Essays on managerial myopia and subject positions in companies with different governance structures

Abstract

This doctoral dissertation examines managerial myopia and subject positions in companies with different governance structures. The study investigates how the use of time models is potentially related to myopia and how organisational controls are tied to the potential for myopia through time models. The time models, researched in the dissertation, are socially constructed mental models on time; more specifically, models that managers construct and use in order to function simultaneously in three periods, the past, the present, and the future. In addition, the study investigates how subject positions, with regard to action/inaction, differ between executives in a listed company and a nonlisted company. The data consists of 42 interviews and archival data gathered in three companies in the financial services industry in Finland; one shareholder value oriented listed company, one mutual company and one coalition of independent savings banks.The dissertation consists of four essays. The first essay covers a general introduction to time models in a Foucauldian framework. The second essay, with the assistance of time models, extends towards solving the paradox of the twofold nature (short and long term orientation) of share price. The third essay explores how organisational controls (exemplified by company culture, share price, and the Balanced Scorecard) are tied to myopia and assist in influencing myopia, through time models. The fourth essay compares subject positions in a listed and non-listed company, partly explaining the time models presented in earlier essays.

The findings of the study are as follows. Shareholder value oriented, listed company executives focus on a present-based time model, and the form of rationality associated with it, whereby present efficiency and effectiveness are experienced as the base for future success; the model reflects thinking that is directed from the present towards the future. The time models of the actors in the non-listed company are found to be more flexible and variant than those of listed company executives. In non-listed companies, executives and managers construct and follow past-, present-, and/or futurebased time models and their associated rationalities. In the past-based model, it is assumed that the past is the base on which it is possible to build the present and/or the future (thinking is directed from the past towards the present and/or the future). In the future-based model, it is considered that future plans are the base on which present actions should be determined (thinking is directed from the future back and towards the present). Subject positions in a listed company are tied to present action, unlike those in a non-listed company, which are tied to inaction. The emphasis on action explains the wide popularity and diffusion of shareholder value.

Building on the extant literature, myopia is redefined to be a disproportionate concern for business matters which do not contribute to the long-term success of the focal company; it is revealed to be represented as an excessive focus on a given time base, without the orientation away from it, albeit implied as necessary by time models. In this regard, the listed shareholder value oriented company myopia presents itself as an excessive focus on action at present inside the present-based model. Non-listed company myopia is related to an extensive focus on the future or the past, in addition to the present, and a potential focus on inaction whenever present action would be in the longterm interests of the focal actors. Organisational control systems that focus on only one measure tend to highlight the myopic tendencies of that measure. In this regard, share price is shown to be connected with the present-based time model and reinforce its potential myopic tendencies. The paradox of simultaneous short and long time orientation of share price that has been revealed by the previous literature is partly resolved; share price is shown to be constructed as long-term by company executives and as short-term by outsiders who criticise the present-based time model. In the study, company culture is shown to be tied to the past-based time model, and the Balanced Scorecard, along with cybernetic systems more generally, to the future-based time model. In order to decrease myopia, organisational control systems need to be balanced, and designed according to the relevant context.