Corporate Governance and Effectiveness

Why Companies Win or Lose

Dipak R. Basu, Victoria Miroshnik

• Publisher: Routledge
• Year: 2018
• Print ISBN: 9780367504168
• eBook ISBN: 9780429838095
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

The book looks at the corporate management system and how it affects company performance. The main theme revolves around the notion that when a company values its workers and their satisfaction, that company can achieve success. The book is unique in its quantitative perspective and analysis and examines whether a corporate management system can be regarded as a source of a firm's competitive advantage by creating a sustainable competitive advantage and firm performance. The book examines how, in the context of Japanese multinational corporations (MNCs), corporate management can be part of an MNC's strategy in enhancing its capabilities, both in the home and abroad, in Japan and in Thailand. Also, it analyses the reason for the demise of two major Indian companies, Dunlop and Hindustan Motors in terms of their unsympathetic management systems.

1
Personality and person–organization fit

Person–organization fit in the context of alienation of workers in modern environment was explained by Karl Marx more than 150 years ago (Aktouf, 1992, 1986; West, 1969). It was not taken up subsequently in the management literature except for some works on Japanese and Swedish organizational culture, which were developed during 1950s and 1960s under the environment of increasing militancy of the workers and their attractiveness toward the socialist system. Toyota in Japan and subsequently other Japanese companies adopted a system of molding the workers according to the value system of the organization so as to reduce or even eliminate militancy. Similar was the case in Sweden (Basu, Miroshnik, and Uchida, 2001).

In the traditional Western literature, person–organization fit correspond to the examination during recruitment whether a newly recruited employee would fit well with the organization. It does not take into account the systematic effort of the company to recognize the psychological characteristic of the employee with appropriate organizational set-up so as to achieve a perfect fit (O’Reilly, Chat-man, and Caldwell, 1991; Cable and Judge, 1997a; Herold, Fedor, and Caldwell, 2007). That is however the ambition of the Japanese and Swedish companies. The Japanese system of management is not just a new production management technique, but it is a comprehensive system of management called Software of Mind to create an atmosphere where the employee will reorganize their psychological characteristic to the espoused goal of the organization. Japanese multinational companies even tried to implement the same system in their overseas subsidiaries. This study is an examination of the achievement of such a system.

Reformist managerial debates

Up until the end of the 1970s, a firm’s success depended on meeting management production targets, with ever-greater speed and in large quantities. Combined with planned obsolescence, this philosophy inherited from Taylorism and Fordism (Aitken, 1960, 1985) would ensure lasting success to firms that first gained control of a product or range of products with which they could then flood the market. Managers and their theories were thus harnessed to the task of developing techniques and instruments that would help production move faster and faster at the plant. Creativity, initiative, and conceptualization were the sphere of specialists in noble R&D and planning departments. The rest of the firm was there to understand and execute orders as diligently and obediently as possible. The ideal employee was of course the “right person at the right place,” executing plans developed by people hired and paid to be intelligent thinkers: management analysts and planners. In that context, the main problem of managers and their theorists was to find the means to mobilize and stimulate people to do work that specialization, technical division of work, and cost-cutting concerns had rendered more and more dull and meaningless.

With the economic success of the Japanese the Germans and Swedes, other concepts and factors of success began to surface. The objectives are no longer to make products faster and faster at the lowest cost but to produce them better, more “creatively,” and more reliably. The era of quality has been extended to the business firm; now, all employees must be active and intelligent participants.

Management theorists cannot see that such dramatic shifts in the factors of success require an equally dramatic shift in management philosophy and in the conception of work and the worker (Scroggins, 2015). There can be no common measure between the employee who is expected to “do more faster and faster” in passive obedience and the employee from whom management expects constant initiative and creativity.

We may even wonder if the latter employee can be “managed” at all. Yet we have witnessed a proliferation of new “how to”: how to construct a “good corporate culture,” how to “manage symbols,” how to generate and distribute “good values.”

Who is this person that we want to actualize, liberate, and acculturate? To whom do we want to restore meaning in the workplace? With whom do we want to share? Is it the person we no longer want to treat like an instrument of short-term profits? This person is, in fact, constantly implied; he/she is considered a given. As Nord (1974) rightly pointed out, Maslow (1954, 1969) and Argyris (1957) are almost the only mainstream writers on management to show any real concern for a “non-industrial” definition of the “Man,” but they are scarcely ever mentioned. It is as if we need only call on this person and tell him or her that we earnestly want him or her to embrace the right culture and symbols, to join the team, and become a champion. It is as if there were no need to have a clearer idea of the reasons, events, and circumstances that might bring about such a metamorphosis. Obviously, such clarity can be gained only if we are willing to take the point of view of the employee who is, after all, the “human element” that these theories want to promote. Thus, it is necessary to construct a vision of the person.

