Objective
My project intend to take an qualitative approach to investigate what are
the roles of independent directors and the process of how they make decisions
using primary data. It is an exploratory study to try to theorise the behaviour
use and go beyond agency theory. It is because prior quantitative studies made
some effort to examine the influence of independent directors on performance
using agency theory and find mixed results. The problem here is they only focus
on drawing the statistical relationship between independence of the board and
firm performance without carefully considers what do BODs actually do in
practice.
My potential theoretical contribution is to develop a theoretical
framework that combines both agency theory and other relevant theory, which can
be used to guide future research. Also, by employing a qualitative study
can allow me to get access to first-hand data to explore what actually happened
in practice, instead of using archival data as proxies and this might be a
first-step attempt to reconcile the inconsistent findings in the prior
literature.
What have I done?
I have discovered two competing theories from the sociology literature to
try to explain the decision-making process of independent directors in
practice.
The first theory is institutional logic theory. Institutional logic
theory suggests institutions
provide social actors with a highly contingent set of social norms, where
behaviour is driven not by a logic of consequence but by a logic of appropriateness
through formal education, legitimating authorities and professional networks.
The key here is it is the social norms and corporate cultures that shape the
behaviours of individuals. In corporate governance content, both executives and
independence directors
have similar experiences (education and field experiences) and networking. All
these shapes the ways how independent directors gain power and determines how
you may act in the company. Coming from similar backgrounds, it is unreasonable
to suspect independent directors will act differently from executives.
The second theory is
institutional entrepreneurship theory. Institutional entrepreneurship theory
suggests actors who are not truly embedded by the institutional logics already
in place may seek to make change; however, condition on certain personal and
social criteria. There are three main criteria mentioned in the theory,
institutional content, personal properties and relation building. Institutional
content suggest an institutional entrepreneur need to be in a powerful position
to hold the power of reward and punishment system. So in corporate governance
content, being an director might be a powerful position. But whether it is
powerful enough? What might be the optimal number of independent directors?
What if, the strategies between independent directors are different? All these
questions need to be explored. The second factor is personal properties. It is
suggested that institutional entrepreneurs should possess special
characteristics, qualities and abilities which distinguish institutional
entrepreneurs from others in the field, and allow them to envision and promote
alternative arrangement. For example, reflexivity, which makes people realise
and initiates a change; unique political and social, the ability to communicate
with others in the field using normative and interest based appeals. So in
corporate governance content, do independent directors possess these
characteristics? Finally, using the resources and personal intellects, an institutional
entrepreneur can develop new relations among actors, collaboration, coalition
and alliance. In corporate governance content, what is relationship should be?
Very close or keep some distance?
The research method I’m
using is to interview some independent directors in the field and I have done
one already. I have gathered some interesting evidences, which supports one of
my theories.
What are still left to
do?
First of all, I’m
arranging more interviews with some independent directors to get more
evidences.
Second, I need to put
all interview notes and recording together to write a transcript. Then, start
to analyse the results.
Finally, I can write up
my project in time and it will be the best day of me life. J
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