Corporate Governance Deviance

Abstract

We develop the concept of corporate governance deviance and seek to understand why, when, and how a firm adopts governance practices that do not conform to the dominant governance logic. Drawing on institutional theory, coupled with the entrepreneurship and corporate governance literatures, we advance a middle range theory of the antecedents of corporate governance deviance that considers both the institutional context and firm-level agency. Specifically, we highlight the centrality of a firm's entrepreneurial identity as it interacts with the national governance logic to jointly create corporate governance discretion (i.e., the latitude of accessible governance practices) within the firm. We argue that as a firm's governance discretion increases, it will be more likely to adopt over-or under-conforming governance practices that deviate from established norms and practices. Moreover, we propose that adopting a deviant corporate governance practice is contingent on the governance regulatory environment and a firm's corporate governance capacity. We conclude by advancing a new typology of corporate governance deviance based on a firm's over-or under-conformity with the dominant national logic, as well as its entrepreneurial identity motives. This globally-relevant study refines and extends comparative corporate governance research and enriches our current understanding of the institutional logics perspective.

Is managerial entrenchment always bad and corporate social responsibility always good? A cross‐national examination of their combined influence on shareholder value

“…When these conditions are present, then, the resulting configurational bundle may lead to positive firm outcomes, as well. This argument is in line with the notion of governance deviance as a competitive strategy (Aguilera et al, ). Based on this notion, we propose that the coherence in the adoption rationale of both MEPs and CSR, in each variety of capitalism, will influence their firms’ value.…”

“…Hall and Soskice () identified two varieties of capitalism (VOC), the Liberal Market Economies (LMEs) and the Coordinated Market Economies (CMEs), whose characteristics are summarized in Table . Though all nations function with multiple logics, it is quite likely that one logic would dominate all others (Aguilera et al, ). For LMEs, the logic of the market is the dominant one.…”

“…This self‐interested orientation of managers when adopting MEPs, represents a notable deviation from the dominant logic of corporate governance in CMEs, according to which the interests of all firm stakeholders should be balanced (Aguilera et al, ). In terms of the model of Aguilera et al (), MEPs would therefore represent a form of deviance that under‐conforms with the norms and expectations set by the CME's institutional environment.…”

“…Moreover, according to the logic of nonmarket coordination of CMEs, firms should meet, not exceed, institutionally‐based expectations when addressing stakeholders’ interests (Matten & Moon, ). So, while matching the expectations of stakeholders gives firms the legitimacy required to operate, exceeding them over‐conforms with the dominant logic (Aguilera et al, ) and does not necessarily lead to positive organizational outcomes (Powell & DiMaggio, ), but to catering private benefit interests.…”

Expanding the Notion of Dialogic Trading Zones for Impactful Research: The Case of Women on Boards Research

“…As the WoB field becomes more global, interdisciplinary and focused on change mechanisms (e.g. quotas or voluntary measures), there has been a recent emergence of new theoretical lenses including comparative corporate governance (Iannotta, Gatti and Huse, 2016), corporate governance deviance (Aguilera, Judge and Terjesen, 2016), social roles (Chizema, Kamuriwo and Shinozawa, 2015) and institutional theory (Carrasco et al, 2015;Gabaldon et al, 2015;Perrault, 2015;Seierstad, 2015;Singh et al, 2015).…”