Corporate Governance and Human Resource Management
| Date | 01 September 2006 |
| Author | Suzanne Konzelmann,Neil Conway,Linda Trenberth,Frank Wilkinson |
| DOI | http://doi.org/10.1111/j.1467-8543.2006.00512.x |
| Published date | 01 September 2006 |
British Journal of Industrial Relations
44:3 September 2006 0007– 1080 pp. 541– 567
© Blackwell Publishing Ltd/London School of Economics 2006. Published by Blackwell Publishing Ltd,
9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
Blackwell Publishing Ltd.Oxford, UKBJIRBritish Journal of Industrial Relations0007-1080Blackwell Publishing Ltd/London School of Economics 2006September 2006443541567Articles
Corporate Governance and Human Resource ManagementBritish Journal of Industrial Relations
Sue Konzelmann is at Birkbeck, University of London and at the Centre for Business Research
in the University of Cambridge. Neil Conway and Linda Trenberth are at Birkbeck, University
of London. Frank Wilkinson is at Cambridge University and at Birkbeck, University of
London.
Corporate Governance and Human
Resource Management
Suzanne Konzelmann, Neil Conway,
Linda Trenberth and Frank Wilkinson
Abstract
This paper investigates the effect of different forms of corporate governance on
the structure and nature of stakeholder relationships within organizations and
the consequent impact on human resource management (HRM) policy and
outcomes. The analysis shows that while performance advantages can be derived
from commitment-based HRM systems, a corporate governance regime that
privileges remote stakeholders may operate as a constraint on such systems. The
empirical analysis is based on the UK Workplace Employee Relations Survey
(WERS98).
1. Introduction
What is regarded as best practice in work organization has evolved from
managerial control over the conception and execution of work epitomized by
Taylorism to the involvement of workers in the planning, organizing and
undertaking of production associated with modern human resource manage-
ment (HRM) (Guest 1987; Legge 1995; Walton 1985; Wilkinson 2003).
However, in the Anglo-American system, there has been no supporting devel-
opment in corporate governance to this shifting of responsibility for produc-
tion to the shop floor. In quoted companies, the primacy of shareholder
interests in law and in practice has been reinforced by theories of shareholder
value, which give the stock market pride of place in policing business effi-
ciency. In the public sector, fiscal stringency has had an analogous effect by
giving the Treasury unprecedented control over the running of public sector
organizations. The importance of these developments lies in the fact that by
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British Journal of Industrial Relations
© Blackwell Publishing Ltd/London School of Economics 2006.
designating dominant stakeholders and prioritizing their interests, corporate
governance importantly influences the structure and nature of stakeholder
relationships and the credibility of commitments that stakeholders make to
one another. This, in turn, affects their willingness to fully participate in
productive activities.
This paper investigates the interrelationship between corporate governance,
HRM practices and HRM outcomes at the level of the firm. The influence
of corporate governance on the design and implementation of the HRM
practices within an organization derives from the requirements of the domi-
nant stakeholder and the contribution HRM might make to meet these
requirements. Corporate governance also has consequences for the effective
translation of HRM practices into HRM outcomes because by prioritizing
stakeholder interests, it determines the degree of organizational commitment
that stakeholders are willing and able to extend to one another. To examine
these interactions, we conduct a comparative analysis of companies operating
under different forms of corporate governance. These include the following:
public sector organizations, in which the government is the dominant
stakeholder; private sector public limited companies (PLCs), in which share-
holders are the dominant stakeholder; owner-managed companies, in which
the owner-manager is the dominant stakeholder; and other forms of private
sector firms, in which stakeholder control is more diffused.
Section 2 considers the interrelationship between corporate governance
and HRM within corporate productive systems. From this, a framework is
developed for analysing this interaction and how alternative forms of corpo-
rate governance influence the credibility of commitments that stakeholders
are able to make to one another. Section 3 explores these relationships and
their effects empirically, using the 1998 Workplace Employee Relations Sur-
vey (WERS98). Section 4 concludes.
2. Corporate governance and HRM
Corporate governance regulates the ownership and control of organizations
(Berle and Means 1932). It sets the legal terms and conditions for the allo-
cation of property rights among stakeholders, structuring their relationships
and influencing their incentives, and hence, willingness to work together. Co-
operation is important because of its role in making effective the diffusion of
responsibility for production, process improvement and innovation. It also
serves to secure the commitment of stakeholders to the objectives of the
organization, and to make available the full benefits of their skills, knowledge
and experience. Ideally, this is a central purpose of HRM and its role in
enhancing organizational performance (Baker 1999; Black and Lynch 1997;
Huselid 1995; Ichniowski
et al
. 1996; Konzelmann 2003; Pfeffer 1998). The
form corporate governance takes therefore impacts the effectiveness of HRM
practices.
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