Breyer State University
Birmingham, Alabama
Ph.D. Proposal
A dissertation proposal submitted in partial
fulfillment of the requirements for the degree of
Ph.D. in ( Input Your Major and, if qualified, your Minor here.)
By
William A. Ryan (BSU # XXXX)
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© This example of a dissertation proposal is based on original work submitted to BSU and has been posted strictly for educational purposes. It contains proprietary information and cannot be duplicated, nor can the topic be used by any other student as a research or dissertation project.
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Abstract
A proposed doctoral dissertation that extends earlier research on corporate governance, with particular emphasis on exploring the relationship between corporate malfeasance and “board information impoverishment.” The thesis argues that boards of directors that conduct their stewardship responsibilities in a corporate environment complacent to the needs and wants of its key stakeholder societies contributes greatly to corporate malfeasance in the U.S. business community. Both multiple and single industry firms will be evaluated to support this thesis using a survey instrument reflective of the rationale embedded in a proposed corporate governance model for business and society.
Title
An Exploratory Study of Corporate Governance:
The Effects of “Board Information Impoverishment”
on Corporate Malfeasance in the U.S. Business Community.
Format
The format of this proposed dissertation will follow the guidelines set forth by Breyer State University in its document entitled “Thesis/Dissertation Guidelines.”
Chapter 1 – Introduction/Problem Statement
Introduction
The escalating problem of corporate malfeasance in the United States has provided fertile ground for countless theoretically-based research studies on corporate governance over the past two decades. Yet this growth trend is not reflected in the literature with respect to empirically-based studies. According to Huse, (1) pg. 218 “research into board of director processes, both inside and outside of the boardroom, and the dynamics of board-stakeholder relations is, for all practical purposes, non-existent.” Huse wrote that back in 1998 and yet, the literature still remains, for all practical purposes, devoid of empirical research conducted within the intersecting realms of corporate malfeasance, stakeholder and director communications, and business and society studies. This research gap needs to be addressed by the business research community. The proposed exploratory study is directed toward that end by empirically exploring the premise that the corporate environment within which boards of directors carry out their oversight responsibilities is a major contributor to the rampant malfeasance problem in the U.S. business community.
The study will document empirically-based exploratory research on corporate governance with a focus on determining whether or not a relationship exists between malfeasant corporate behavior and “ board information impoverishment” (a term I introduce to represent boards of directors that function in a socially-deficient corporate environment; i.e., an environment complacent to the needs and wants of its key stakeholder societies). A new conceptualized corporate governance model for business and society will be developed and used in creating the survey instrument for the empirical portion of this study. This new model will embody a framework designed to enhance a board of directors' oversight and decision-making processes for the purpose of improving corporate performance. In addition, the model will add to the literature, a proposed method of building a coherent interface between business and society.
Problem Statement
There exist conspicuous and increasing numbers of malfeasant incidents in the U.S. business community together with an apparent lack of director oversight that, I believe, contributes greatly to this unlawful and costly phenomenon. As part of their stewardship responsibilities, boards of directors need to understand a variety of stakeholder issues. This is especially true when it comes to research on the dynamics of board-stakeholder relations. Although business researchers study corporate governance issues quite extensively, they have not yet conducted adequate empirical studies of board stewardship within a stakeholder orientated or normative framework. This is due, most likely, to two classic research problems: a) statistical “restriction of range;” .i.e., conditions worthy of research that are never detected or reported on, and b) the difficulty of obtaining corporate sensitive data.
Corporate governance systems in the U.S. business community are inadequate in many ways (2,3,4,5,6,7,8) . I submit, along with others, that the component of corporate governance exercised by boards of directors is a major contributing factor to this inadequacy (9,10,11,12,13,14) . Of eight recognized core components of corporate governance (15) , ( board structure and composition, audit issues, charter and bylaw provisions, laws of the state of incorporation, executive and director compensation, board qualitative factors, D&O stock ownership, and director education ) five are related to boards of directors in one way or another. That said; I do not believe it is outside the “realm of reasonability” to assert that an association exists between a dysfunctional board oversight system in the U.S. business community and, for example, the recent Enron, America Online, HealthSouth, Qwest, Citigroup, Merrill Lynch, Tyco, WorldCom, MCI, Arthur Andersen and Adelphia corporate debacles, just to name a few. These and other examples of corporate malfeasance have persisted for years and, in doing so have squandered untold billions of dollars in stakeholder resources. Moreover, the Sarbanes-Oxley Act of 2002, specifically enacted as a result of these gross examples of malfeasance, is directed toward public company accounting reform and investor protection, the success of which will be highly dependent on the performance of new information technology systems. I believe that a proactive, rather than a reactive accounting oversight system, is also needed, if not more so, to address corporate malfeasance. The aforementioned examples of disastrous corporate failures have much to do with the role boards of directors' play in developing a constructive business relationship with society.
