Exit, voice, loyalty, and … disobedience: When a CEO opposes his principal

Cyrille Sardais, Martin Blom and Josée Lortie

Corporate Governance: An International Review, 2021, vol. 29, issue 2, 188-207

Abstract: Research Question/Issue On the basis of a dynamic interrelation between the assumptions of agency theory and stewardship theory, this study seeks to make sense of disobedience at the highest corporate level. Departing from a processual view in order to better understand how loyalty plays a critical role in the relationships between a CEO and his/her principal, we propose a conceptualization of the options open to a top executive in disagreement with the principal. We view the relationship from “below” by primarily taking the CEO's perspective, resulting in a more complex view on how “duty” is perceived and acted upon by the CEO. Research Findings/Insights We use the rich and abundant archives left behind by the CEO of a large French firm. We had access to over 50,000 pages of documents that allowed us to follow the CEO and his relationships with his principals, at times from day to day. We found two competing loyalties (loyalty to the principal—agency theory—and loyalty to the organization—stewardship theory) that gradually become independent of each other, triggering different responses in terms of “exits” from the relationship with the principal. This particular dynamic in which the CEO acted as a guardian of the overall purpose of the organization enabled the emergence, development, and consolidation of a disobedience process that over the years contributed to the well‐being of his firm as well as to the social changes occurring in France at that time. Theoretical/Academic Implications This longitudinal study extends the corporate governance literature by offering a process‐oriented approach, quite rare in this stream of research, and a more dynamic view of how agency theory and stewardship theory interact. Then, by providing empirical support for the idea that the disobedience process can protect and allow an organization to first evolve positively over time and eventually contribute to social improvements, our study proposes a form of responsible stewardship. Practitioner/Policy Implications This study offers important insights for executives, directors, and shareholders on how to make sense of, and in the long run potentially benefit from, disobedience at the highest corporate levels.

Date: 2021
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