European Management Journal 34 (2016) 22e35

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European Management Journal

journal homepage: www.elsevier.com/locate/emj

Corporate governance and strategic human resource management:

Four archetypes and proposals for a new approach to corporate
sustainability
Graeme Martin a, *, Elaine Farndale b, Jaap Paauwe c, Philip G. Stiles d
a
University of Dundee, Scotland, UK
b
Penn State University, USA
c
Tilburg University, Netherlands
d
University of Cambridge, England, UK

a r t i c l e i n f o a b s t r a c t

Article history: In this paper we develop a new typology connecting strategic human resource management (SHRM) to
Received 21 December 2015 different models of firm-level corporate governance. By asking questions concerning ownership and
Received in revised form control issues in the corporate governance literature and drawing on institutional logics, we build a
9 January 2016
typological framework that identifies four firm-level archetypes of corporate governance systems. Two
Accepted 9 January 2016
Available online 18 January 2016
archetypes represent dominant logic types (shareholder value, communitarian stakeholder), while the
other two represent hybrid organizations (enlightened shareholder value, employee-ownership). Using
these archetypes, we theorize the implications of different governance structures for SHRM and the
Keywords:
Corporate governance
challenges they pose. We conclude by discussing a novel solution to many of these challenges based on
Strategic human resource management the corporate sustainability literature, and, in so doing, provide new directions for SHRM research to
Institutional logics tackle key challenges facing organizations and the management of people.
Hybrid organizations Crown Copyright © 2016 Published by Elsevier Ltd. All rights reserved.
Corporate sustainability

1. Introduction resolution of conflicts among the myriad of participants in organi-

zations”. Similarly, Aguilera, Filatotchev, Gospel, and Jackson (2008:
A central focus of strategic human resource management (SHRM) 475) define it as the “mechanisms to ensure that executives respect
concerns the relationship between people management policies and the rights and interests of company stakeholders, and that those
practices and the business strategy of organizations (Huselid & stakeholders are held accountable for acting morally and respon-
Becker, 2011) but a number of commentators have highlighted the sibly for the generation, protection and distribution of wealth
failure of this literature to engage with the wider context in which invested in the firm”. Despite such clear statements of scope,
firms, strategy, human capital and human resources (HR) actors are implicating SHRM in governance, we have little understanding of
embedded (Delbridge & Keenoy, 2010; Shen, 2011; Wright, Coff, & the ways in which governance modes and SHRM choices and the
Moliterno, 2014). In particular, the SHRM literature has failed to implementation of these choices are associated. Consequently, there
integrate recent work on different modes of how firms are governed, is a need to understand how both concepts interact.
which represents highly important conditioning influences on firms' Three important questions emerge from our statement of this
investments in human capital and how people are managed in or- problem. First, what effect does the choice of governance mode
ganizations (Gospel and Pendleton, 2005). have on the way people are managed in a firm? Second, how do
This lack of integration is puzzling since how firms conceptualize certain HR practices affect the governance approach of a firm?
and approach corporate governance has fundamental implications Third, what are the traditional and non-traditional ways in firms
for SHRM. For example, Daily, Dalton, and Canella Jr. (2003: 371) are governed and what are the implications of these for the man-
define corporate governance as “the determination of the broad agement of people?
uses to which organizational resources will be deployed and the In this paper we develop a typology to explain the linkages
between choice of corporate governance mode and SHRM choice.
With theories of institutional logics as our foundation (Delbridge &
* Corresponding author. Edwards, 2013; Friedland, 2012; Friedland & Alford, 1991;

http://dx.doi.org/10.1016/j.emj.2016.01.002
0263-2373/Crown Copyright © 2016 Published by Elsevier Ltd. All rights reserved.
 G. Martin et al. / European Management Journal 34 (2016) 22e35 23