Proposed Hypotheses for Testing
Developing support for the following hypotheses will be dependent on the format of the proposed survey instrument and its ability to elicit the required empirical data.
Hypothesis 1 : Corporations operating in political and regulatory environments that discourage a strong stakeholder orientation will have a tendency toward malfeasant behavior.
Hypothesis 2 : Corporations with a core management culture that discourages a strong stakeholder orientation will have a tendency toward malfeasant behavior.
Hypothesis 3: C orporations whose boards of directors lack a strong stakeholder orientation will have a tendency toward malfeasant behavior.
Hypothesis 4: Corporations operating under higher than normal regulatory constraints will tend to encourage a strong stakeholder orientation.
Hypothesis 5: Corporations operating under higher than normal regulatory constraints will have a core management culture that tends to encourage a strong stakeholder orientation.
Hypothesis 6: Corporations operating under higher than normal regulatory constraints will have boards of directors that tend to possess a strong stakeholder orientation
Motive for Selection of Topic
During the early 1990's, Northeast Utilities (my employer at the time), a large investor-owned, electric utility then serving Connecticut and Western Massachusetts (later acquiring the service territory of New Hampshire), was experiencing severe organizational problems. Its management had let the supervision, operations, and performance of its nuclear-powered electric generating plants deteriorate to the point where by mid-1996, sixty-percent of its operating units were being systematically forced from active service by the Nuclear Regulatory Commission (NRC). An additional twenty-percent of its nuclear-powered generation capacity was subsequently removed from active service by another NRC mandate before the beginning of 1997.
This series of actions resulted in a staggering cost penalty for the company, its ratepayers and its stockholders – both members of its key stakeholder societies. The mandated nuclear plant shutdowns required activating reserve fossil-fuel-powered (coal, gas, and oil) generation costing ratepayers millions of dollars a day, referred to as “replacement fuel costs.” In addition to the plummeting of its stock price, which had devastating financial effects on shareholders, well over a reported $1 billion (16,17) was spent over a four year period to replace the lost production from nuclear generating facilities and to administer and manage corporate improvement initiatives, most of which wound up in partial or complete failure. Although oftentimes prompted by management consultant studies, these failed corporate initiatives resulted from decisions made by its managers and executives. Some of their decisions were probably far-reaching and obvious; however, considering their outcome, most were not. Taken together, they added up to countless failures that were costly to its stakeholders.
The ineptness of management and the board of directors in dealing with this corporate problem was beyond my comprehension. I kept asking myself:
• How, in just a few short years, could a previously highly successful nuclear-orientated organization let its prior NRC rated “best in class” units deteriorate to the point of being placed on that Commission's “Watch List” of troubled U.S. nuclear facilities?
• How could a previously well managed organization waste such enormous amounts of internal resources on ill-fated initiatives to correct needless operational problems? How could it place itself in a position to be investigated by the U.S. Justice Department for alleged criminal misconduct through the illegal operation of its nuclear plants and the willful violation of federal and state environmental laws?
BUT MOST IMPORTANTLY, AND THE DRIVING FORCE BEHIND THIS DISSERTATION. . .
• How could this company's board of directors fail to such a degree in its corporate oversight responsibilities? And was there no concern on the part of the board as to the impact such action would have on society ?
What does this study hope to prove or disprove?
This exploratory study hopes to demonstrate that corporate malfeasance is related to boards of directors that conduct their stewardship responsibilities in a corporate environment complacent to the needs and wants of its key stakeholder societies. In addition, the study will hopefully encourage further and more detailed research into this is phenomena as well the need for implementing, in some fashion, a new business and society model of corporate governance.
