Top Management & Political Skill
Exam Summary (Lectures 1–5)
Lecture 1 — Boardroom Dynamics: Theories and Perspectives
Lecture anchors (slides + notes)
From homo economicus (agency assumptions) toward bounded rationality and ‘homo ludens’ (play/creating).
Recurring critique: governance research often stays at input–output ‘usual suspects’ and misses boardroom micro-
dynamics (‘black box’).
Board structure
The lecture positions classic corporate governance work against the reality that boards are socially complex
arenas. Basic board structures: one-tier vs two-tier; decision management vs decision control.
• Core difference: separation of decision management and decision control.
• In a one-tier model (Anglo-Saxon), executives and non-executives sit together in the board of
directors (decision control + decision management).
• In a two-tier model (Rhineland), decision control is separated (supervisory board) from decision
management (executive/management board)
• Typical trade-offs:
o two-tier can strengthen formal independence and monitoring but may create information
distance and slower decision cycles.
o one-tier can improve information flow and strategic involvement but can raise concerns
about managerial dominance (especially with CEO–chair duality) and weaker
independence.
Note: Always check what board model a study assumes; one- vs two-tier affects information access and
monitoring dynamics.
Agency theory vs. stewardship theory (lecture core framing)
Agency theory: boards as monitors to curb managerial self-interest under separation of ownership and
control.
• Principal-agent problem: principals (shareholders) delegate decision management to agents
(executives) who may pursue private benefits.
• Information asymmetry + moral hazard: managers know more about operations and can hide
effort, risk, or opportunism.
• Governance response: decision control mechanisms (board oversight, independent directors,
audits, committees, performance-based incentives) to align interests and reduce agency costs.
• Predicted board emphasis: monitoring, disciplining, and evaluating the CEO/top team; limiting
entrenchment; ensuring accountability and compliance.
,Stewardship theory: executives are viewed as stewards whose motives are pro-organizational rather than
purely self-interested.
• Behavioral assumptions: intrinsic motivation, identification with the organization, collectivism, and
psychological ownership make goal alignment plausible.
• Governance response: empower and involve executives, emphasize trust, collaboration, and
information sharing; the board contributes advice and support as well as control.
• Implication for board composition/structure: more weight on expertise and firm-specific
knowledge (insider value) rather than only independence; CEO duality can be argued as functional
when it improves unity of command and reduces costly monitoring (contingent claim).
• Risk and boundary condition: stewardship logic can fail when incentives, narcissism/hubris, or
external pressures shift executives toward self-interest; thus, stewardship does not eliminate the
need for accountability.
Pendulum swing = how governance logics move over time: practice and research often oscillate between
‘control’ and ‘collaboration’ logics in the boardroom.
• After scandals or crisis, the pendulum swings toward agency-style monitoring, formal controls,
compliance, and director independence.
• In periods emphasizing growth, strategy, or external dependence, the pendulum swings toward
stewardship/resource provision: boards as strategic partners and boundary spanners (advice,
access, legitimacy).
Cultural arrangement model (Graamans & Millenaar, lecture slide) — why it appears in this course
Boards and negotiations are not only ‘unfolding’ (rational planning) but also ‘playing’ and ‘creating’ in interaction.
Exam-use: when asked about political skill, influence, or boardroom dynamics, emphasize interaction patterns
and meaning-making, not only formal structure.
,Key term Meaning (exam-ready)
Decision management Initiating and implementing strategic decisions (typically
executives).
Decision control Ratifying and monitoring strategic decisions (typically non-
executives/supervisory board).
Principal–agent problem Goal conflict + information asymmetry between principals
(e.g., shareholders) and agents (executives).
Homo economicus assumptions Consistently rational; self-interested opportunism; limitless
information processing (challenged by bounded rationality/UE
theory).
, Hambrick (2007) — Upper echelons theory: An update
Original article: Upper Echelons Theory was written to explain why organizations behave differently, by
arguing that strategic choices reflect the values, experiences, and personalities of top executives. It shifts
attention from abstract “rational” decision-making to the human side of leadership, showing how
managers’ backgrounds shape perceptions and choices.
Why? = to update and sharpen upper echelons theory after and to respond to skepticism.
Upper echelons theory explains strategic choices and organizational outcomes as reflections of top
executives’ experiences, values, and personalities, because executives interpret rather than objectively
‘know’ complex environments (bounded rationality). Demographic indicators (functional background,
tenure, education, affiliations) are treated as imperfect proxies (volmachten) for underlying cognitive
frames; this yields the classic ‘black box’ critique.
Core UE causal chain:
Core causal chain: Top executive characteristics → Attention and perception (field of vision, selective
perception, interpretation) → strategic choices (e.g. innovation, diversification, risk) → performance
outcomes.
Key refinements and implications:
Exam focus (Hambrick, 2007)
Two key moderators you must name: managerial discretion and executive job demand.
Managerial discretion = absence of constraint + means–ends ambiguity; UE predictions strengthen as
discretion increases. Discretion arises from environmental conditions (e.g., growth), organizational factors
(e.g., weak board), and executive factors (e.g., tolerance for ambiguity).
Executive job demands = push executives toward heuristics (mental shortcuts) and ‘what they have
tried/seen work’; UE predictions strengthen as demands increase. Job demands stem from task challenges,
performance challenges, and executive aspirations.
à UE effects are strongest when managerial discretion is high and executive job demands push reliance on
simplified interpretations.
Comment to critique
Hambrick explicitly argues UE theory does not ‘glorify elites’; it punctures the myth of techno-economic
optimization by emphasizing human limits (fatigue, bias, self-presentation). But the field still struggles with
the black box and reverse causality. For the exam, translate this into boundary conditions
(discretion/demands) and methodological caution (input–output designs).