The solution is to open the way for managerial practices that will permit development of the employee’s desire to belong and to use his or her intelligence to serve the firm, the employee as an active and willing accomplice. How can employees be expected to participate in shared values, to achieve personal success, and to express and liberate them if managers are often explicitly designated the quasi-unique artisans of liberation?

This notion does not deny the obviously determining role of managers, but it does underline the fact that this role must consist, essentially, in a radical change in everyone’s concrete working conditions. A culture of synergy and collaboration – characterized by convergence, closeness, and sharing – must be injected into actual practice.

Radical-humanistic position

The first element is human beings as destined, that is, owing their unique status to their “self-consciousness,” which forces them to search for what will liberate them, emancipate them (from all sorts of obstacles), restore them, and lead them to fulfill their vocations: They are endowed with consciousness, right judgment, and free will, and they aspire to their own elevation. Thus, people are “generic beings” who create their own milieu, their society, and, thus, themselves.

There are key role of social relations, class phenomena, fundamentally defined by community, society, and their relations with each others. The relations in and through which people live, help them to construct and grasp their sense of self (which make them the ground and condition of self-realization). “Man’s” nature is undeniably social and community oriented.

Marx’s thought can be found in the unrelenting search for the conditions dehumanizing man and for possible ways of restoring more human conditions (Engels and Marx, 1987). And the consideration is that people are most in danger of “ruin,” of “losing themselves” (alienation), through the very act by which they can express their generic essence: the act of work.

The heart of the process of dehumanizing “man” is alienation through work. This idea explains the primordial importance of what takes place, concretely, in the work process. In this process, the workers alienate themselves by selling their capacity for work, while contributing to the development and the consolidation of forces (merchandise, profits, capital), which are exterior, foreign, and in the final analysis, hostile to them and, thus, even more “dehumanizing.”

In sum, people are slipping into “self-estrangement” because of what they are led to do and experience as social and economic beings. An alienated person is caught up in production relations that are structurally, materially, and historically determined. Human beings are definitely not like mechanisms or organisms: They are ruled by reasons, feelings, and choices.

Mintzberg (1989) have used words calling for a revolution; management by men who are still men; suppression of managerial rules that degrade people; liberation of intelligence from the grip of the inhuman Taylorian machine; disregard of now ossified top-down hierarchical authority; renunciation of a management that renders society’s call for recognition that managerial conceptions and practices foil any real possibility of giving “man” the status of subject, that of an actor personally and ontologically authorized to identify with and question the firm, to reappropriate the acts he or she is assigned to do, to experience them as an expression of his or her own desires.

The humanized firm

Almost all the authors of contemporary management best-sellers agree that facilitating the development of a new type of employee means the evolution of a new kind of firm. Whether it is called excellent or third type or open, it would still be a firm in which relations and the rules of the game will have changed radically. Workers must experience their relation to their work as a real, rather than a formal, appropriation. What they do in the firm must be experienced as a real extension of themselves, as an occasion for self-expression as well as for the pursuit and satisfaction of personal desires and interests that converge with those of the firm. Thus, the firm would become a place for partnership and dialogue, a workplace no longer run on the intensive use of workforce.

Surprisingly enough, this new trend seems to encompass one of Marx’s most cherished principles: abolition of wages. Whether explicitly or not, many authors are advocating this principle, most often with reference to Japanese forms of remuneration (largely tied to corporate profits). This is the case for Weitzman (1984); for Peters (1987), who calls for profit sharing as part of remuneration; for Perrow (1979), who writes that control and coercion will be the only ways (more costly than profitable) to obtain maximum productivity as long as the salary system is the rule; for Etchegoyen (1990), who feels that salaries turn employees into mercenaries working in soulless enterprises (the “mercenary” element is seen here as an obstacle to individual commitment – a person no longer satisfied with doing what is asked, who has neither interest nor “soul”).

At the present time, strong American and European trends are being shaped that will demand that an organization become a place where the employee can feel and act as a thinking, speaking, and questioning subject (Girin, 1990; Morgan, 1986, Sainsaulieu, 1983). This would be the place where the employee could find his or her essential availability, interest, and creativity. In other words, these are fee conditions for the advent of vital work (subjective and creative work, capable of constant adaptation and innovation), which Marx recognized as the main characteristic of humanity and which he deplored seeing replaced by dead, ossified work – that of machines, objective working conditions, maximum profits, and repetition.

The birth of industrial enterprise was marked by violence and suffering: It was a long struggle in which laws were won inch by inch and terrible clashes took place between workers and bosses to achieve slightly more just and human working conditions Marx based his terrifying descriptions of nineteenth-century working conditions on the reports of doctors and British government labor inspectors.

These descriptions point to the relevance of the element around which Marxism has always centered – the analysis of work relations, which is the original and still rampant contradiction between the interests of bosses and managers and those of the workers. For the bosses, it was and still is a matter of making the most profit possible, which is synonymous, among other things, with setting the lowest possible wages. For the workers, it has always been a question of fighting back to gain decent working conditions and wages.

