Strategic Corporate Governance Research Articles

ПЕРЕДУМОВИ ПРОВЕДЕННЯ АНАЛІТИЧНИХ ПРОЦЕДУР АУДИТУ ФІНАНСОВИХ РЕЗУЛЬТАТІВ ПІДПРИЄ

The audit of financial results in companies with corporate governance has become a critical aspect of modern business practices. This study explores the prerequisites for conducting analytical procedures of audit of financial results in the context of corporate governance, emphasizing its role as a comprehensive tool ensuring efficiency, transparency, and sustainable development of the corporate sector. The relevance of this topic is underscored by the growing complexity of business environments, increasing regulatory demands, and the need for greater transparency in corporate operations. As companies face heightened scrutiny, the role of audit has expanded beyond traditional boundaries, becoming integral to strategic decision-making and risk management processes. This paper examines the regulatory framework for audit in Ukraine, which integrates both national and international standards. A key contribution of this research is the proposal of a hierarchical model of audit objectives. This model illustrates the multi-level nature of auditing activities, encompassing a spectrum of tasks from ensuring the reliability of financial statements to achieving strategic corporate governance goals. The study delves into the role of analytical procedures in audit, positioning them as powerful means of generating valuable information for strategic decision-making and business process improvement. This perspective highlights the evolving nature of audit, moving from a compliance-focused activity to a value-adding business function. In the context of investment attractiveness, the paper argues that quality audit is a key factor in building investor and stakeholder confidence. It plays a crucial role in protecting shareholder rights, especially those of minority shareholders, by ensuring transparency and accountability in management decisions. The paper concludes by positioning audit of financial results as an integral component of modern corporate governance systems. It argues that effective audit practices contribute significantly to enhancing the efficiency, transparency, and competitiveness of Ukrainian companies in the global market. This study contributes to the ongoing dialogue on the evolution of audit practices in the face of changing business landscapes and increasing stakeholder expectations, providing valuable insights for practitioners, regulators, and academics in the fields of auditing and corporate governance.

Understanding board designs in Latin American firms: Insights from Brazil

Firms are facing an increasing pressure to conform to a globally-accepted good governance norm that is largely based on developing economies in order to increase board monitoring. However, many Latin American firms deviate from a set of recommended corporate governance practices by adopting board designs with practices associated with low board monitoring. We attribute this deviation to the interplay of capacity and willingness to bear the high costs of board designs with few barriers to board monitoring. In this study, we use a configurational approach to inductively identify the board designs of publicly listed Brazilian firms. Our findings uncover a typology of board designs corresponding to particular levels of firms’ capacity and willingness to bear the costs of board governance practices that conform to the good governance norm. We discuss our study’s implications for strategic corporate governance.

Governance Stickiness: Understanding Governance Designs in Emerging Economies

Many firms in emerging economies adopt governance designs that include several barriers of board monitoring. Scholars argue that these barriers are attributed to powerful shareholders who want to control corporate decisions and/or relatively weak minority shareholder protection from regulatory frameworks. Alternatively, we propose that governance designs can also be explained by governance stickiness, which we define as the difficulty of firms to transfer or adopt specific corporate governance practices due to high governance costs. We theorize that governance stickiness involves the interplay of a firm’s capacity and willingness to bear the high costs of adopting specific governance designs. Building on the neo-configurational perspective, we test our proposition by inductively exploring the governance designs reflected in the bundles of board monitoring barriers of publicly listed Brazilian firms. Our findings uncover a typology of governance designs that correspond to particular levels of governance stickiness. Our research advances knowledge of strategic corporate governance by bridging the literatures of governance designs and costs.

A strategic corporate governance framework for state-owned enterprises in the developing economy

Corporate scandals that have rocked the world in the past two decades have heightened the importance of corporate governance (Zalewska, 2014). Despite the interest in the adoption of corporate governance state-owned enterprises (SOEs), the performance of these organisations remains poor (Vagliasindi, 2008), which has been attributed to ineffective corporate governance (World Bank, 2007). The objective of this study was to develop a strategic corporate governance enterprise in the developing economy. The study followed a critical realism approach. As a result, a multi-methodology and mixed design were employed. The sample included all SOEs registered in Malawi, which had operated from 2000–2016 but excluded regulatory, financial, and academic institutions. Data collection followed the critical realism case study method. Findings reveal that large power distance, cronyism, and materialistic cultures are entrenched in society and negatively impact corporate governance. Results further show that increased shareholders’ power and multiple principals have a negative effect on performance. The study recommended changes to legal form, board operations, and disclosure to improve corporate governance effectiveness. The study has contributed to a body of knowledge in terms of developing a strategic governance framework for SOEs in Malawi. The study has also established that cultural values influence the effectiveness of corporate governance.

