Can Powerful Boards Increase Firm Innovativeness When Faced with Exploitative CEOs?

Saleh M. Bajaba, Abdulah M. Bajaba and Abdulrahman S. Basahal

International Journal of Business and Management, 2021, vol. 15, issue 11, 171

Abstract: Although quite amount of research investigated the detrimental effects of destructive leadership styles at the individual level, less has focused on its effect on the organization as a whole. Therefore, this conceptual paper proposes a model of integration between the micro and the macro level of the organization through investigating the impact of CEO exploitative leadership style on firm innovativeness. Exploitative leadership emphasizes the leader’s self-interest through overdelegation of tasks and underchallenging of followers. We propose that CEO exploitative leadership is going to have a detrimental effect on firm innovativeness through TMT behavioral integration as it causes a climate of unfair exchange and hostility, which limits the amount of information being exchanged, collaboration, and joint decision making. We also propose that TMT behavioral integration is an important factor in achieving firm innovativeness, especially when TMT diversity is high. Lastly, board power is proposed to act as an intervention that mitigates the detrimental impact of CEO exploitative leadership on TMT behavioral integration and, ultimately, firm innovativeness, as a powerful board limits/controls any CEO behavior that contradicts the profit-maximizing expectations of the shareholders. Practical implications, limitations, and future directions are also discussed.

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:ibn:ijbmjn:v:15:y:2021:i:11:p:171

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