Thornton, Ocasio, & Lounsbury, 2012), we present four ideal-typical Stout, 1999; Davis, 2009b; Huse, 2009; Jensen, 2001; O'Brien,
archetypes of corporate governance and SHRM: (a) a market-based, 2006; Starbuck, 2014) and neo-institutional theorists regarding
agency-led shareholder value model (b) a relational, communi- the politics of institutional contradictions (Almandoz, 2014;
tarian stakeholder model; (c) a strategy-led enlightened share- Friedland, 2012; Friedland & Alford, 1991; Lok, 2010; Suddaby &
holder value model, and (d) an employee-ownership model. The Greenwood, 2005). The first question relates to the ownership
shareholder and stakeholder models are familiar ideal types but (c) problem: whose rights and interests are, or should be, paramount
and (d) represent hybrid ideal types. Hybrid organizations (c.f. in a firms' corporate governance approachdshareholders who have
Battilana & Lee, 2014; Pache & Santos, 2010, 2013) have become contractual property rights in the business, or other members of
increasingly common in addressing issues of the types of organi- the community directly or indirectly affected by a firm's activities
zational complexity promoted by pluralistic demands (Aoki & both now and in the future (Aguilera et al., 2008; Gospel &
Jackson, 2008; Greenwood, Raynard, Kodeih, Micelotta, & Pendleton, 2003; Janssens and Steyart, 2012; Mansell, 2013;
Lounsbury, 2011). Such organizational forms are important in Stout, 2012)? The second question relates to the control problem:
governance literature and practice addressing different ways of how do a firm's governance structure and approach create an
dealing with the agency problem at one extreme (Dalton, Hitt, appropriate balance between control to ensure that the executives
Certo, & Dalton, 2007), and the problem of excessive democracy who run firms act in the interests of financial investors (Dalton
at the expense of managerial efficiency at the other (Kaarsemaker, et al., 2007; Hansmann, 1996), and commitment to other stake-
Pendleton, & Poutsma, 2010; Lan & Heracleous, 2010). To build our holders who commit their long-term economic and social capital
typology, we draw on the concept of ‘institutional complementar- and whose continued participation is vital to the continued oper-
ities’ (Aoki & Jackson, 2008; Hall & Soskice, 2001), defined as ation of the firm (Mayer, 2014)?
mutually constitutive relationships between institutional logics at Combining these two questions in Fig. 1, we locate both the
societal, field, and organizational levels, to link the four corporate dominant logic archetypes and hybrid archetypes. The latter char-
governance archetypes to ideal-typical approaches in SHRM. acterize governance systems that attempt to deal with the excesses
Following the development of our typology we extend our created by (i) a market logic that underpins agency-led shareholder
theorizing to offer a new approach, based on corporate sustain- value, and (ii) a democratic logic that underpins the communitarian
ability (Benn, Dunphy, and Griffths, 2014; Linnenluecke & Griffiths, stakeholder archetype. These are, respectively, a strategy-led
2010; Mayer, 2014) and socially responsible human resource enlightened shareholder value (Lok, 2010; Martin & Gollan,
management (Aguinas & Glavas, 2012; Shen & Benson, 2014), as 2012), and an employee-ownership archetype (Kaarsemaker
over-riding principles of good governance. These proposals deal et al., 2010; Lampel, Balla, & Jha, 2014; Pierce, Rubenfeld, &
with many of the challenges associated with the previous four ar- Morgan, 1991). As both Aoki and Jackson (2008) and Besharov
chetypes, and provides a way forward to deal with the impact of and Smith (2014) argue in different ways, logics within hybrid or-
organizations on current and future generations of stakeholders. ganizations may lead to either contestation (extensive conflict) or
