Corporate Governance Against Recommendations: The Cases of the Strong Executive and the Strong Ownership

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.Existuje několik základních konfigurací správy podle oddělení vlastnictví a kontroly (Jensen teorie). Efektivní řízení je popsáno jako situace, kdy vlastník (nebo skupina vlastníků) udržuje právoratifikace a sledování strategických rozhodnutí. Při řízení má právo zahájit a provádět tato rozhodnutí. Existují dva zvláštní případy, kde toto doporučení neplatí a obě situace jsou spojeny s CEO dualitou.První případ se stane, když vlastník ztratí, nebo nevyužije právo kontrolovat management organizace a je pojmenován jako silná exekutiva.Druhý případ se nazývá silná správa vlastníka a vyznačuje se tím, že vlastník převezme implementaci rozhodnutí.Zaměření studie bylo zaměřeno na prozkoumání zejména konfigurace se silnou exekutivou a silnou správou.Smíšená metoda designu výzkumu byla vybrána, aby prozkoumala rozdíly mezi stanovenou konfigurací.Vzorek byl vybrán záměrným výběrem a vztahuje se na sto ziskových organizací všech velikostí a ze všech sektorů ekonomiky. Údaje byly získány prostřednictvím rozhovorů se zástupci, zejména členy vrcholového managementu. Zjistili jsme, že obě z těchto konfigurací mohou nést dobré firemní výsledky, ale také větší rizika. Silná exekutiva je typická pro organizace s rozptýleným vlastnictvím nebo ve veřejném vlastnictví organizace a výkonnosti organizace je plně závislá na kompetencích, ale také osobnosti manažerů. Tato konfigurace obsahuje vysoké riziko zneužití pravomoci.Silná správa je účinná v malých organizacích, zatímco ve větších organizacích vede k nízké výkonnosti, protože se obvykle potýká s problémy udržet strategické zaměření organizace.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