Despite the growing importance and the current trend of a globalizing economy, relatively little is known about the roles and responsibilities of subsidiary board of directors and how they are influenced by various drivers. This thesis focuses on and investigates the roles and responsibilities of a subsidiary board and which firm-related (internal) and environmental-related(external) drivers could potentially influence these roles. From the existing literature on corporate governance four major roles are derived for the SB, namely a monitoring, advising, internal and external role. Qualitative data from 8 in-depth interviews with board members of a global subsidiary company provided a clear set of responsibilities in line with the four board roles. Furthermore, in this case firm growth, acquisitions and the organization at the parent level are seen as major internal drivers of board responsibilities. Economical downturn, industry changes and technological innovations are seen as critical external
drivers of board responsibilities in a subsidiary company. Additionally, this thesis shows that in times of economical recession the board tends take on a more
monitoring focused role. Smaller firms and acquisitions lead to a strong internal focus whereas the changes in the industry and a larger firm size result in more external
responsibilities. Finally, changes at the level of the parent and technological innovations lead to a more service or advising role of the board of directors in subsidiary boards. This thesis highlights the conditions under which the roles and responsibilities could change or shift and contributes to the literature as it presents
evidence that agency theory as well as resource dependence theory are relevant in the analysis of board responsibilities in subsidiary companies.
Table of Contents
1 Introduction
1.1 Problem Definition
1.2 Research Questions
1.3 Empirical Context
1.4 Contributions
1.5 Outline
2 Theoretical Framework
2.1 Board of Directors
2.1.1 Board Size
2.1.2 Board Composition and Structure
2.1.3 Board Roles and Responsibilities
2.2 Subsidiary Boards
2.2.1 Subsidiary Board Roles
2.2.2 Subsidiary Board Responsibilities
2.3 Determinants of board responsibilities
2.3.1 Industry Level Factors
2.3.2 Firm Level Factors
2.4 Research Questions and Conceptual Framework
3 Methods
3.1 Research Method: Case Study
3.2 Research Context
3.3 Research Design
3.3.1 Data Analysis
3.3.2 Data Collection
3.3.3 Triangulation of results
3.4 Validity and reliability of the study
3.4.1 Validity
3.4.2 Reliability
4 Findings
4.1 Board Roles and Responsibilities
4.1.1 Internal Role
4.1.2 External Role
4.1.3 Monitoring Role
4.1.4 Advising Role
4.2 Determinants of Board Roles and Responsibilities
4.2.1 Firm Size & Complexity
4.2.2 Acquisitions
4.2.3 Parent Organization
4.2.4 Economical Uncertainty
4.2.5 Industry Changes
4.2.6 Technology & Innovation
4.3 Summary of Research Results
4.4 Correlation with Theory
4.4.1 Firm level Characteristics
4.4.2 Environmental Uncertainty
5 Conclusion & Discussion
5.1 Contributions
5.2 Limitations
5.3 Future Research
Research Objectives and Thematic Focus
This thesis investigates the roles and responsibilities of boards of directors in subsidiary companies and examines how various internal (firm-related) and external (environmental-related) drivers influence these roles. The study specifically addresses the gap in existing corporate governance literature, which has traditionally focused on stand-alone firms rather than the governance dynamics of subsidiary units.
- Identification of core roles for subsidiary boards (Internal, External, Monitoring, Advising).
- Analysis of firm-level drivers such as company growth, acquisitions, and parent organization influence.
- Examination of external environmental drivers including economic uncertainty, industry changes, and technological innovation.
- Application of Agency Theory and Resource Dependence Theory in the context of subsidiary governance.
- Case study research on Lightspeed Research (LSR) to provide empirical evidence and test research propositions.
Excerpt from the Book
4.1.1 Internal Role
The internal role of the subsidiary board is very prominent because it entails critical components like its employees and other organizational aspects as such. The internal role also refers to the fiduciary responsibilities of the subsidiary company as a separate entity as well as the relationship between the subsidiary company and the organization as a whole. Leksell & Lindgren (1991) imply that the internal role is twofold. On one hand the subsidiary board is primary responsible for controlling and monitoring the management and operations of the subsidiary company. Secondly, the subsidiary board is responsible for coordinating and integrating the subsidiary with the parent organization as a whole.
One of the most prominent responsibilities of the subsidiary board is to develop a strategic business plan and to set the strategic direction for the company. It enables the board to get an understanding of their goals and objectives and where they stand today against those goals. It is an important responsibility as it entails the critical functions of the company such as its employees, operations, technology and its offer towards the clients.
Overseeing talent and employees is another critical internal responsibility of the board. It is important or sometimes quoted as “our number one asset” because it is the function of the company that delivers the work and enables the organization to grow in the future. It is about thinking about how to attract and retain the right talent for our company and benchmark this across the parent and sister companies.
Summary of Chapters
1 Introduction: Provides the problem definition, research questions, and the empirical context of the study, highlighting the need for research on subsidiary boards.
2 Theoretical Framework: Reviews relevant literature on corporate boards, defines the role of subsidiary boards, and discusses internal and external determinants of board responsibilities.
3 Methods: Details the case study research approach, including data collection via semi-structured interviews at Lightspeed Research and the process of data triangulation.
4 Findings: Presents the empirical results regarding the four board roles and discusses how firm-specific and environmental factors influence these responsibilities.
5 Conclusion & Discussion: Summarizes the study's contributions to governance literature, acknowledges research limitations, and proposes directions for future academic exploration.
Keywords
Corporate Governance, Subsidiary Boards, Board Responsibilities, Internal Role, External Role, Monitoring Role, Advising Role, Agency Theory, Resource Dependence Theory, Subsidiary Management, Firm Size, Environmental Uncertainty, Strategic Planning, Lightspeed Research, Case Study.
Frequently Asked Questions
What is the primary focus of this research?
This thesis examines the roles and responsibilities of boards of directors within subsidiary companies and identifies the internal and external drivers that shape these functions.
What are the central thematic fields?
The research bridges corporate governance, strategic management, and subsidiary-level operations, focusing on the dichotomy of monitoring and advising functions in complex multinational organizations.
What is the primary research question?
The central question is: How do firm- and industry-related characteristics influence the roles and responsibilities of boards of directors in subsidiary companies?
Which scientific method is utilized?
The author uses a qualitative inductive approach, specifically a single-case study of Lightspeed Research, utilizing 8 in-depth interviews and secondary documentation.
What topics are covered in the main body?
The main body covers the conceptualization of internal, external, monitoring, and advising roles, and analyzes drivers such as firm size, acquisitions, parent-subsidiary relationships, economic downturns, and industry technology trends.
Which keywords characterize this work?
Key terms include Subsidiary Boards, Corporate Governance, Agency Theory, Resource Dependence Theory, and Board Responsibilities.
How does a subsidiary's growth impact its board's focus?
The research finds that as a subsidiary grows and becomes more complex, the board's focus shifts from internal operational monitoring to more external and advising-oriented roles.
What role does economic uncertainty play for the board?
In times of economic recession, the study demonstrates that subsidiary boards intensify their focus on the monitoring role, specifically regarding financial ratios and budgetary controls.
What is the "Parent Relationship" in this context?
This refers to the board's role in navigating the politics of the parent organization and sister companies, aligning the subsidiary’s goals with the broader group strategy.
- Quote paper
- Riccardo Altenburg (Author), 2011, The determinants of roles and responsibilities of boards of directors in subsidiary companies, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/179814
