Are Alternative Organizational Forms the Solution to Limit Excessive Managerial Discretion?

Abstract

Modern corporations have been widely accused of promoting values of managerial autonomy that can result in managerial waste and opportunistic behaviour, leading organizational theorists to suggest the adoption of alternative organizational forms that should normatively and structurally limit such autonomy. However, this mixed-methods study of an alternative organizational form – income trusts (1995–2005) – finds that income trusts were also characterized by excessive managerial autonomy. Managers strategically used the income trust form in discretionary ways such as by providing little information on important decisions to external parties, limiting investors’ right to oppose managerial actions and retaining firm earnings to a great extent. Thus, the article concludes that alternative organizational forms do not necessarily promote an ethical business culture since they are unable to overcome deeply institutionalized values of managerial autonomy.