THE PETER PRINCIPLE: PERSONAL OR ORGANIZATIONAL INCOMPETENCE?

This article proposes that incompetence in management may not be explained so much by the ‘Peter Principle’, i.e. by terminal weaknesses of personnel in faulty promotion systems, as it is by the organizational climate in which managers perform, i.e. by outmoded supervisory styles and limiting structural relationships. This alternative explanation is supported by Townsend's popular book, Up the Organization,¹ where Theory X styles of leadership, in some combination with bureaucratic elements of structure, are seen as impairments in modern organizations. This contention argues that organizational change agents must operate in tandem upon perceptions and attitudes as well as structural properties to maintain effectiveness - embarking on either skill and sensitivity training alone or mandating authority and task changes is insufficient. In addition, leadership flexibility and structural variety must provide alternative options across different task units if both short-run efficiency and long-term relevance are to be generated for the organization. Finally, organization survival is viewed as a function of managerial performance as determined by structure, including the promotion system, and by level of humanism of the climate, especially motivational stimuli. Within all of this, managerial effectiveness is considered to be influenced by incumbent conceptualizations of goals and capacities of the organization and of his own ‘self’ within that system. Concepts of self, in turn, are determined by historical notions associated with work and authority, as well as by various socialization processes in the organization, e.g. training, super-vision and general psychological conditioning. Accordingly, the matrix design of organizations and the contingency theory of leadership are offered as vehicles for tentatively re-conceptualizing the nature and form of collective behavior. Matrix and contingency theories focus upon modern, complex organizational structures and varied superior-subordinate relationships rather than upon man's instrumental performance, as with the Peter Principle, in explaining managerial inadequacies.     

Ownership effects on operating strategies: Evidence of expense-preference behavior in the hospital industry

Expense preference offers an alternative to profit-maximization theory in explaining firms' operating strategies (Williamson, 1963; Rees, 1974). Expense-preference theory suggests that when disctretionary behavior is allowed, corporate managers may choose to maximize individual utility instead of corporate profit. Expense-preference behavior tends to be evidenced by higher expenditures on items for which managers have a positive personal preference than would be justified by profit maximization. Conditions under which significant managerial discretion can emerge include weak competition, strictly controlled entry, a high degree of regulation, separation of ownership and control, and existence of a strong public interest character for the firm or industry (Awh and Primeaux, 1985; Edwards, 1977). The hospital industry may be characterized as operating under all the above conditions. Hospital ownership can be classified as being either not-for-profit or proprietary. Profit-maximization influences are generally not present in not-for-profit hospitals, thus further increasing managerial discretion with respect to operating expenses. This study provides support for the contention that expense-preference behavior exists in not-for-profit hospitals as compared to proprietary hospitals. Specifically, we present evidence of considerable managerial discretion in the allocation of resources in not-for-profit hospitals.     

公司管理层权力与银行信贷融资决策

运用中国上市公司2010—2013年相关数据,考察公司管理层权力与公司融资结构及银行信贷资源配置,结果显示：公司的管理层结构及高管层权力是公司融资政策选择和银行信贷资源配置的重要动因,公司管理层权力越大,管理层向银行借入短期借款越多,公司管理层权力与短期借款结构正相关。在债务约束效应下,管理层可能会出于个人任期和控制权私利的原因做出影响公司融资决策的行为,在公司银行信贷融资中表现为银行信贷融资规模与公司管理层权力呈现负相关关系,即管理层权力越大,公司配置的银行信贷资源越少;同时,公司管理层权力中结构权力与所有者权力对公司信贷决策有重要影响。     

Management training and education in the People's Republic of China

Management education and training is an important means of improving the competence of managerial personnel in any economy, and managerial talent is a necessary condition for successful economic development. From the beginning of the open door policy, the People's Republic of China has recognized this need. However, ideological road-blocks, a rather narrow interpretation of modern management, absence of a consistent national policy on managerial education and training and lack of qualified faculty have stifled the development of managerial talent. The worsening fate of the state-owned enterprises has been linked to a shortage of qualified managerial personnel and that shortage continues to be a key operational concern for foreign companies establishing operations in China. This paper traces and describes the historical development of management education and training in the PRC, and explains the current state of affairs. An analysis of political, structural, policy and attitude issues leads to the conclusion that problems remain which could severely hamper China's continued programme of economic reform.     