Our paper makes three contributions to existing theory on relative alignment (minimal conflict), depending on the compati-
governance and SHRM. First we contribute to the literature on bility of the multiple logics in practice. Thus, we highlight the
corporate governance by showing the impact of governance choices different challenges that these two hybrid archetypes are likely to
on how people are managed within organizations. Our typology present for both corporate governance and SHRM. Finally, we
elucidates the linkages between choice of governance mode and suggest that our suggestions for a new framework based on
the mode of SHRM, deepening our understanding of the effects of corporate sustainability can be located can be located on the top
governance through the organization. Further we answer calls to right hand side of this figure for reasons we raise in the Discussion.
develop our knowledge of non-traditional corporate governance by
highlighting hybrid organizations in our typology and their impact 1.2. Elements of corporate governance and shrm
on the structure and management of people within the firm
(Besharov & Smith, 2014; Delbridge & Edwards, 2013; Greenwood We have created our framework by plotting the archetypes in
et al., 2011). Second, we contribute to the literature on SHRM by columns against specific ‘elemental categories’ or building blocks
showing, through our classification, how the choices of HR actors (Thornton et al., 2012) of our theory in rows (see Table 1). The
on the SHRM approach can reproduce the governance mode of the elemental categories reflect three levels of analysis: societal,
firm, extending previous perceptions of the influence of HR in how organizational, and functional. We describe in turn what each
a firm is configured. Moreover, through clarifying the link between elemental category constitutes before applying the elements
SHRM and corporate governance, we deepen our understanding of concurrently to describe the archetypes that emerge.
the dimensions of strategy that SHRM is intended to include. Third,
through our development of the linkage between SHRM and sus- 1.3. Societal level: institutional logics
tainability, we respond to calls for more normative theorizing in
governance (Suddaby, 2014) by proposing some suggestions for a We use the notion of institutional logics to locate firm-level
new model of governance-SHRM linkages embodying the princi- governance logics and structures in societal, inter-institutional or-
ples of corporate sustainability. ders (Fiss, 2008; Friedland, 2012; Friedland & Alford, 1991; Suddaby
Our paper is structured as follows. First, we outline issues in & Greenwood, 2005; Thornton et al., 2012; Westphal & Zajac,
corporate governance and the control of resources. Then we 2013). Throughout the paper, we draw on Thornton et al.'s (2012:
develop our typology of corporate governance and SHRM arche- 2) definition of institutional logics as “the socially constructed
types. In the Discussion section, we present our normative theo- historical patterns of cultural symbols and material practices,
rizing on corporate sustainability and SHRM. We conclude with including assumptions, values and beliefs, by which individuals and
directions for future research. organizations provide meaning to their daily activity, organize time
and space, and reproduce their lives and experiences”. The two
1.1. Corporate governance: interests and control primary societal level logics of corporate governance on which we
focus are the market-based capitalist logic and the democratic-
To structure our discussion, we address two related questions participative logic, both of which feature in the original formula-
raised by particular corporate governance researchers (Blair & tion of institutional logics by Friedland and Alford (1991).
24 G. Martin et al. / European Management Journal 34 (2016) 22e35

