Me or We: The Effects of CEO Organizational Identification on Agency Costs

Toward a Configurational Perspective on the CEO

“…There is evidence to suggest that the role itself is often structured to reduce identification with the organization. That is, some scholars have noted that certain corporate governance mechanisms-particularly those that impose structural limitations on the CEO's ability to exercise autonomous control-appear to reduce identification (Boivie et al, 2011;Lange et al, 2015). Still, though, aspects of the structure of the position-particularly equity ownership and incentive alignment-may increase identification.…”

“…Research testing this prediction, however, has failed to demonstrate any consistent effect of monitoring of the CEO on firm performance (Dalton, Hitt, Certo, & Dalton, 2007). Looking outside agency theory's boundaries, though, reveals that monitoring is more effective at controlling agency costs when industry uncertainty is low (Boyd, 1995), when the firm's reliance on innovative knowledge assets is low (He & Wang, 2009), and when CEO identification with the organization is low (Boivie et al, 2011). Only in the context of CEOs is it feasible for a relationship between a board/CEO-level attribute (i.e., monitoring) and a firm-level outcome (i.e., performance) to vary with industry-, firm-, and individual-level constructs, with hypotheses derived from contingency theory (Dess & Beard, 1984), the resource-based view (Barney, 1991), and identity theory (Ashforth, Harrison, & Corley, 2008), respectively.…”

“…Extant research on CEOs covers an array of related topics and phenomena, including boundary spanning (e.g., Markóczy, Sun, Peng, Shi, & Ren, 2013), power and influence (e.g., Daily & Johnson, 1997), decision making (e.g., Arendt, Priem, & Ndofor, 2005), attributions (e.g., Hayward & Hambrick, 1997), identity (e.g., Boivie, Lange, McDonald, & Westphal, 2011), reputation (e.g., Zajac & Westphal, 1996), and celebrity (Wade, Porac, Pollock, & Graffin, 2006), among others. While much research also examines top management teams and boards of directors, within which CEOs are nested, research specifically focusing on CEOs has proliferated and shows no signs of abating.…”

Behavioral Agency Theory

“…They challenge the idea that intrinsic and extrinsic motivation are either independent or additive, arguing instead that contingent monetary awards might actually cause a reduction in intrinsic motivation. Boivie, Lange, McDonald and Westphal (2011) point out how, in the case of CEOs, high organizational identification, which may be associated with intrinsic motivation, can help to reduce agency costs. Frey and Jegen (2001) and Sliwka (2007) postulate that in some cases extrinsic rewards can "crowd-out" intrinsic motivation, particularly if monetary incentives are badly designed.…”

Identity in Family Firms: A Theoretical Analysis of Incentives and Contracts

“…Abernethy, Bouwens and Kroos (2017) observed that managers with incentivebased compensation who strongly identify with the firm engage in lower levels of opportunistic earnings manipulation. Boivie, Lange, McDonald and Westphal (2011) found out that CEOs with higher levels of organizational identification are less prone to take actions that might harm his/her firm or its image. Also, the authors observed that CEO organization identification is a substitute for external controls mechanisms with respect to agency problems, therefore reducing the overall agency costs.…”