Well It’s Only Fair: How Perceptions of Manager Discretion in Bonus Allocation Affect Intrinsic Motivation

Perceptions of manager discretion in incentive allocation are theoretically and practically important to help explain the much‐debated relationship between performance‐related bonuses and intrinsic motivation. We argue, and demonstrate, that perceived managerial discretion is a key moderator to this relationship because of its relevance to procedural fairness. In a first study, we developed a measure for perceived manager discretion and distinguished it from related concepts. In a second experiment, we found that higher bonuses associated with higher levels of perceived manager discretion enhanced procedural fairness but those based on lower discretion did not. In a third field study, we found that actual bonuses implemented by a service organization enhanced intrinsic motivation indirectly through procedural fairness, but only when employees perceived their bonus to be based on higher levels of perceived manager discretion. Conversely, when bonus level was associated with lower perceived manager discretion, it negatively predicted of intrinsic motivation.     

Searching for managerial discretion: how public managers engage managerialism as a rationalization for increased latitude of action

ABSTRACT

This article focuses on the managerial discretion that public managers experience. More specifically, it discusses how managerialism is an embedded ideological stance that influences understandings of public sector governance. I argue that managers’ perceptions of discretion are affected by these understandings. The analysis draws on empirical data from a longitudinal study, demonstrating how public managers engage discourses emanating from managerialism in order to rationalize increased discretion. The findings suggest that customer perspectives functions as a rationalizing factor for engaging public managers’ transition towards increased discretion. As such, this article contributes to knowledge about managerial discretion as well as managerialism.     

An integral model for the implementation of environmental policy strategy

This article responds to demands for a more in‐depth study on how to implement an environmental policy strategy (EPS). Following the strategic choice framework, this study seeks to address this issue by testing a theoretical model of several managerial and organisational variables associated with a firm's EPS. The managerial variables examined include managers' perceptions of environmental pressures, managers' consciousness of environmental problems, and managers' perceptions of the potential benefits associated with the implementation of an EPS. The organisational variables that are investigated relate to the structure, systems, and processes of the representative organisations. Control variables include the firm's industrial sector, its country of origin, its size, and its international character. A model based on structural equations with the weighted least squares estimation method is used to test the hypotheses in a large sample of firms. The results confirm the need to consider a multidisciplinary view of the implementation of an EPS.     

Board Antecedents of CEO Duality and the Moderating Role of Country‐level Managerial Discretion: A Meta‐analytic Investigation

CEO duality reduces boards’ monitoring capacity. But governance substitution theory holds that boards of directors who can effectively monitor their CEOs are more likely to adopt the CEO duality governance structure. By examining relationships between board characteristics underlying their monitoring capacity and CEO duality, we bring evidence to bear on governance substitution theory. Further, by applying a managerial discretion theory lens to CEO duality, we extend governance substitution theory to the cross‐country context where institutional features vary in their constraints on managerial discretion. Meta‐analytic results from a dataset of 297 studies across 32 countries/regions provided support for the majority of our predictions. As predicted, board independence and certain types of board human capital were positively related to CEO duality. Unexpectedly, board ownership was negatively related to CEO duality. Additionally, country‐level managerial discretion significantly moderated the board independence‐ and human capital‐duality relationships (but not the board‐ownership‐duality relationship) as predicted.     

Ownership structure and corporate liquidity policy

This study analyzes the relationship between corporate liquidity (i.e. the fraction of assets invested in cash and marketable securities) and managerial ownership in the firm's stock. We postulate a negative relationship between excess liquidity and managerial stock ownership as the managers' interests shift from protecting the value of their human capital to maximizing the value of their stockholdings. This managerial behavior is constrained by the disciplining forces of the firm's product market structure and the market for corporate control. While the tests fail to reveal any significant impact of managerial stock ownership, they show that firm liquidity is positively related to the firm's ability to earn economic rents.     

Accounting Discretion in Goodwill Impairments: UK Evidence

This study examines managers’ use of discretion in determining goodwill impairment losses following the mandatory adoption of IFRS 3 “Business Combinations,” and whether this discretion reflects opportunistic reporting by managers or the provision of their private information. Although IFRS 3 was issued to improve the accounting treatment for goodwill and provide users with more useful and value‐relevant information regarding the underlying economic value of goodwill, it has been criticized on the grounds of the managerial discretion inherent in impairment testing. Therefore, ex‐ante, it is unclear how the impairment‐only approach has affected the reporting of goodwill impairment losses. After controlling for economic factors, empirical results reveal that managers are exercising discretion in the reporting of goodwill impairments following the adoption of IFRS 3. Specifically, goodwill impairments are more likely to be associated with recent CEO changes, income smoothing and “big bath” reporting behaviors. However, the results also indicate that goodwill impairments are strongly associated with effective governance mechanisms suggesting that managers are more likely to be exercising their accounting discretion to convey their private information about the underlying performance of the firm rather than acting opportunistically. These inferences are robust to various modeling specifications and variable definitions, suggesting that IFRS 3 has provided managers with a framework to reliably convey their private information about future cash flows consistent with the IASB's objectives in developing the impairment standard.     