Corporate Governance Archetypes

Commitment
Corporate
sustainability

Communitarian
stakeholder
How to ensure
balance between
control of boards
Employee-
and commitment
ownership
of stakeholders

Enlightened
Shareholder value

Shareholder value

Control

Present and future

Shareholders
community
Whose rights and stakeholders
interests should be
paramount in
ownership

Fig. 1. Positioning Corporate Governance Archetypes.

1.4. Firm-level: structure theorists argue the greater the number and complexity of re-
lationships organizations have with others, the more likely they
In addressing the question of how these societal-level logics will resemble hybrid organizations (Battilana & Lee, 2014; Kraatz &
constitute corporate governance and SHRM at the firm level, we Block, 2008). From a governance perspective, and in line with
draw on neo-institutionalist theorizing in organizational studies, resource dependence theory (Pfeffer & Salancik, 1978), the reliance
combining the notions of hybrid organizations (e.g. Battilana & Lee, on different financing structures represents our primary source of
2014; Pache & Santos, 2013) and institutional carriers (Scott, 2008). difference among firms here. As Gospel and Pendleton (2003: 574)
This work leads us to explore three elements at the firm level: core argue: “the sources and types of finance, the objectives of financial
corporate governance logics, inter-organizational relationships, providers and the means by which they attempt to secure them”
and the cultural cognitive system. are major factors in shaping the management of labor.
Core corporate governance logics. Corporate governance The cultural-cognitive system. Scott (2008: 222) describes the
models are often typified as a choice between two opposing rhe- cultural-cognitive system as one of the principal means of
torics: shareholder and stakeholder value models (Mansell, 2013). embedding institutional logics into an organization as an institu-
This dichotomy epitomizes the two questions posed in this study: tional carrier, “which emphasizes the centrality of symbolic sys-
whose rights and interests are, or should be, paramount in a firms' tems: the use of common schemas, frames, and other shared
corporate governance approach, and how does a firm's governance symbolic representations that guide behavior”. Such schemas and
structure and approach create an appropriate balance between frames of reference shape how institutional actors focus their
board control and stakeholder commitment? The typical answers attention, which, as Thornton et al. (2012) propose, depends on the
to these questions are embedded in a firm's core corporate gover- availability and accessibility of information concerning the logics
nance logics. For example, shareholder corporate governance logic embedded in the organization. Organizational culture is an
involves maximizing shareholder returns by controlling boards and important carrier of meaning, for as actors engage in organizational
aligning managerial interests to those of shareholders (Appelbaum activities, enact its structure and interact with others inside and
& Batt, 2014), whereas the stakeholder logic aims to achieve a more outside of its boundaries, they also create and reproduce patterns of
balanced approach to control, representing the interests of diverse shared meanings and values (Battilana & Lee, 2014). Values are thus
stakeholders (Canals, 2010). Hybrid logics fall between these two the core of institutional logics and their associated material and
extremes, balancing control through less-shareholder driven symbolic practices (Friedland, 2012).
boards and encouraging a broader range of stakeholder participa- In the field of employment studies, one of the most notable
tion (Lampel et al., 2014). accounts of such cultural schemas is the unitarist-pluralist
Inter-organizational relationships. Hybrid organizational distinction developed by the British industrial sociologist, Alan
 G. Martin et al. / European Management Journal 34 (2016) 22e35 25

Table 1
Archetypes connecting corporate governance and SHRM.

Agency-led shareholder Strategy-led enlightened Communitarian stakeholder Employee-ownership (hybrid)

Value shareholder Value (hybrid)

Societal level (rules of the game):

Institutional logic(s) - shape Market logic Dominant market logic, with Democratic logic Dominant, democratic logic with
ownership and control issues democratic logic also evident market logic also evident
Organizational level (structure):
Core corporate governance Aimed at maximizing Aimed at maximizing longer- Aimed at balancing the diverse, Aimed at balancing the long-term
logics shareholder returns by term shareholder value by long-term interests of diverse interests of diverse stakeholders by
controlling boards through balancing shareholder interests stakeholders by ensuring allowing employees to participate
an active market for with those of relatively commitment to the democratic in financial and socio-psychological
corporate control, autonomous boards and other principles of equality, co- ownership but not necessarily
shareholder activism and powerful stakeholders determination and overall control.
aligning managerial involvement.
interests to those of
shareholders
Inter-organizational Short-term focus on hedge Mixed short term and longer Longer term institutional and Longer term investors ranging from
relationships e financing funds or private equity term institutional investors - family investors - democratic schemes through which employees
structures investors, cost control and business case for stakeholder case for stakeholder own all shares to those in which
flexibility, eschewing other management, including management, sustainability, employees have a minority stake,
than minimal interest in partnership, sustainability, and social responsibility, and such as ESOP schemes.
stakeholders social responsibility but only community involvement.
when aligned with shareholder
value.
Cultural-cognitive system e A unitary frame of reference A unitary focus on economic A pluralist frame of reference A pluralist frame of reference that
values, symbols, and shared that emphasizes hierarchy values but acknowledges the that recognizes legitimate recognizes legitimate competing
meanings and the common interests business case for stakeholders, competing interests and the interests e need to align employee
of all in achieving partnership and social values. benefits of resolving conflict interests with democratic and
shareholder goals though compromise, market logics
negotiation, co-determination,
stakeholder involvement.
Functional Level (SHRM)
Strategic human resource Control/calculative SHRM Hybrid SHRM approach, High-commitment- Hybrid SHRM approach, involving
management approach approach, including: involving control/calculative collaborative SHRM approach, high commitment/collaborative
 hire and fire mentality - practices and high including: practices and control/calculative
transactional commitment/collaborative  training for high skill levels practices, including:
psychological contract practices, including: and job security  employer-provided training and
 rewards to ensure that  engaging more vulnerable,  investment in social capital development
managerial agents act in arguably less value-adding as a source of innovation  labor unions recognized for
the best interests of and scarce employees  employee voice collective bargaining
shareholders through inclusive, high-  relational psychological with  employee involvement in quality
 disproportionate commitment HRM practices a high trust dynamic contract circles and teams
economic rents being  yet maintaining an exclusive  employee-management
secured by an exclusive focus on high value-adding communication
group of high value- employees to incorporate key  employee share-ownership
adding ‘star’ employees ‘stars’ into decision-making  identification with the vision and
 low investment in  building high (calculative) purpose of the organization e
human or social capital, trust relations practices to build employee
apart from firm-specific  potentially leading to work commitment
human capital intensification  yet also quantifiable elements in
contractual agreements, such as
incentive-based pay for
performance

