Floor Rink, Professor of Organizational Behaviour and Identity Management at the Faculty of Economics and Business, has been awarded a Vidi research grant of € 800.000 by the Netherlands Organization for Scientific Research NWO for her research project
Internal and External Regulation of Top Management Decisions.
Multiple fraud and executive remuneration cases in organizations led to public calls for more stringent management regulation. Public critics claim, however, that stringent regulation merely burdens compliance costs without changing the decisions of management boards fundamentally. Research indeed shows that strict regulation is not always enforceable nor desirable. This is problematic because upper management has ultimate decision power over firm strategies and needs to translate these strategies into tangible results (e.g., Adams, Hermalin, & Weisbach, 2010).
Accountability theory proposes that management responses to regulation depend on their social relations with two key supervisory bodies; internal supervisory boards within their firms and external central regulators outside their firms (e.g., the Dutch Central Bank [DNB], Walsh & Seward, 1990). Economy and psychology present opposing predictions about the degree to which the two supervisory bodies influence management decisions. Whereas economists speak in favour of external regulators on the basis of agency theory, psychologists draw on intergroup identity theory to promote internal supervisory boards. The central goal of this VIDI project is to solve this controversy by offering a more conclusive theoretical viewpoint on how the two supervisory bodies influence top management decisions.
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