CHARACTERISTICS OF BUSINESS NETWORKS AND THEIR ROLE FOR STRATEGIC COMPANY DEVELOPMENT

The processes of globalization and internationalization impose the need to change the traditional thinking and reorganize the strategic corporate governance. An important prerequisite for the strategic development of the modern organizations is the construction of flexible business network structures for intercompany interaction. In this regard, the purpose of the paper is to study the specifics of the business networks and on this basis to justify their role in the process of strategic corporate governance. In connection with the goal realization, the following tasks are solved in the article: presentation of the theoretical bases of the business network organizations; consideration of the development of the theory; identification of their main features; presentation of the network business structure as a system; argumentation of the importance of the business networks for the strategic company development.

CEO selection in intergovernmental organizations: the clash between control and efficiency in governance

CEO selection is a crucial governance function influencing and driving the strategic direction of organizations. Extant research has largely assumed that boards are an efficient mechanism vested with the CEO selection function. However, boards are not always delegated with this function. In some organizations, the principals directly select the CEOs to keep effective control over the organization. Drawing on the clashing rationales of control and efficiency, this article identifies the factors influencing the governance choice of whether CEO selection is directly carried out by the principals or channeled through the board. Using a Bayesian logistic regression on a dataset of all global intergovernmental organizations, we find that the substantive character of ownership (i.e., capacity and incentive) matters more than the structure (i.e., diversity and dispersion) in such a governance choice. We also find that organizational characteristics barely have direct and moderating effects on the relationship between ownership structures and the governance choice of CEO selection. Our study has important implications for the literature on CEO selection, and strategic corporate governance research in general.

The Endurance of Shareholder Value Maximization as the Preferred Corporate Objective

AbstractSundaram and Inkpen (2004a, 2004b) proposed shareholder value maximization (SVM) as the preferred corporate objective since it alone impels the firm to implement strategies that enhance outcomes for all stakeholders. Goranova and Ryan (2021) argue that three recent developments – common ownership, decoupling of owners from managers, and greater divergence in shareholder interests – call into question our SVM view. We dispute their arguments: (i) The developments they cite are overplayed in the literature, and may not matter much for SVM; (ii) To the extent they do matter, their concern is less about SVM’s relevance as corporate objective but more whether these developments bias decisions towards the short‐term. We do not disagree since, after all, Sundaram and Inkpen (2004a) is solely about SVM for the long‐term; (iii) If anything, Goranova and Ryan’s (2021) proposed solution of ‘strategic corporate governance’ can be viewed as an endorsement of the relevance and enduring primacy of SVM for the long‐term.

The Corporate Objective Revisited: The Shareholder Perspective

AbstractShareholder value maximization has spurred a long‐standing and heated debate between the proponents of a unified corporate objective function and the supporters of multi‐constituency goals of the corporation. We weigh in on the corporate purpose debate from a different point of view: that of the shareholders. Specifically, we seek to critically assess the assumptions about shareholders embedded in the shareholder value maximization doctrine and examine the implications of three contemporary shareholding practices: (a) shareholders investing concurrently in competing firms, (b) residual‐risk bearing decoupling, and (c) heterogeneous shareholder interests. Our critique draws out the challenges that contemporary shareholder practices pose for corporate governance and highlights the need for strategic corporate governance, or governance policies and practices that prioritize the sustainable competitive advantage of the firm.

Introduction to the Point‐Counterpoint: The Corporate Objective as a Contingency

AbstractIn this introduction to the Point‐Counterpoint on the corporate objective, I briefly review and reflect on three views of the corporate objective presented in the exchange. I argue that each perspective – the shareholder value model, the stakeholder management perspective, and the strategic corporate governance framework – has merit in its own right, but that their relevance is contingent on the theoretical and practical contexts in which they are applied, assessed and evaluated. From a theoretical perspective, the choice of which model best fits depends upon whether one is looking through a normative, instrumental, or descriptive lens. From a practical vantage, the relevance and applicability of each of these corporate objectives is contingent on the national institutional context as well as the individual corporation’s relevant sector and industry, its strategy, and its leaders’ vision. In fact, there is no one corporate objective; rather the objective is variable based on a range of conceptual lenses and contextual factors and influences.