Fox (1974), which has been revived in current writing on institu- and, if managed effectively, is capable of simultaneously producing
tional pluralism (Kraatz & Block, 2008), organizational trust dynamic stability and transformation in the institutional frame-
(Siebert, Martin, Bozic, & Docherty, 2015) and SHRM (Van Buren work of organizations.
et al., 2011). Unitarism sees the organization as an integrated and
harmonious hierarchy in which the notion of team spirit and a 1.5. Functional level: SHRM
pursuit of a shared common purpose through mutual cooperation
is a natural state of organizational affairs; in contrast, conflict in all SHRM represents patterns of management strategies and prac-
its forms is seen as a disease to be cured through effective com- tices that result from actor agency in the business system.
munications and ridding organizations of sectional greed among Normative models of SHRM have been conceived in the literature in
workers. Essentially it is paternalistic frame of reference that de- various ways. The first approach is a hard/soft distinction that poses
mands the loyalty of all employees to a managerial agenda and different routes to achieving business objectives (Legge, 1995/
rejects the legitimacy of labor unions as stakeholders. In contrast, 2005). The second approach is to distinguish between control/
pluralism sees an organization as made up of often divergent sub- calculative SHRM and high commitment/collaborative SHRM and
groups each legitimately pursuing their own sectional aims and their associated practices (Appelbaum, Bailey, Berg, and Kalleberg,
interests, albeit within a framework of rules and consensus con- 2000; Gooderham, Parry, & Ringdal, 2008). The practices associ-
cerning the long-term survival and prosperity of the organization. ated with the former categories include those that are intended to
From this perspective, conflict is seen in a much more positive light attain employee compliance and those that are intended to ensure
26 G. Martin et al. / European Management Journal 34 (2016) 22e35

