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Stakeholder engagement refers to the aims, practices, and impacts of stakeholder relations in businesses and other organizations. According to a general framework, stakeholder engagement has four dimensions: examining stakeholder relations, communicating with stakeholders, learning with (and from) stakeholders, and integrative stakeholder engagement. Stakeholder engagement is increasingly used in areas like strategic management, corporate social responsibility (CSR), and sustainability management, while stakeholder-engagement research in marketing, finance, and human resources (HR) is still less common. Two main camps in the stakeholder-engagement literature exist: the strategic and the normative. To foster an inclusive understanding of stakeholder engagement, future research in both camps is needed. While the strategic camp necessitates a relational view, including both the firm and the stakeholder perspectives, the normative camp requires novel philosophical underpinnings, such as humanism and ecocentrism. Furthermore, there is constant debate about the argument that stakeholder engagement is, and should be, most importantly, practical. Stakeholder-engagement research should focus on solving real-life problems with practical consequences intended to make people’s lives better.

Article

M. Taner Albayrak and Alper Ertürk

Empowerment is considered one of the best managerial approaches to foster employees’ effectiveness, creativity, commitment, performance, and other positive work-related attitudes and behaviors while providing an essential tool for leadership development and succession planning. Empowerment involves delegation of authority, sharing of information and resources, and allowing employees to participate in decision-making processes. Empowerment practices result in positive outcomes through psychological empowerment, which comprises meaning, impact, self-determination, and competence. However, empowerment should be exercised with care, and before doing so, leaders should understand their employees’ competences, willingness, and characteristics, as well as the organizational culture and industrial dynamics. With the increasing use of information and communication technologies, inevitable influence of globalization, and continuously changing dynamics of interconnectedness among industries, the business environment has become more volatile, uncertain, complex, and ambiguous (VUCA). In order to survive in this environment, companies try to increase diversity in their workforce to make the best use of a broad variety of skills, experiences, and opinions, thus boosting creativity and innovativeness, which makes leadership more difficult than ever. With empowerment, the concept of delegation of power is important. Therefore, comparing the concept of personal empowerment with managerial empowerment helps in understanding that these concepts are different, although interconnected. Delegation of authority ensures that the manager transfers decision-making authority to subordinates under certain conditions. In delegation, authority is retained by the manager, who has the ultimate responsibility. On the other hand, in empowerment, authority is fully transferred to the person who is already doing the job, with all the rights and responsibilities to take the initiative as necessary. Empowerment is also closely related but different from the concept of motivation. In motivation, decision-making authority and control stays with the manager. Empowerment, on the other hand, gives employees the opportunity to participate in management, solve problems, and participate in decision-making processes. In this context, the concepts of delegation of authority, motivation, participation in management, and job enrichment are the domain dimensions of personal empowerment, and thus they are interrelated, yet different. It is important to create a common vision and to have common values in order to establish the empowerment process. Subordinates and supervisors need to trust each other, and empowerment needs to be seen as a philosophy, not a technique. It is necessary to create business conditions that enable the development of knowledge and skills in personnel empowerment. These conditions affect the perceptions and attitudes of the staff, such as, support, loyalty, identification, and trust. Empowering employees promotes organizational commitment, increases engagement, and reduces turnover intentions of key personnel. Because empowerment involves encouraging participation of subordinates in the decision-making process, it also helps to enhance the effectiveness of the decisions and reduce decision-making time. In the VUCA world, limited decision making could be a critical obstacle to establish and maintain sustainability in highly competitive business environments.

Article

“Strategic leadership” is the umbrella term used to describe the study of an organization’s top leaders—what they do, their interactions, and how they influence important organizational outcomes. The three major areas of focus within this field are the chief executive officer (CEO), the top management team (TMT), and the board of directors. Although each area has vibrant bodies of literature on important topics of inquiry, the integration of research findings, frameworks, and insights across the three areas remains underdeveloped. For example, the study of leader personality is a rich line of inquiry within the broader management literature, and all three areas are developing, albeit at different rates and with little integration across the three areas. The work on CEO personality is the most developed, and the work on board personality is the least developed. CEOs personality traits that have been studied include the Big Five personality traits (conscientiousness, extraversion, agreeableness, openness to experience, and emotional stability), locus of control, core self-evaluations, narcissism, overconfidence, hubris, humility and regulatory focus (a person’s general approach to goals as either promotion focused or prevention focused). TMT personality traits that have been studied include the Big Five, trait positive affect, propensity to innovate, and competitive aggressiveness. Finally, board of directors’ personality traits that have been studied include only personality diversity.