Marxism sheds light on the powerful vogue of the management and organizational sciences. Thus, from management’s viewpoint, the nineteenth century was the century of absolute surplus value, whereas the twentieth century is, at least in the West, mainly the century of relative surplus value. However, faced with competition from other countries such as Japan, it is becoming increasingly difficult to obtain a relative surplus value solely by organizing and disciplining labor and by making maximum profit from work time (Hassard, 1988). Japanese corporations stress the importance of human creativity over robotized automation in their manufacturing operations. This, however, does not imply that Japanese businesses are in general more humane, but that they make better use of the creative faculties of their employees. Even obtaining relative surplus value seems to depend more and more on a new attitude on the part of employees: The continued exploitation of labor (by relative surplus value) seems to imply, paradoxically, some kind of commitment from the employee and, thus, greater equity to him or her.

Real and concrete participation in management, in profits, in planning; workers’ greater autonomy and polyvalence; and workers’ adequate security; a finality of cooperative and shared production; and an organization that fosters commitment and interest through the meaning given to each person’s daily work are now necessary to end the stagnation of productivity.

It will, for many companies, be the price to pay for survival. Because companies have reached the ultimate limits of Taylorism (Aitken, 1960, 1985), their only way of improving productivity seems to be making room in the firms for employees to adequately express their personal desires.

Recently, Pagès (1984) spoke about seeking to fuse the ideal of self with the ideal of the organization. To recognize this contradiction is to lay the groundwork for promoting labor to a position of active “co-management” with capital.

From corporate culture to management by symbols and from champions of the product to total quality, the aim is to change the behavior of employees, with no thought that the context must also be changed. In this case, employees are constantly being acculturated by self-cultured leaders, motivated by self-motivated leaders, and mobilized by self-mobilized managers.

However, although Marx’s radical humanism may present an inescapable theoretical framework for constructing the know-how and bases of change suitable to today’s managerial problems, it can be made by moving toward a form of organization where candor, symmetry, equity, and sharing would provide the grounds for humanizing the firm.

In sum, workers must no longer be considered as cost factors to be “compressed” or “rationalized,” but as allies to be won – Although the pursuit of profit is a legitimate objective, it must not become the only factor to be considered and must stop being perceived as a short-term goal to be reached for the sole benefit of managers and shareholders. Instead, profit should be regarded as the result of collective efforts of all parties, and it should be administered accordingly. The rates and applications of profit should therefore be decided in common by all stakeholders, managers, shareholders, and workers alike.

Finally, we would argue that the Taylorist vision of the employee (Beissinger, 1988)as a cost factor and as a passive cog has now become a liability that must be discarded as quickly as possible to make room for a humanistic vision, whereby the employee is seen as an active and willing participant in the organization.

German system of workers participation in management

Germany has a well-established regulatory framework for worker participation. Rules were set out as early as the 1950s on how workers participate in management decisions – through board membership and works councils. It had a long history. It started in the eighteenth century to mitigate the sharp practices of capitalism that has seen in the United Kingdom the terrible scenes of exploitation.

Works councils provide representation for employees at the workplace, and they have substantial powers – extending to an effective right of veto on some issues. Employee representatives have a right to seats on the supervisory board of larger companies – one-third in companies with 500–2,000 employees, and half in companies with more than 2,000.

At national level, trade unions and employer associations participate in the decision-making process of the national legislator. Due to the act on co-determination, companies with over 2000 employees must allow workers representatives to participate in decision making. Workers representatives have 50 percent of the seats in the supervisory board. This is also known as parity codetermination because shareholders and workers are equally represented.

Japan followed the German system as far as possible. As Drucker pointed out:

If there is one point on which all authorities on Japan are in agreement, it is that Japanese institutions, whether businesses or government agencies, make decisions by “consensus.” The Japanese, we are told, debate a proposed decision throughout the organization until there is agreement on it. And only then do they make the decision.

(Drucker, 1971)

One of the core mechanisms for labor–management relations within a large Japanese firm is joint labor–management committees (JLMCs). The majority of labor-side JLMC members are elected by employee vote. Thus, labor-side JLMC members usually legitimately represent the interests of the firm’s workforce (Kato, 2003).

Corporate governance is characterized by the interplay between managers and owners of a firm. While the latter wish to maximize the value of the firm in the long run, executives maximize their own utility, for wh...

Table of contents

• Cover
• Half Title
• Series Page
• Title
• Copyright
• Dedication
• Contents
• List of illustrations
• Introduction
• 1 Personality and person–organization fit
• 2 Organizational strategy and design
• 3 Leadership and decisions
• 4 Person–organization fit in Japan
• 5 Transmission of organizational culture to Thailand
• 6 Corporate management in India
• 7 Failure of Dunlop in India
• 8 Failure of Hindustan Motors in India
• 9 Conclusion
• Bibliography
• Index