Corporate restructuring,ownership-disciplined alignment,and the reorganization of management

Intensified focus on shareholder value during the 1980s led to a stress on consistent, integrated linkages among major elements of company organization. Drawing on senior management interviews and documents from six large publicly-traded corporations and six small firms, we argue that this ownership-disciplined alignment devolved decision-making authority into operating business units; contracted headquarters' managers and staff functions; heightened stress on management selection; expanded use of performance-based compensation; and created mechanisms for internal ownership. Changes in each area of managerial organization have appeared before, but they are now explicitly and systematically focused around enhancing shareholder value.     

A LONGITUDINAL ANALYSIS OF THE CONTEXT AND STRUCTURE OF A LARGE BRITISH FINANCIAL INSTITUTION

This study represents an analysis of the changes in the environment, context and structure of an organization, using the full Aston Interview Schedule.² The limitations of generalizing from a single case are acknowledged, but the longitudinal analysis provides support for the notion that organizations can and do develop self-evaluative capacities when threatened by external change. The results of the process of self-evaluation on the part of the organization are shown as changes in the organization's scores on the various scales of organizational context and structure developed by the Aston school, at two points in time. These changes provide support for a number of conjectures arising from previous analyses of the relationships among the structural dimensions of organizational form displayed by the Aston methodology; notably the relationship between size/standardization and centralization/standardization. The analysis also suggests that the centralization scale can be viewed as having two components – one related to policy decisions, the other to operational decisions.     

Line managers and HRM: A managerial discretion perspective

Line managers play a central role in HRM practices, but research and theory on how their role is enacted remains underdeveloped. This paper presents a case study of a large U.K.‐based fashion retailer and uses managerial discretion theory to develop a novel understanding of line managers' contribution to the implementation of HRM practices. We describe three distinct ways in which line managers engage with HRM policies and procedures, and propose that line managers make an important contribution to the effective implementation of HRM systems through exerting their cognitive and political abilities to bring about decisions that are well suited to their local situations. Moreover, we find that HR specialists design and manage HRM policies and procedures to afford different levels of managerial discretion in different areas of HRM.     

Apple's disaster: Linking two‐sided markets and strategic delegation

Asymmetric pricing structure and different intergroup network externalities are characteristics of two‐sided markets not captured in the analysis of one‐sided markets. Focusing on Cournot duopoly where membership decision may be delegated to a manager, several equilibrium regimes are sustained depending on the fixed cost of managerial hiring and strength of the network externality exerted by the side whose demand is more price sensitive. The change from null to full delegation sharpens the asymmetric pricing structure and reduces the price level in two‐sided markets. Contrary to one‐sided markets with direct network effects, the prisoner's dilemma holds for sufficiently strong indirect network externalities. Imperfect interside discrimination of managerial incentives ensures profit maximization and efficient consumers' allocation. Private hiring should occur when the two‐sided market exhibits symmetric pricing structure. An explanation for Apple's unprecedented event is provided. The reduction of revenue and managerial bonus in 2016 may be justified by the dissemination of full delegation in the Chinese information technology industry. Apple's upcoming strategy may consist on reducing both access prices, although the side whose demand is more price sensitive should have a greater price reduction. Alternatively, improving the content quality may constitute Apple's corporate strategy, thereby inducing a skimming pricing strategy on Chinese rivals.     

Chief executive officer ability,corporate social responsibility,and financial performance: The moderating role of the environment

This paper seeks to explore how chief executive officer (CEO) ability influences the economic impact of corporate social responsibility strategic decisions. Currently, the evidence on the impact of corporate social responsibility on the value of the company is mixed; in this paper, we aim to observe the moderate role played by this particularity of the CEO in the relationship between socially responsible commitment and financial performance. Our results identify that the most able CEOs make investments in social and environmental practices that lead to greater financial performance; in contrast, the less able CEOs can overinvest or underinvest in an opportunistic way for personal benefit at shareholders' expense. In addition, the role that CEO ability plays in social and environmental strategies is particularly pertinent in munificent environments that foment managerial discretion; in these contexts, high managerial ability leads to investment in socially responsible performance, which benefits shareholders by alleviating moral hazard.     