Influence of Strategic Corporate Governance Practices on Public Service Delivery of Mombasa Huduma Centre, Kenya

Influence of Strategic Corporate Governance Practices on Public Service Delivery of Mombasa Huduma Centre, Kenya

Social Outcomes of Corporate Governance: Evidence from the Food Industry of Pakistan

Social and environmental problems are becoming strategic concerns for the managers in the current business scenario because it is challenging their sustainability. Here the need arises to respond to this changing phenomenon accordingly. In this regard social impact of corporate governance has not yet been explored where it can play a role of driver of excellence in terms of social performance and it is required to be studied. To check the existing situation, this study has been conducted where the social impact of corporate governance has been explored in the food Industry of Pakistan. Questionnaires have been filled from 176 managers working in six food producing firms listed in Pakistan Stock Exchange (PSX). Structural Equation Modeling based partial least square (PLS) has been used where Smart PLS has been used for model estimation. Results are supporting the stakeholder theory as Nestle Pakistan and Engro Foods are driving social excellence through corporate governance practices, where the corporations are showing strong positive relationships of corporate governance practices with stakeholders management, environmental integrity and protection, social cohesion and equity while insignificant relationship exists between strategic proactivity and corporate governance practices as people are resistant to change and innovation. The relationships can be explored in other industries like Oil and gas, Chemicals and Construction etc.

Strategic corporate governance factors for municipally owned companies: an empirical analysis from a municipal perspective

Empirical research on municipally owned companies is still an under-researched field. In particular, there is a lack of sound empirical success factor-related studies that take into account the municipal mission of creating public value, as well as future-oriented strategic measures by which municipally owned companies can be directed from a municipal perspective. Therefore, this study examines strategic success factors that have an impact on the perceived success of municipally owned companies by investigating the responses from 271 qualified key informants using structural equation modelling. The analysis of the responses indicates that three factors (shared vision, strategic coordination and goal clarity) show a positive significant impact on the perceived success of municipally owned companies. In summary, the study provides insights to academics and public officials, and contributes to address the prevailing gap of empirical knowledge in the field. Points for practitioners The findings suggest that creating a shared vision and building a common understanding with their municipally owned companies concerning their goals, roles and duties is an important task for municipalities. Furthermore, the results indicate that municipalities that take an active part in their ownership role are more likely to experience enhanced municipally owned company success than others that instead rely on contractual agreements. Thus, creating a joint understanding of the intended strategy and operations seems more promising than creating excessive bureaucratic burdens.

An Empirical Study of Strategic Corporate Governance and Competitive Advantage

An Empirical Study of Strategic Corporate Governance and Competitive Advantage

Stefnumiðaðir stjórnarhættir: Dæmi frá Orkuveitu Reykjavíkur

Þessi grein er á sviði stjórnarhátta og fjallar um rannsókn á eigendastefnu og stefnumiðuðum stjórnarháttum hjá Orkuveitu Reykjavíkur (OR). OR er sameignarfyrirtæki í eigu þriggja sveitarfélaga. Staða og þróun OR er áhugaverð vegna lagabreytinga sem knúðu á um að raforkuframleiðsla og -sala skyldi sett í sérstakt fyrirtæki og vera aðskilin frá veiturekstri OR. Í ársbyrjun 2014 var OR skipt upp í samstæðu sem samanstendur af móðurfélagi og þremur dótturfélögum. Við þau tímamót var sameignarsamningur OR endurnýjaður ásamt eigendastefnu, og stjórnarhættir fyrirtækisins endurskoðaðir. Í rannsókninni er fjallað um innra samhengi milli sameignarsamnings OR, eigendastefnu og heildarstefnu fyrirtækisins og rýnt í hvernig unnið er að framkvæmd eigendastefnunnar í samstæðunni. Helstu niðurstöður eru þær að með sérstöku verklagi við rýni, mótun og eftirfylgni er stuðlað að því að stjórn samstæðunnar hafi nauðsynlega yfirsýn til að sinna stefnutengdu hlutverki sínu í því flókna stjórnskipulagi sem varð til við uppskiptingu fyrirtækisins. Einnig kemur fram að sérstakar aðstæður OR eftir hrunið höfðu áhrif á þróun skipulags og stjórnarhátta.

Carrot or Stick? Strategic Corporate Governance and the Incentivization of Attention to ESG Issues

When seeking to influence firms’ behaviors, investors have a range of strategic alternatives through which pressure can be exerted. These approaches range from collaborative dialogue with firms, to...

Labor Unions and Strategic Corporate Governance: A Balancing Act of Managerial Power and Entrenchment

This paper investigates the relation between unionization and corporate governance practices in the United States. For unionized firms to secure a bargaining advantage, we hypothesize that the managers of such firms will optimally adopt structures of governance that increase managerial power and reduce the influence of union-backed dissident shareholders. We also recognize a force that counteracts this power and avoids provoking quiet-life problems, leading to the prediction that unionized CEOs will face greater exposure to external discipline. Using a matching estimator with hand-collected data on unionization, we find support for our hypotheses. Unionized firms are more likely to unify the CEO and chairman positions, avoid voting mechanisms that increase the power of minority shareholders (e.g., cumulative voting), and install a younger board (i.e., a board that is more exposed to the market for directors). Finally, unionized firms are less likely to adopt golden parachutes and/or poison pills.