employee efficiency. Such a perspective is often associated with market dictum that companies maximize social welfare by using
Fordism, which has been a dominant mode of work organization resources and engaging in activities that maximize profits over
since the 1920s combining work practices associated with Taylor- time, so long as they do so “in open and free competition without
ism and control through technology (Sabel, 1982). deception or fraud” (Friedman (1970): 4). It is also consistent with
In contrast, the high commitment/involvement bundles of so- the arguments of Sternberg (2004) that for managers to pursue
called high performance work practices emphasize extensive in- social objectives at the expense of shareholder objectives would
vestment in human and social capital, internal labor markets, contravene the property rights of owners.
employee involvement and voice, self-managed teams, employee Core corporate governance logics. Dominated by a capitalist
ownership, and a reduction in status differentials. This latter model market logic (Zajac & Westphal, 2004), which prioritizes the
is best exemplified by Beer, Spector, Lawrence, Mills, and Walton property rights of ownership, this corporate governance model
(1984) ‘Harvard model’, which recognizes the need for employees emerged in the 1980s as a means of resolving the agency problem
to be treated as stakeholders in the firm. associated with explaining how organizations can maximize effi-
Both of these approaches, however, can be criticized because of ciency under constraints of imperfect informational flows in
their use of simplistic binary opposites. Thus, following Guest's imperfect markets (Dalton et al., 2007). The resolution of this
(1999) cautionary note, we propose that many organizations pur- problem largely rested on the use of high-powered incentives or
sue both hard and soft HRM strategies simultaneously depending close monitoring to align managerial agents with shareholders
on organizational strategy, with much the same criticism being when there was an imbalance of information asymmetry between
leveled at the control and commitment distinction. Moreover, as these managers and the investors in the business (Eisenhardt, 1989;
critical management scholars have also argued (Keenoy, 1999), Jensen & Meckling, 1976). The contribution of agency theory to this
SHRM practices are never exclusively hard or soft, nor control or way of operating cannot be underestimated (Khurana, 2007).
commitment-based; instead they embody elements of hardness Agency theory viewed share prices as the best guide to the future
and control, and softness and commitment simultaneously because worth of the firm through the efficient markets hypothesis (Jensen
of their mutual interdependence. Finally, we propose the signals & Meckling, 1976). It further proposed that societal-level welfare
such practices send out, how they are perceived by employees and, could only be maximized by capitalizing on shareholder value
importantly, how they are bundled together to form an HRM (Friedman, 1970). Managerial agents sometimes followed their
strategy are contingent on the institutional context in which they natural self-serving interests, however, which were potentially
embedded (Farndale et al., 2010). harmful to shareholders unless they were strictly supervised and
incentivizeddso-called agency loss (Jensen & Meckling, 1976).
2. Connecting corporate governance and shrm Thus the main aim of corporate governance research shifted to
solving the agency problem through governance mechanisms
Applying an institutional logics lens as a method of analysis, designed to constrain opportunistic managerial actions by linking
firm-level corporate governance logics are often deeply embedded managerial pay to shareholder value and to appoint independent
in societal level logics (Thornton et al., 2012). In turn, these directors who would be able to stand up to powerful executives
corporate governance logics constrain HR actors' cognitions at the (Withers, Hillman, & Cannella, 2012). Related governance research
individual/group level, which also draws on their identities and has focused on legal and technical arguments about board struc-
frames of reference to produce decisions on how best to manage ture, composition, and rewards to ensure that managerial agents
people. Through a process of negotiation and communication, these act in the best interests of shareholders (e.g. Dalton & Dalton, 2010).
individual decisions made by HR managers are enacted as organi- Inter-organizational relationships. The degree of complexity
zational SHRM approaches and sets of material and symbolic of financial relationships has been low, traditionally relying mainly
practices. Institutional complementarity occurs when such orga- on institutional investors and, more recently, new sources of
nizational level approaches and practices in the area of people finance, including hedge funds, private equity and sovereign wealth
management help reproduce corporate governance logics at the funds operating within largely unregulated financial markets at
level of the firm. In turn, similar SHRM approaches and practices of least in Anglo-Saxon economies (Buchan, Chai, & Deakin, 2012; Lok,
firms can reproduce field-level and even societal-level governance 2010). Nevertheless, as, researchers have pointed out (Mayer, 2014;
logics. Pendleton & Gospel, 2013), different kinds of equity investors have
Drawing on the elemental categories, we now describe the ar- varying objectives and legal rights in controlling company man-
chetypes presented in Fig. 1. The detail of each archetype is sum- agement, especially in countries outside of the influence of British
marized in Table 1. We argue that the four ideal-types are central to and American corporate law. Typically, however, this reliance on
understanding how organizations operate in society, how people equity investment has been associated with short-termism
are managed within them, and how and why the approach to SHRM (Applelbaum and Batt, 2014), an active market for corporate con-
tends to reproduce these archetypes in a dynamically stable trol (Mayer, 2014), a focus on ‘lean thinking’ and internal labor
manner. We also point out the challenges created by these arche- market flexibility to control fixed costs (Thompson, 2011).
types for SHRM practice. Finally, however, we also wish to engage Cultural-cognitive system. This is best described as embracing
with normative theorizing by proposing a corporate sustainability a unitary frame of reference (Fox, 1974), which emphasizes social
perspective as a guide to tackle many of the problems associated order and hierarchy as a natural state of affairs, in which only
with the archetypes. shareholders' interests matter. In doing so, it treats conflict over the
notion of shareholder value as a disease to be cured, thus rendering
(1) Agency-led Shareholder Value the notion of stakeholders as irritants in the system and empha-
sizes traditional bureaucratic organization exercised through hard
Institutional logics. This first archetype is based on shareholder power (Courpasson, 2000; Courpasson & Clegg, 2006).
primacy principles, in which company boards are exhorted to ex- SHRM approach. Such institutional influences are consistent
ercise their wealth generation, protection, and distribution roles in with a control/calculative SHRM perspective to ensure employee
the economic interests of the company shareholders (Lan & compliance and efficiency. Typical practices include close supervi-
Heracleous, 2010). This perspective has a strong technical/ratio- sion, and regular assessment and discipline through ‘hire and fire’.
nalist underpinning based on Friedman (1970) classical free- There is also strict internal labor market segmentation that
 G. Martin et al. / European Management Journal 34 (2016) 22e35 27

