Corporate Governance Against Recommendations: The Cases of the Strong Executive and the Strong Ownership
Král Pavel, Tripes Stanislav, Pirožek Petr, Pudil Pavel
Corporate governance, strong executive, strong ownership, CEO duality, Governance in CEE countries
There are several basic configurations of corporate governance according to the separation of
ownership and control (Jensen’s theory). Effective governance is described as a situation when
an owner (or group of owners) keeps the right to ratify and monitor strategic decisions while
management has the right to initiate and implement those decisions. There are two particular
situations how this recommendation is partially broken and both situations are linked to CEO
duality. The first case happens when an owner loses or does not exercise the right to monitor
management of the organization and is termed as the strong executive. The second case is called
the strong ownership and is distinguished by an owner taking over implementations of the decisions.
The focus of the study was to explore particularly configurations of the strong executive
and the strong governance. A mixed method research design was chosen to explore the differences
between the basic governance configurations. The sample was chosen by purposive sampling
and covered a hundred for-profit organizations of all size and from all sectors of economy.
The data were collected through interviews with representatives, mainly members of top management.
We revealed that both of these configurations can bear good corporate performance
but also bigger risks. The strong executive is typical for organizations with dispersed ownership
or a publicly owned organization and the performance of the organization is fully dependent
on competencies but also personalities of managers. This configuration contains a high risk of
misuse of authority. The strong ownership is effective in small organizations while in a larger
organization leads to an overexertion of owners and low performance because they usually face
problems to keep focus on the strategic issues of the organization.
Corporate Governance Against Recommendations: The Cases of the Strong Executive and the Strong Ownership [PDF file] [Filesize: 411.22 KB]
Král P., Tripes S., Pirožek P., Pudil P.(2012). Corporate Governance Against
Recommendations: The Cases of the Strong
Executive and the Strong Ownership. Journal of Competitiveness, 4 (3), 46-57. https://doi.org/10.7441/joc.2012.03.04