Article

Boards of directors are governing bodies that reside at the apex of the modern corporation. Boards monitor the behavior of firm management, provide managers access to knowledge, expertise, and external networks, and serve as advisors and sounding boards for the CEO. Board attributes such as board size and independence, director demographics, and firm ownership have all been studied as antecedents of effective board functioning and, ultimately, firm performance. Steady progress has been made toward understanding how boards influence firm outcomes, but several key questions about board leadership structure remain unresolved. Research on board leadership structure encompasses the study of board chairs, lead independent directors, and board committees. Board chair research indicates that when held by competent individuals, this key leadership position has the potential to contribute to efficient board functioning and firm performance. Researchers have found conflicting evidence regarding CEO duality, the practice of the CEO also serving as the board chair. The effect of this phenomenon—once ubiquitous among U.S. boards—ranges widely based on circumstances such as board independence, CEO power, and/or environmental conditions. Progressively, however, potential negative consequences of CEO duality proposed by agency theory appear to be counterbalanced by other governance mechanisms and regulatory changes. A popular mechanism for a compromise between the benefits of CEO duality and independent monitoring is to establish the role of a lead independent director. Although research on this role is in its early stage, results suggest that when implemented properly, the lead independent director can aid board monitoring without adding confusion to a unified chain of command. Board oversight committees, another key board leadership mechanism, improve directors’ access to information, enhance decision-making quality by allowing directors to focus on specialized topics outside of board meetings, and increase the speed of response to critical matters. Future research on the governance roles of boards, leadership configurations, and board committees is likely to explore theories beyond agency and resource dependence, as well as rely less on collecting archival data and more on finding creative ways to access rarely examined board interactions, such as board and committee meetings and executive sessions.

Article

Which components should a manufacturing firm make in-house, which should it co-produce, and which should it outsource? Who should sit on the firm’s board of directors? What is the right balance between debt and equity financing? These questions may appear different on the surface, but they are all variations on the same theme: how should a complex contractual relationship be governed to avoid waste and to create transaction value? Transaction Cost Economics (TCE) is one of the most established theories to address this fundamental question. Ronald H. Coase, in 1937, was the first to highlight the importance of understanding the costs of transacting, but TCE as a formal theory started in earnest in the late 1960s and early 1970s as an attempt to understand and to make empirical predictions about vertical integration (“the make-or-buy decision”). In its history spanning now over five decades, TCE has expanded to become one of the most influential management theories, addressing not only the scale and scope of the firm but also many aspects of its internal workings, most notably corporate governance and organization design. TCE is therefore not only a theory of the firm, but also a theory of management and of governance. At its foundation, TCE is a theory of organizational efficiency: how should a complex transaction be structured and governed so as to minimize waste? The efficiency objective calls for identifying the comparatively better organizational arrangement, the alternative that best matches the key features of the transaction. For example, a complex, risky, and recurring transaction may be very expensive to manage through a buyer-supplier contract; internalizing the transaction through vertical integration offers an economically more efficient approach than market exchange. TCE seeks to describe and to understand two kinds of heterogeneity. The first kind is the diversity of transactions: what are the relevant dimensions with respect to which transactions differ from one another? The second kind is the diversity of organizations: what are the relevant alternatives in which organizational responses to transaction governance differ from one another? The ultimate objective in TCE is to understand discriminating alignment: which organizational response offers the feasible least-cost solution to govern a given transaction? Understanding discriminating alignment is also the main source of prescription derived from TCE. The key points to be made when examining the logic and applicability of TCE are: (1) The first phenomenon TCE sought to address was vertical integration, sometimes dubbed “the canonical TCE case.” But TCE has broader applicability to the examination of complex transactions and contracts more generally. (2) TCE could be described as a constructive stakeholder theory where the primary objective is to ensure efficient transactions and avoidance of waste. TCE shares many features with contemporary stakeholder management principles. (3) TCE offers a useful contrast and counterpoint to other organization theories, such as competence- and power-based theories of the firm. These other theories, of course, symmetrically inform TCE.

Article

Trust is a relatively complex psychological state that arises in relationships characterized by dependence and risk. It has both cognitive and emotional elements that can be linked to certain actions made by parties involved in exchange relationships. The relationships of interest include some level of uncertainty, both about the motives and future actions of other parties and about the potential outcomes of engaging in cooperative behavior with those parties. Each party involved in an exchange relationship has a certain propensity to trust, a baseline shaped by various factors including previous relationships. An individual’s propensity to trust is viewed to be relatively stable over time and is most important in the earliest stages of a relationship when a leap of faith is required to enter the relationship because firsthand evidence about the other party is scant. During a relationship, a party’s propensity to trust serves as a filter through which the other party’s actions are judged. A party’s trustworthiness is shaped by views on the degree to which the potential trustee has (a) an ability to fulfill its duties, (b) a sincere concern about the welfare of the trusting party and a willingness to sacrifice its own outcomes, and (c) a commitment to abide by prevailing ethical norms. The relative importance of each component—ability, benevolence, and integrity—is likely to change over the course of a relationship. Trust may exist between two individuals in a dyad, among several individuals in a work group, between an individual and a firm, and between one organization and another. The last of these categories has been described as interorganizational trust, an important component in the relationships between firms and their stakeholders. When trust exists between firms, formal governance mechanisms, such as contracts and monitoring systems, will be less necessary, reducing transaction costs in the relationship. At the interpersonal level, trust in a relationship has been tied to many positive outcomes, including greater sharing of more accurate information and more frequent displays of organizational citizenship behavior. It has also shown a connection to higher levels of job satisfaction, creativity, cooperation, and productivity. When trust in leaders is higher, subordinates’ intention to quit is lower.