distinguishes high value-adding and scarce employees (a so-called attempts to engage others with interests in the business (Freeman,
exclusive talent management approach), performance-based pay, Harrison, & Wicks, 2010).
job evaluation and job specifications, and other practices in which Core corporate governance logics. This emergent model is
there is a quantifiable element in the legal and psychological ex- associated with changing legal obligations and new codes of
change relationships between employer and employee. practice. These include disclosure of information concerning
The focus on a control/calculative approach to SHRM creates corporate board workings with key stakeholders, directors acting in
strategic fit with business objectives and internal fit amongst HRM the interests of the corporation as a whole, and recent pressures
policies (Beer et al, 1984). For the majority of shareholder value- placed on firms to take the interests of the community and social
governed firms, this also led to attributions of success to individ- obligations into account (Shen, 2011). Huse (2009) has described
ual leaders (Grint, 2009), typically CEOs and independent directors, this as a strategy-led form of governance, in which boards and di-
who were frequently recruited from a small inner circle (Withers rectors have been exhorted to take a more active role in managing
et al., 2012). These leaders were seen as a critical part of wealth the long-term direction of organizations rather than restricting
generation, but only when constrained from pursuing their natural themselves to monitoring firm performance in the interests of,
self-interest by active markets for corporate control and by linking increasingly, short-term investors. Indeed much of the impetus for
their pay to share performance (Khurana, 2002). this strategy-led enlightened perspective has come from long-term
Challenges. While shareholder value has its adherents, it has institutional investors and shareholder pressure groups seeking to
come under increasing scrutiny and criticism because of the invest in corporate social performance and reputations as well as
increasing focus on ethics in business, and the corporate scandals economic performance (Cox, Brammer, and Millington, 2004).
that have characterized much of the last few decades. These criti- Freeman et al. (2004), key proponents of strategy-led stakeholder
cisms have extended to SHRM (Pfeffer, 2010; Spector, 2003). Thus, a theory have argued, regardless of the ultimate aim of a corporation,
number of critics of shareholder value models (Aoki & Jackson, managers and boards have no option but to have regard for key
2008; Appelbaum & Batt, 2014; Davis, 2009a, 2013; Gospel & stakeholders whose legitimate interests are affected by, and affect,
Pendleton, 2013) have argued that people management is heavily what the corporation does and how it is managed. To do otherwise,
influenced by different forms of finance in a number of ways, they argue, would be to ensure the long-term destruction of the
including investor threats to sell equity if business strategies are business.
not to their liking, time frames for returns and the methods used to Inter-organizational relationships. The changes in legal obli-
calculate returns, the extent to which business strategies stress gations have resulted in a much more complex set of inter-
financial aspects and cost leadership, the approach to securing organizational relationships that need to be considered beyond
employee commitment and engagement, and the extent of inter- those of investors. Jensen (2001), one of the original authors of
firm cooperation. agency theory, belatedly recognized that long-term value maxi-
For example, HR decisions to implement an exclusive talent mization has to engage employees and managers, as well as other
management approach results in disproportionate economic rents key stakeholders. He argued that an enlightened theory needs firms
being secured by an exclusive group of high value-adding em- to specify long-term value maximization as their mission, set out a
ployees (Martin, Gollan, & Grigg, 2011). For the majority, however, single (not a balanced) dimensional score for measuring perfor-
this approach to SHRM is often associated with little more than mance that reconciles different stakeholder interests, and for
