The Contribution of Senior Managers to Corporate Governance

Research Issue: A taxonomy of corporate governance based on: • classifying the practice of corporate governance into four discrete primary functions; and • identifying the tasks of corporate governance that correspond to each of the four primary functions; and • describing for each of the Board, individual directors and senior managers: o the roles performed in each of the four primary functions; and o the types of behaviour that correspond to each of the four primary functions. Research Insights: The paper contends that the contribution of senior management to the practice of corporate governance has largely been ignored by the corporate governance community. Dominant theoretical frameworks of corporate governance do not appear to explain or predict improvements to the often divisive and combative relationship between the board, individual directors and those in positions of senior management. The taxonomy identified in the paper provides a novel corporate governance framework that may, amongst other things, better solve the problem of board/ management dysfunction. The paper concludes by presenting two anomalies not considered or addressed by the dominant theoretical frameworks but identified by the taxonomy: • Boards may suffer from an imbalance of primary functions that occurs when the focus of the board on each function does not reflect contingency factors (organisation type, history, life cycle, external circumstances, internal circumstances); and • Boards may also suffer from misalignment when the board, individual directors and/or senior managers do not adapt their role and type of behaviour to match the primary function performed. The paper argues the result of the imbalance and/or misalignment will manifest itself in the typical complaints that directors and senior managers make of the other. Theoretical and Academic Implications: Academic research implications include novel research questions: • Is “supervision” as understood by management literature one of the four primary functions of corporate governance and how does this differ from the traditional concept of “monitoring” associated with agency theory. • Are there desirable corporate governance roles and types of behaviour for senior managers that correspond to the performance of each primary function? • Is there a correlation between the alignment of inter board/senior manager roles and behaviours for each primary function and board/company performance? Practioner Implications Practioner implications include: • The potential to improve the performance of directors by offering alternative explanations for poor performing boards: o The primary function of “supervision” of management not being performed by the board; o Wrong balance of primary functions; o Misalignment between the roles and types of behaviour exhibited by the board and senior managers and that required by a function. • Non-existent or poor formal training of senior management.