Article

How do firms organize economic transactions? This question can be thought of as a question of firm boundaries or as a decision about a firm’s scope, encompassing the choice along a continuum of governance structures, including spot markets, short-term contracts, long-term contracts, franchising, licensing, joint ventures, and hierarchy (integration). Although there is no unified theory of vertical integration, transaction cost economics, agency theory, and more recently property rights theory have been influential not only in analyzing make-or-buy decisions but also in understanding “hybrid forms” or inter-firm alliances, such as technology licensing contracts, equity alliances, joint ventures, and the like. Before Coase’s work became widely known, whatever theoretical underpinnings there were of vertical integration were provided by applications of neoclassical theory. Here, the firm was viewed as a production function that utilized the most technologically efficient way to convert input into output. In particular, neoclassical theory was concerned primarily with market power and the distortions that it created in markets for inputs or outputs as the main driver of vertical integration. Hence, the boundaries of the firm—that is, where to draw the line between transactions that occur within the firm and those outside the firm—were irrelevant within this framework. It was Coase’s question “Why is there any organization?” that first suggested that price mechanisms in the market and managerial coordination within firms were alternative governance mechanisms. That is, the choice between these alternative mechanisms was driven by a comparative analysis of the costs of implementing either mechanism. Oliver Williamson built on Coase to provide the theoretical foundations for vertical integration by joining uncertainty and small numbers with opportunism in defining exchange hazards, and consequently established comparative analysis of alternative governance forms as the way to analyze vertical integration. More recently, property rights theory brought attention to ownership of key assets as a way to distinguish between the governance of internal organizations and those of market transactions, where ownership confers the authority to determine how these assets will be utilized. And lastly, agency theory also provides important building blocks for understanding contractual choice by placing the emphasis on the different incentives that vary with different contractual arrangements between a principal and its agent. Transaction cost economics, property rights theory, and agency cost theory complement one another well in explaining vertical integration in terms of alternative governance forms in a world of asymmetric information, bounded rationality, and opportunism. These theories have also been utilized in analyzing “hybrid” organizational forms, in particular strategic alliances and joint ventures. Together, vertical integration and alliances account for a significant part of corporate strategy decisions, and more research on the theoretical foundations as well as novel ways to apply these theories in empirical analyses will be productive avenues for a better understanding of firm behavior.

Article

Contrary to its popular use to refer to racially violent extremism, white supremacy in the tradition of critical race studies describes the normalized ideologies, structures, and conventions through which whiteness is constructed as biologically, intellectually, culturally, and morally superior. This socially constituted racial hierarchy was developed through European colonialism to justify the acts of genocide and slavery that extracted resources from “non-white” lands and bodies to enrich “white” elites. Despite prevailing myths that colonialism and racism are artifacts of the past, the cultural hegemony of white power and privilege remain enduring pillars of contemporary business and society. White supremacy inextricably shapes business practices. Indeed, our current practices of business administration and management are themselves modeled on slavery—the possession, extraction, and control of human “resources.” White supremacist ideologies and structures can also be found in the highly romanticized discourses of leadership that continue to rely on imperialist myths that white people are more fit to govern. They likewise surface in entrepreneurship and innovation where white people are overwhelmingly cast in the glorified roles of geniuses and pioneers. Even diversity management, which purports to nurture inclusive organizations, ironically reinforces white supremacy, treating workers of color as commodities to exploit. Within liberal logics of multicultural tolerance, workers of color are often tokenistically hired, expected to assimilate to white structures and cultures, and used as alibis against racism. White supremacy is an integral (and often invisible) dimension of work, organizations, society, and everyday life. Challenging white supremacy requires that we engage in frank, honest conversations about race and racism, and the brutal legacy of European colonialism that maintains these constructs and practices. The path ahead requires the relinquishment of beliefs that race is an immutable, primordial essence and recognize it instead as a socially constructed and politically contested identification that has been used for white gain. Two ways that white supremacy may be dismantled in our cultures include redoing whiteness and abolishing whiteness. Redoing whiteness requires collectively understanding the mundane cultural practices of whiteness and choosing to do otherwise. Abolishing whiteness calls for a more absolute rejection of whiteness and what it has come to represent in various cultures. Antiracist resistance demands people of all racial identifications to commit to thinking, doing, and being beyond the existing racial hierarchy.