Goals of Dissertation
This study acknowledges the need for research on the relationship between corporate social performance and corporate financial performance that reflects a consistency of financial measures, that uses multiple measures of social performance, and that focuses on a single industry (18) . With this need in mind, the proposed study will be designed to meet the following goals:
• To demonstrate the effects that studies conducted over multiple industries versus single industries have on the results of correlation studies of corporate governance.
• To demonstrate that sensitive primary data can be obtained for conducting further empirical corporate governance studies on this topic.
• To compare empirically selected key stakeholder societies against those generally listed in the literature.
• To develop a new characterization of a corporate governance system.
• To develop a successful survey instrument consisting of a set of surrogate, yet ethical questions for each hypothesis under study.
• To demonstrate that malfeasant corporate behavior is associated with boards of directors that function in a corporate environment complacent to the needs and wants of its key stakeholder societies.
• To provide additional support for the stakeholder model of the firm with a focus on reinforcing Swanson's proposed research strategy for developing a coherent theory of business and society that integrates normative and descriptive philosophies (19) .
Chapter 2 – Review of the literature
The type of literature that I will be reviewing for my dissertation will include
journals, books, magazines, and newspaper articles on the following subjects:
• Boards of Directors
• Board-Stakeholder Dynamics
• Community Relations
• Corporate Change
• Corporate Governance
• Organizational Failure
• Public Policy
• Resource Dependency
• Shareholder Values
• Theory Development
• Utility Mismanagement
• Virtual Private Networks
Examples of books will include:
Aguilar FJ. Managing Corporate Ethics: Learning from America 's Ethical Companies How to Supercharge Business Performance . New York , NY : Oxford University Press; 1994.
Berle AA, Means GC. The Modern Corporation and Private Property . New York , NY : Macmillan.; 1932.
Clarkson MBE. The Corporation and Its Stakeholders: Classic and Contemporary Readings : Introduction . Toronto , Canada : University of Toronto Press; 1998.
Collins JW. The Seven Fatal Management Sins: Understanding and Avoiding Managerial Malpractice . Boca Raton , FL : St. Lucie Press; 1998.
Estes R. Tyranny of the Bottom Line: Why Corporations Make Good People Do Bad Things . San Franicsco , CA : Berrett-Koehler Publishers; 1996.
Handy C. The Hungry Spirit - Beyond Capitalism: A Quest for Purpose in the Modern World . New York , NK: Broadway Books; 1998.
Mokhiber R. Corporate Crime and Violence: Big Business Power and the Abuse of the Public Trust . San Francisco , CA : Sierra Club Books; 1988.
Morris R. Early Warning Indicators of Corporate Failure: A Critical Review of Previous Research and Further Empirical Evidence . Brookfield , VT : Ashgate Publishing Ltd; 1997.
Novak M. The Fire of Invention: Civil Society and the Future of the Corporation . New York , NY : Rowman Publishers, Inc.; 1997.
Svendsen A. The Stakeholder Strategy: Profiting from Collaborative Business Relationships . 1st ed. San Francisco : Berrett-Koehler Publishers, Inc.; 1998.
Wheeler D, Sillanpaa M. The Stakeholder Corporation -The Body Shop: Blueprint for Maximizing Stakeholder Value . Washington , DC : Pitman Publishing; 1997.
Examples of journals will include:
Academy of Management Review
American Management Association
American Sociological Review
Business & Society
California Management Review
Harvard Business Review
International Journal of Organizational Analysis
Journal for Quality & Participation
Journal of Business Ethics
Journal of Business Strategy
Journal of General Management
Journal of Management
Journal of Management Inquiry
Journal of Management Studies
Chapter 3 – Proposed Methodology
Even though this study will be based on exploratory research, a methodology will still be required. I propose to proceed in the following manner, but not necessarily in the order shown:
• Develop a characterization of our present-day board corporate governance model.
• Use the model developed in Step 1 as justification for conducting a correlation test in the same reporting period for the following three variables:
• The fifty best and worst multi-industry corporate boards
• The multi-industry corporate social responsibility ratings for these fifty multi-industry firms
• The Fortune 500 multi-industry corporate ranking for these fifty firms
• Draw conclusions from the correlation results of Step 2
• Develop a characterization of a conceptual corporate governance model
• Use the model created in Step 4 as the rationale for developing an empirical corporate survey instrument.
