Executive work describes the formulation of goals, norms, and policies to promote internal coordination, create value, and guide an organization's response to environmental contingencies (e.g., Parsons, 1960; Thompson, 1967). This strategic work is most often performed by a firm's top management team, including the highly visible role of chief executive officer (CEO) (Finkelstein, Cannella, & Hambrick, 2008). Since Barnard (1938), scholars have invested substantial effort into understanding and directing executive behavior in organizations. Yet, in light of highly visible corporate scandals involving the illegal behavior of executives, and public consternation at perceived excesses in executive compensation, one could readily assert that executives are no better behaved for the effort.
Perceiving a failure of organizations to regulate themselves, government has responded by more actively and prescriptively monitoring executive behavior, including passage of the Sarbanes-Oxley provisions, enhanced oversight from the Securities and Exchange Commission, and consideration of executive pay controls. The unfortunate consequence of such intervention is that government regulation tends to be rigid, expensive, and unaccommodating to firm and industry differences. Additionally, government intervention exposes firms to political interests that may run contrary to their own (Williams, 1999). The net effect of this intervention is the encumbrance of good firms for the improprieties of poorly managed firms.
At face value, government intervention and external monitoring of executive behavior also illustrate a failure of academe to present viable solutions to industry and society at large (Holland, 2009). Though scholars share some of the blame for poor executive outcomes, feasible solutions exist in our body of knowledge, and offer alternatives to the inhibitory external regulation of firms. In particular, agency theory (e.g.