst it is assumed that stakeholders penalize and deter corporate social irresponsibility (CSI), instances of CSI persist. Correspondingly, the literature on social regulation—which describes how non-governmental stakeholders exert their regulatory influence on organizations—remains fragmented. To act as a springboard for future studies, this review examines the contribution of corporate reputation to our understanding of how CSI is socially regulated. Our analysis of a large (n = 448 studies) multidisciplinary body of literature unearths a set of nuanced relationships between CSI and corporate reputation. We synthesize a conceptual framework in order to map the diverse landscape of literature and its contributions. We then highlight important gaps among—as well as between—research streams to present a future research agenda. Accordingly, this review contributes to closing ‘the loop’ between CSI, corporate reputation and social regulation, thereby opening up new pathways for future research.     

Environmental scanning— the state of the art

In recent years increasing attention has been devoted to amplifying individual elements of corporate planning systems—among them the environmental scanning element. Moreover, the unprecendented intensification of corporate environmental complexity has led to a proliferation of approaches to scanning the general environment. However, a recent survey of a dozen U.S. companies has questioned whether such scanning practices have, in fact, been established in an ongoing manner. The author provides evidence here, based on publicly available information, of at least nine leading organizations where the practice of scanning for planning appears to have taken firm root. A discussion of the many facets of the resulting composite picture of sophisticated wide angle scanning leads to the anticipation that it is, in fact, on the threshold of rapid diffusion in the corporate world.     

Whistle-blowing regulation in different corporate governance systems: an analysis of the regulation approaches from the view of path dependence theory

The research question of this paper is, if and why countries need different legal approaches to whistle-blowing regulation. The paper specifically explores whether regulation approaches from other countries are suitable to regulate whistle-blowing in the German corporate governance system. First, it is clarified which factors influence the choice of the desired action—that is, “internal whistle-blowing”—and it is demonstrated that the underlying corporate governance system has a potential influence on these factors. Next, it is shown that the consistency of systems is responsible for the lack of success of some legal approaches of the whistle-blowing regulation in special corporate governance systems, whereas in other systems they can be very successful. Finally, the paper presents the requirements for whistle-blowing regulation that does not damage the consistency of the underlying corporate governance system. The findings support path dependence theory, which claims that legal approaches of one country cannot be transferred to other countries. Moreover, whistle-blowing literature is expanded by the fact that the underlying corporate governance system of a country influences the power and loyalty of the employee. It suggests new avenues for whistle-blowing research as well as for the potential convergence of corporate governance regulation. The findings offer insights for policy makers interested in the development of legal proposals for whistle-blowing regulation in their countries. Moreover, it provides a new perspective to enable managers of multinational firms to design whistle-blowing systems within different corporate governance systems.     

Setting corporate objectives

This paper states that ‘the resources are raw materials, people and capital. The private sector company can survive as such only by using all three resources efficiently’.These statements summarize the need not only for the setting of Corporate Objectives but the cogent and incontrovertible argument for such objectives being financial.Let no one doubt the painful process that is involved in determining the right objectives for the corporate entity or, indeed, for any entity which seeks to survive and continue.This is why the process of setting, accepting and working towards objectives has to start from the top but must continue throughout the whole organization. Who am I and where am I going?—is a question that is as valid for the Company as it is for the individual.The corporate objective of the Fisons Group is consistently to achieve profitable growth in real terms by increasing earnings per share and raising the return on capital employed.I hope you find this paper as constructive to you as it has been to me and my colleagues.     

Implementing corporate strategy: Using management education and training

This article surveys a wide area—all of it relevant to the chief executive and the corporate planner—in linking management training and education to corporate strategy. Some companies are well aware of the benefits of using training as a means of implementing strategy. Unfortunately the management of many firms does not seem to be aware that the option exists and they are not able to use training this way because of their organizational and control systems. Training is a powerful weapon for implementing strategy. All the evidence suggests that it works, so who can afford to ignore it?     

Introducing corporate planning in a medium-size company—A case history

Within an organization pursuing a participative style of management, the organizational effort required to implement a corporate planning process—as against a corporate plan—is not generally recognized. In this article the author describes the mechanisms adopted in one company to establish and control the planning process. These include the use of network analysis, the creation of questionnaires to obtain information and necessary data, and the construction of a set of computer models. A full assessment of the success and failures during the first year of the process is given, together with an account of the turning away from planning that has taken place in subsequent years.     