Managerial incentives and R&D investments: The moderating effect of the directors’ and officers’ liability insurance

Literature regarding the impact of managerial incentives on firm’s research and development (R&D) investments suggests that due to the riskiness of R&D activities, firms need to provide managerial incentives to encourage managerial discretion on corporate long-term investments of R&D. In spite that managerial incentives influence corporate R&D spending, some also argue corporate R&D spending a function of managerial incentive schemes. This paper applies the simultaneous equation to investigate the association between managerial discretion on R&D investments and the incentive scheme of CEO compensations by using the sample firms listed in Taiwan Security Exchange and Taipei Exchange. The results indicate that the listed firms in Taiwan simultaneously determine corporate R&D investments and CEO compensations. They reward their CEOs in compliance with their efforts on R&D investments and CEO compensation motivates CEOs to align their interests with firms’ long-term investments on R&D. A further analysis of the protection effect from the directors’ and officers’ (D&O) liability insurance suggests that D&O protection intensifies the relationship between R&D investments and CEO compensation. It encourages CEOs to allocate resources on R&D activities and make CEO incentive contracts efficacious on corporate long-term investments. The result is robust in the electronic industry of Taiwan.     

Uptake of organisational work–life balance opportunities: the context of support

This research examines the relationship between structural and cultural dimensions affecting managerial decision-making about work–life balance (WLB) opportunities. Through a top-down study of two contrasting Irish organisations, we identify how each of five dimensions of work–life culture: ‘managerial and organisational support’, ‘organisational time expectations’, ‘career consequences’, ‘gendered perception of policy use’ and ‘co-worker support’ are mediated through managers to affect availability and uptake of WLB opportunities and creating gaps between policy and practice. This study demonstrates how marked distinctions between the personal opportunities managers may wish to offer and the discretion available to them arise. Secondly, the concept of organisational work–life culture is advanced by elaborating the ‘context of support’, namely interdependencies between organisational culture and structure that affect the uptake of WLB opportunities. Implications for researchers and practitioners are also discussed.     

The causes of mergers: tests based on the gains to acquiring firms' shareholders and the size of premia

Despite the large number of event studies of mergers that have been undertaken, considerable disagreement still exists over whether mergers increase the value of the merging firms, and if so why. Most event studies measure the average returns to the acquired and acquiring companies' shareholders separately, and based on these averages conclude either that mergers increase wealth, or that they reduce it. From this the authors go on to claim support either for a hypothesis about how mergers increase efficiency, or for one that claims they do not. This paper develops a methodology that uses the distribution of gains and losses across the two samples of firms, and their relationship to one another to test four hypotheses about why mergers occur: (1) the market‐for‐corporate‐control hypothesis, (2) the synergy hypothesis, (3) the managerial discretion hypothesis, and (4) the hubris hypothesis. The hypotheses are tested with data for 168 mergers between large companies from 1978 through 1990. Considerable support is found for the managerial discretion and hubris hypotheses, and some support is found for the market‐for‐corporate‐control hypothesis. Little or no support is found for the hypothesis that mergers create synergies and that shareholders of both the acquiring and acquired firms share gains from these synergies. Copyright © 2003 John Wiley & Sons, Ltd.     

An Empirical Exploration of Decision-making Under Agency Controls and Stewardship Structure

abstract Two theories have emerged in the managerial control literature as to the best way for organizations to ensure that managers are acting in the firm's best interest: agency theory, which stresses controlling decision‐makers through monitoring and incentives aligned with organizational goals, and stewardship theory, which stresses that decision‐makers will act in the organization's best interest even in the absence of controls. Much of the research investigating the utility of these two positions is based on archival data where actual decision‐making can only be inferred. In this study, we utilize a laboratory methodology in order to determine if decision‐makers actually make different decisions when under the types of control (or lack thereof) suggested in these two theories. The results of this study show that individuals under agency controls invest more in alternatives that maximize profits of an organization than individuals under stewardship controls.     

State Ownership,Socio-political Factors,and Labor Cost Stickiness

This article examines the effect of state ownership on the labor cost stickiness of firms in 22 European countries. States are more likely to interfere in the decision-making processes of state-owned enterprises (SOEs) and demand firm activities that are desirable from a socio-political perspective. For example, to win political support, politicians may instruct SOEs to avoid layoffs to minimize unemployment rates. The varied objectives of SOEs also make it more difficult to control managers' behavior, leaving more room for managerial discretion and the pursuit of self-interests through empire-building behavior. Both state intervention and managerial self-interest restrain managers from laying off employees or reducing employee wages when sales decrease, which may lead to greater labor cost stickiness. Data from 1993 to 2012 reveal that SOEs exhibit greater labor cost stickiness than private firms, and their labor cost stickiness also varies predictably with socio-political variables such as election years and left-wing governments.