• Send out the survey instrument developed in Step 5 for response to a sample of the same companies examined in Step 2
• Draw conclusion from the results of Step 6
• Send out the survey instrument developed in Step 5 to ten high ranked and ten low ranked corporations from the same industry.
• Draw conclusions from the results of Step 8
• Draw conclusions from a comparison of Steps 3, 7, & 9.
• Use the results of Step 10 to support as many of the proposed hypotheses as possible and to draw study conclusions.
• Develop Dissertation from the results obtained in Step 11.
Chapter 4 – Findings
As discussed in Chapter 3, I will be using models, survey instruments, statistics, and tables of results to lend support for my findings.
An Estimated Timeline for Completion of Dissertation
• Receipt of BSU evaluation on proposal February 2, 2004
• Possible rework of proposal based on #1 February 9, 2004
• Possible resubmission/approval of proposal February 13, 2004
• Development of models/survey instrument February 20, 2004
• Prepare and send out survey instruments February 27, 2004
• Complete statistical tests of multiple industry data March 5, 2004
• Prepare outline of dissertation report March 12, 2004
• Evaluate empirical industry data March 26, 2004
• Complete draft of dissertation April 16, 2004
• Submit Dissertation for approval April 23, 2004
Bibliography
1. Huse M. Researching the Dynamics of Board-Stakeholder Relations. Long Range Planning. 1998;31(2):218-226.
2. Corporate Malfeasance. Available at: http://www.creativeinvest.com/sri/corpmal.html .
3. Lack of legitimacy threatens democratic governance. Canadian Speeches. Vol 17; 2003.
4. Collins JW. The Seven Fatal Management Sins: Understanding and Avoiding Managerial Malpractice . Boca Raton, FL: St. Lucie Press; 1998.
5. Estes R. Tyranny of the Bottom Line: Why Corporations Make Good People Do Bad Things . San Francisco, CA: Berrett-Koehler Publishers; 1996.
6. ICM. The 1995 ICM Crisis Report. The Institute for Crisis Management [Internet]. March, 1997. Available at: http://www.crisisexperts.com/icm2/crisis reports/96report.html. Accessed September 20, 1997.
7. Pound J. The Promise of the Governed Corporation. Harvard Business Review. 1995(March-April):89-98.
8. Starkey K. Opening Up Corporate Governance. Human Relations. 1995;48(8):837.
9. Anderson CA, Anthony RN. The New Corporate Directors: Insights for Board Mambers and Executives . New York, NY: John Wiley & Sons; 1986.
10. Baldwin FD. Conflicting Interests; Corporate Governance Controversies . Lexington, MA: Lexington Books; 1937.
11. Borch OJ, Huse M. Informal Strategic Networks and the Board of Directors. Entrepreneurship Theory and Practice. 1993(Fall):23-36.
12. Firstenberg PB, Burton MG. The Twenty-First Century Boardroom: Who Will Be in Charge? Sloan Management Review. 1994(Fall, 1994):27-35.
13. Huse M. Stakeholder Expectations from Boards of Directors: An Empirical Examination. Norway: Norland Research Institute; 1994. N-8002 BOD0.
14. Mintzberg H. Power In and Around Organizations . Englewood Cliffs, NJ: Prentice-Hall, Inc.; 1983.
15. ISS Corporate Governance Quotient. Available at: http://www.isscgq.com/central.asp .
16. Pooley S. Nuclear Safety Fallout. Time ; 1997:34.
17. Ryan WA. A Management Systems' Model for Boards of Directors:A Case-Control Study of Corporate Governance in a Regulated Environment - A Proposal White Paper. New Haven, CT: University of New Haven; February 6, 1998.
18. Griffin JJ, Mahon JF. The corporate social performance and corporate financial performance debate: Twenty-five years of incomparable research. Business and Society. 1997(March).
19. Swanson DL. Toward An Integrative Theory of Business and Society: A Research Strategy for Corporate Social Performance. Academy of Management Review. 1999;24(3):506-521.