Korreferat zum Beitrag: Hanno Merkt,Die Rolle des Bilanzrechts in der aktuellen Corporate Governance-Diskussion

Objective of my discussion is to assess the findings of Hanno Merkt and to provide some suggestions regarding several of the discussed issues. The coactions of company law and capital market regulation as well as codices pertaining to accounting and corporate governance as mentioned by Hanno Merkt call for a differentiated approach. In particular, a distinction regarding capital market orientation of companies as well as regarding differing purposes of individual and consolidated financial statements has to be made. Also, I encourage the research community to discuss the company’s management and monitoring philosophy (“Unternehmensinteresse”) and its enforcement in more detail (again). In my opinion, financial reporting serves the purpose of accountability and therefore is—in this sense—only a part of corporate governance in the area of capital markets.     

Delistings and the costs of governance: a study of European stock exchanges 1996–2004

In recent years there has been a dramatic increase in delistings from stock exchanges in the US and Europe, and this trend has been partly attributed to increasing administrative costs in listed companies. Has corporate governance regulation gone too far? We examine delistings from European stock exchanges 1996–2004 and find that standard corporate governance regulation—like investor protection and corporate governance codes—is associated with more delistings and in particularly going private transactions. In contrast, the tendency to go private is found to be lower, when the quality of overall governance is high. The results continue to hold when we take into consideration that governance policy may be endogenous.     

Partial privatisation and the role of state owned holding companies in China

China has never agreed to full privatisation of its state-owned enterprises (SOEs). This essentially means a dual role for the government—as a shareholder of privatised SOEs and a regulatory authority of the corporate sector. This begs the question—how does the government avoid being caught in the awkward state-first condition where political-economic interest overrides the commercial interest as its exercises both the shareholder and regulatory roles? This paper argues that a positive way forward is to establish state-owned holding companies (SOHs). As shareholders representative of the government, the SOHs serve to monitor the performance of partially privatised firms and see that the state receives its fair share of return. In China, the State-Owned Assets Supervision and Administration Commission (SASAC) assumes the role of the SOH. However, the relationship between the central government and SASAC is ambiguous with evidences suggesting SASAC’s commitment to political-economic goals. To play the role more effectively, this paper argues that SASAC must function independently of the government. SASAC must demarcate the government’s role as a shareholder and a regulator with SASAC assuming the role of a shareholder representative of the government.     

Calling in a Debt: Government's Role in Creating the Capacity for Explicit Corporate Social Responsibility

Before the field of business and society can adequately analyze the relationship between governmental policies and corporate social responsibility (CSR), either as a reality or an ideal, it is first necessary to understand exactly how governments nurtured the development of the autonomous corporation. The roles assigned to government by the economics and management literatures—regulator, standard setter, protector, and adjudicator—ignore the crucial part played by state violence and government expenditures in the rise and sustained success of the corporate economy. An examination of the history of the American case, crucial for the development of the modern corporation as well as the “explicit” form of CSR that eventually followed it, highlights these roles: the willingness of the state to intervene with force in labor conflicts bolstered the managerial autonomy that defined the large corporation, and the way government expenditures promoted innovation and firm success. Acknowledging how corporations depended on government assistance in their development is a necessary step for both assessing the responsibilities owed stakeholders and for advancing the theoretical development of the field.     

Environmental lobbying: A case of the New York state soft drink association

In the field of lobbying, the phrase “an ounce of prevention is worth a pound of cure” is germane to most issues. However, corporate America is often loath to expend resources on lobbying until an actual problem arises which, in reality, is almost always past the point at which intervention should have occured in order to ensure a reasonable chance of success.The difficulties of convincing management to dedicate resources to an activity whose results are never easily quantified or qualified are numerous. Lobbying does not lend itself to cost-benefit analysis and thus is often scorned as frivolous by corporate officers and managers who are motivated by bottom-line and productivity measurements. Convincing corporate policy makers that it is prudent to be prepared for some as yet unidentified governmental decision, which may significantly impact their operation and profitably, likens the lobbyist to a fortune teller—hardly a credible mantra. However, as illustrated in the following case, corporate America can reap many benefits from wise anticipation of the need for an environmental lobbyist.     

The Challenges of Socially Responsible Investment Among Institutional Investors: Exploring the Links Between Corporate Pension Funds and Corporate Governance

During the last few decades, globalization of finance markets has come under increasing pressure to manage the many risks that companies face due to the negative impact that certain financial crises have had on securities quoted on the stock exchange. Simultaneously, there is a growing tendency among different institutional investors to take into account nonfinancial aspects—social, environmental, and ethical values—of company management. In this respect, increasing numbers of asset managers are aware of the importance of nonfinancial aspects of company management for finance markets. Asset managers integrate corporate social responsibility, sustainability policies and corporate governance strategies as indicators in risk management and the search for long‐term investments. The largest segment of socially responsible investment (SRI) screened and mutual funds are portfolios that are privately managed on behalf of institutions. Socially responsible investors include private and public pension funds, mutual funds, and private accounts that are managed on behalf of institutional investors such as corporations, universities, hospitals, religious institutions, and nonprofit organizations, among others. The aim of this paper is to analyze the development of SRI‐screened management corporate pension plans in the Spanish finance market. Spain is one of the European countries with a less developed SRI institutional market. Since SRI is still at the fledgling stage in the Spanish institutional market, this analysis is restricted to the awareness of SRI among a sample of the total number of corporate pension funds or schemes in Spain. The paper concludes with some proposals to encourage wider SRI acceptance and practice in Spain.     