Carrot or Stick? Strategic Corporate Governance and the Incentivization of Attention to Environmental, Social, and Governance Issues

When seeking to influence firms’ behaviors, investors have a range of strategic alternatives through which pressure can be exerted. These approaches range from collaborative dialogue with firms, to other more coercive methods such as divesting their shareholdings. However, limited consideration has been given to the relative effectiveness of the various corporate governance decisions available to investors. Consequently, this study proposes a behaviorally-grounded strategic view of corporate governance whereby intendedly rational investors choose their corporate governance decisions based on whether the expected response from the targeted firm is preferable to the response from investors’ other alternatives. Doing so enables investors to more efficiently allocate their monitoring resources. I operationalize the study by analyzing investors’ strategic decisions relating to the use of shareholder proposals. Focusing on environmental, social, and governance issues, I find that investors’ use of incentives for collaboration — by withdrawing shareholder proposals — produces more effective outcomes than the coerced enforcement of control — putting the proposal to a vote. A key mechanism relates to firms’ cognition of issue salience and the external legitimacy which investor activism signals. In doing so, these findings suggest that investors can strategically channel firms’ attention and effort to substantively address the issues raised.

Sovereign Wealth Funds: A Strategic Governance View

Recent tectonic, global economic and political shifts have spurred the emergence of new organizational forms such as sovereign wealth funds (SWFs)—state-owned investment organizations without pension liabilities—primarily in emerging and frontier markets. Although scholars have begun to explore SWF macroeconomic trends, little is known about the challenges these institutional investors face or their strategic capabilities to address these concerns. Drawing on comparative and strategic corporate governance research, we develop an organizing framework to better understand the firm-level characteristics of SWFs and their consequences. Our analysis of these investment funds’ multidimensional strategic governance traits contributes to the literature on state capitalism and comparative corporate governance.

Sovereign Wealth Funds: A Strategic Governance View

Recent tectonic, global, economic and political shifts have spurred the emergence of new organizational forms such as sovereign wealth funds (SWFs), state-owned investment organizations without pension liabilities, arising primarily in emerging and frontier markets. Although scholars have begun to explore SWF macroeconomic trends, little is known about the challenges these institutional investors face or about their strategic capabilities to address these concerns. Drawing on comparative and strategic corporate governance research, we develop an organizing framework to better understand the firm-level characteristics of SWFs and their consequences. Our analysis of these investment funds’ multidimensional strategic governance traits contributes to the literature on state capitalism and comparative corporate governance.

Strategic corporate governance stakeholder complexities in strategic decision implementation (sdi): The shipbuilding industry in Abu Dhabi

This paper explores the complexity of SDI and the conflicting roles of government as the main client, partner and stakeholder in the naval shipbuilding industry in two main shipyards in United Arab Emirates’ capital, Abu Dhabi. This industry was recently established in this highly Westernized part of the Middle East, and constructs naval vessels under the auspices of Abu Dhabi government. The industry envisaged developing private clients in the future, but before achieving this, some issues identified in this study need to be resolved to the mutual satisfaction of the industry and the clients. The literature indicates that strategic decisions taken by one partner in the enterprise can lead to problems that are difficult to resolve. Hence, to gain an in-depth understanding of the complexities, an explorative qualitative research with a case-study approach was carried out over a period of two years in order to track progress in this industry. It was found that government collaboration can lead to many challenges in strategy implementation within the industry itself due to a lack of communication and coordination between the two. The main managerial actors were interviewed to obtain a sense of their involvement and their individual perception of control in the implementation process to the outcomes of which they were wedded, and the extent to which they felt they were successful. To provide specific focus, this article focuses exclusively on the impact of government salaries and policies on shipbuilding strategy and implementation within two shipyards. Strategy appears easier to formulate than to implement. It was found that there were contradictions in strategies as devised by the industry and the policies which the government wished it to implement. The article makes recommendations about three prime ways in which the industry and its main sponsors, now and in the future, may more harmoniously collaborate to attain mutual success. Reciprocal communication lies at the core of the solution. The article is limited by its constraint of using only two cases, and the findings are indicative of a greater need to examine similar policy, formulation, and implementation issues in Abu Dhabi specifically, and between industry/client generally wherever such a situation may occur.