Exam Summary (Lectures 1–5)
Lecture 1 — Boardroom Dynamics: Theories and Perspectives
Lecture anchors (slides + notes)
From homo economicus (agency assumptions) toward bounded rationality and ‘homo ludens’ (play/creating).
Recurring critique: governance research often stays at input–output ‘usual suspects’ and misses boardroom micro-
dynamics (‘black box’).
Board structure
The lecture positions classic corporate governance work against the reality that boards are socially complex
arenas. Basic board structures: one-tier vs two-tier; decision management vs decision control.
• Core difference: separation of decision management and decision control.
• In a one-tier model (Anglo-Saxon), executives and non-executives sit together in the board of
directors (decision control + decision management).
• In a two-tier model (Rhineland), decision control is separated (supervisory board) from decision
management (executive/management board)
• Typical trade-offs:
o two-tier can strengthen formal independence and monitoring but may create information
distance and slower decision cycles.
o one-tier can improve information flow and strategic involvement but can raise concerns
about managerial dominance (especially with CEO–chair duality) and weaker
independence.
Note: Always check what board model a study assumes; one- vs two-tier affects information access and
monitoring dynamics.
Agency theory vs. stewardship theory (lecture core framing)
Agency theory: boards as monitors to curb managerial self-interest under separation of ownership and
control.
• Principal-agent problem: principals (shareholders) delegate decision management to agents
(executives) who may pursue private benefits.
• Information asymmetry + moral hazard: managers know more about operations and can hide
effort, risk, or opportunism.
• Governance response: decision control mechanisms (board oversight, independent directors,
audits, committees, performance-based incentives) to align interests and reduce agency costs.
• Predicted board emphasis: monitoring, disciplining, and evaluating the CEO/top team; limiting
entrenchment; ensuring accountability and compliance.
,Stewardship theory: executives are viewed as stewards whose motives are pro-organizational rather than
purely self-interested.
• Behavioral assumptions: intrinsic motivation, identification with the organization, collectivism, and
psychological ownership make goal alignment plausible.
• Governance response: empower and involve executives, emphasize trust, collaboration, and
information sharing; the board contributes advice and support as well as control.
• Implication for board composition/structure: more weight on expertise and firm-specific
knowledge (insider value) rather than only independence; CEO duality can be argued as functional
when it improves unity of command and reduces costly monitoring (contingent claim).
• Risk and boundary condition: stewardship logic can fail when incentives, narcissism/hubris, or
external pressures shift executives toward self-interest; thus, stewardship does not eliminate the
need for accountability.
Pendulum swing = how governance logics move over time: practice and research often oscillate between
‘control’ and ‘collaboration’ logics in the boardroom.
• After scandals or crisis, the pendulum swings toward agency-style monitoring, formal controls,
compliance, and director independence.
• In periods emphasizing growth, strategy, or external dependence, the pendulum swings toward
stewardship/resource provision: boards as strategic partners and boundary spanners (advice,
access, legitimacy).
Cultural arrangement model (Graamans & Millenaar, lecture slide) — why it appears in this course
Boards and negotiations are not only ‘unfolding’ (rational planning) but also ‘playing’ and ‘creating’ in interaction.
Exam-use: when asked about political skill, influence, or boardroom dynamics, emphasize interaction patterns
and meaning-making, not only formal structure.
,Key term Meaning (exam-ready)
Decision management Initiating and implementing strategic decisions (typically
executives).
Decision control Ratifying and monitoring strategic decisions (typically non-
executives/supervisory board).
Principal–agent problem Goal conflict + information asymmetry between principals
(e.g., shareholders) and agents (executives).
Homo economicus assumptions Consistently rational; self-interested opportunism; limitless
information processing (challenged by bounded rationality/UE
theory).
, Hambrick (2007) — Upper echelons theory: An update
Original article: Upper Echelons Theory was written to explain why organizations behave differently, by
arguing that strategic choices reflect the values, experiences, and personalities of top executives. It shifts
attention from abstract “rational” decision-making to the human side of leadership, showing how
managers’ backgrounds shape perceptions and choices.
Why? = to update and sharpen upper echelons theory after and to respond to skepticism.
Upper echelons theory explains strategic choices and organizational outcomes as reflections of top
executives’ experiences, values, and personalities, because executives interpret rather than objectively
‘know’ complex environments (bounded rationality). Demographic indicators (functional background,
tenure, education, affiliations) are treated as imperfect proxies (volmachten) for underlying cognitive
frames; this yields the classic ‘black box’ critique.
Core UE causal chain:
Core causal chain: Top executive characteristics → Attention and perception (field of vision, selective
perception, interpretation) → strategic choices (e.g. innovation, diversification, risk) → performance
outcomes.
Key refinements and implications:
Exam focus (Hambrick, 2007)
Two key moderators you must name: managerial discretion and executive job demand.
Managerial discretion = absence of constraint + means–ends ambiguity; UE predictions strengthen as
discretion increases. Discretion arises from environmental conditions (e.g., growth), organizational factors
(e.g., weak board), and executive factors (e.g., tolerance for ambiguity).
Executive job demands = push executives toward heuristics (mental shortcuts) and ‘what they have
tried/seen work’; UE predictions strengthen as demands increase. Job demands stem from task challenges,
performance challenges, and executive aspirations.
à UE effects are strongest when managerial discretion is high and executive job demands push reliance on
simplified interpretations.
Comment to critique
Hambrick explicitly argues UE theory does not ‘glorify elites’; it punctures the myth of techno-economic
optimization by emphasizing human limits (fatigue, bias, self-presentation). But the field still struggles with
the black box and reverse causality. For the exam, translate this into boundary conditions
(discretion/demands) and methodological caution (input–output designs).