Zombies and Originals: How Cultural Theory Informs Stakeholder Management

The question of stakeholder salience has recently resurfaced in the suggestion that the ethical foundations of corporate cultures result in stakeholder cultures that largely explain how firms allocate resources among stakeholders. The present article seeks to complement this novel approach to understanding stakeholder management by adding insights from the multilevel influences that create the corporate culture in the first place, and ultimately affect managers in their stakeholder decisions. This article draws on cultural theory to examine how the individuals who compose firms present group and grid solidarity that results in cultural biases in the corporate culture. These cultural biases—individualism, hierarchy, fatalism, and egalitarianism—are then paired with the stakeholder cultures they enable, and inferences are extracted concerning the salience managers are likely to accord to various classes of stakeholders as a result. Future research and managerial implications stemming from this new view on stakeholder management conclude this article.     

Corporate governance as custodianship of the business model

Recently businesses have been encouraged to discuss their business models in their annual reports as a means of communicating their future intentions to readers of their financial statements. At the same time, corporate governance has continued to be a focus of attention. In this paper we set out the view that a useful way of regarding corporate governance is that of custodianship of the business model—by which we mean that the directors are responsible for sustaining and developing a company’s business model. A comparison of corporate governance and the activities required to sustain and develop the business model shows them to be essentially the same. A business model view has the advantage that it unifies the compliance and monitoring aspects of governance with the advisory and strategy-setting roles of directors, roles that have sometimes been seen as conflicting. Viewing corporate governance from a business model perspective highlights aspects of board responsibilities that are not explicitly recognised in the UK Corporate Governance Code and may have been neglected in the prevailing emphasis on compliance, but which are intimately connected to both network relationships and corporate culture which are now becoming a source of concern.     

Implementing strategic plans through strategic program evaluation

Strategic Program Evaluation (SPE) is proposed as a method for linking the choice elements of corporate strategy—missions, objectives, strategies, goals, programs etc.—to ensure that strategic plans are implemented. Such a use of SPE requires the exposition of the specific relationships among the strategic choice elements and the development of evaluation criteria that can be used to develop a program structure that effectively implements higher level strategic decisions.     

Equator Principles: Bridging the Gap between Economics and Ethics?

The hypothetical conflict between self‐interest, corporate interest, and the common good is one of the hottest debated issues in business ethics. This article focuses on a particular corporate social responsibility approach within the field of sustainable (project) finance, which has the potential—given that certain reform measures are adopted—to overcome the alleged trade‐off between self‐interest and the common good. The approach is labeled as the Equator Principles (EPs) framework, which celebrated its tenth anniversary and the formal launch of the third generation of the EPs (EP III) in 2013. The article shows how companies can theoretically be both profitable and socio‐environmentally responsible by adhering to the EPs. The article proceeds as follows: Before moving on to the EPs, section 2 defines the key terms self‐interest and common good. Section 3 then analyzes the EPs from a business ethics perspective. Section 4 shows how the EPs can help in solving the potential trade‐off between self‐interest and the common good—provided that the EPs are substantially revised. These required reform steps are discussed in section 5. The article ends with a summary of the main findings.     

Taking (and Sharing Power): How Boards of Directors Can Bring About Greater Fairness for Dependent Stakeholders

One of the ways in which scholars have sought to broaden the discussion of the social responsibilities of corporations and their managers is through the development of the stakeholder concept. The primacy of shareholder interests in corporate‐governance processes and managerial action is, however, a myth that justifies all sorts of managerial self‐interest seeking and exploitation of particular stakeholder groups. What makes this myth particularly problematic—from the standpoint of fairness and corporate governance—is that not all nonshareholder stakeholders are equally situated with regard to their ability to secure fair treatment. In this article, I explore the ethical dimensions of board responsibilities to dependent stakeholder groups by first describing the differences between shareholders and nonshareholder stakeholders with regard to risk, examining why dependent stakeholders (stakeholders with legitimate and urgent claims, but no power) are particularly important from the standpoint of stakeholder risk, and discussing how stakeholder consultation might provide a partial fix to such problems. I will conclude with proposals for how boards can more faithfully discharge their ethical responsibilities to dependent stakeholder groups, and in so doing facilitate stakeholder involvement in corporate governance in ways that promote fairness in organization–stakeholder relationships.