compliance with legislative requirements on issues such as pay and boards and managers to work together to create strategies that will
diversity, the (re)introduction of transactional contracts focused on achieve this mission.
short-term employment relationships, and directed primarily at Cultural-cognitive system. Despite drawing on some ‘soft’
performance outcomes (Cappelli, 1999). Employees become so- pluralist rhetoric and principles, however, we argue that the
cially constructed (and, in some cases, construct themselves) as cultural-cognitive system in this strategy-led enlightened share-
‘human capital’ or ‘human resources’ rather than ‘resourceful holder archetype remains essentially a variant of unitarism,
humans’ (Wright & MacMahan, 2011). The short-term profits focus designed to rescue shareholder value as the overarching goal of
of the traditional shareholder value model prevents long-term in- firms (Van Buren and Greenwood, 2013). Thus, this enlightened
vestment in training and well-being initiatives, as evidenced perspective still represents a hierarchical form of governance,
especially in liberal market economies of the UK and the USA casting corporate boards and senior executives as the pre-eminent
(Davis, 2013; Konzelmann, Conway, Trenberth, & Wilkinson, 2006). actors in corporate decision-making (Lan & Heracleous, 2010).
In brief, this SHRM approach promises to deliver short-term Moreover, in some versions (e.g. Jensen, 2001), it is still committed
financial returns, rather than incurring the costs associated with to shareholder value maximization as the single most important
investing in long-term human and social capital (Groysberg, 2010). measure of firm and managerial performance. However, it also
As such firms operating with this approach often developed a low places a moral obligation on boards and senior executives to treat
trust dynamic between employer and employees (Appelbaum, Batt all employees with dignity and respect (Adams, Licht, & Sagiv, 2011;
and Clark, 2013; Fox, 1974; Siebert et al., 2015). Ferrary, 2009).
SHRM approach. Compared to the agency-led shareholder
(2) Strategy-led Enlightened Shareholder Value value archetype, the enlightened version is associated with a softer
and more inclusive form of HR rhetoric on talent management and
Institutional logics. Dissatisfaction in some quarters with the the engagement of the non-core workforce (Boxall & Macky, 2009;
dominant market logic underpinning shareholder value, most Lok, 2010). We see this SHRM approach as a hybrid, involving high
notably Freeman, Wicks, and Parmar (2004), along with a perceived commitment/collaborative practices and control/calculative prac-
need to present shareholder value in a more acceptable light with tices. This rhetoric seeks to create high trust relations and the
key stakeholders, has resulted in what we see as a hybridized conditions for employees to display self-driven commitment and
model of corporate governance (Jannsens & Steyart, 2012; Pache & assume greater responsibility for their own behavior rather than
Santos, 2013; Thornton et al., 2012). We have labeled this a being compliant with managerial control initiatives.
strategy-led, enlightened shareholder value archetype because it The enlightened shareholder value model can be described as a
attempts to reconcile a dominant market logic that focus on value compromise by firms embracing a market logic that remains
maximization for shareholders with a democratic logic that dominant in its governance functioning but, nevertheless, are able
28 G. Martin et al. / European Management Journal 34 (2016) 22e35

to reconcile it with a, somewhat less central, democratic logic and society (Fox, 1974). In contrast, certain continental European
arising from demands and expectations of stakeholders (Besharov countries and Japan (Adler, 2014; Gospel & Pendleton, 2003; Mayer,
& Smith, 2014; Pache & Santos, 2013). A structure and culture of 2014) have been characterized by a different version of capitalism
‘soft’ bureaucracy (Courpasson, 2000; Courpasson & Clegg, 2006) is associated with a pluralistic, democratic stakeholder logic (Ferrary,
at the heart of this model. Soft bureaucracy, however, is not meant 2009; Friedland & Alford, 1991). These coordinated market econ-
to convey a rejection of traditional hierarchical principles associ- omies typically recognize a wide range of legitimate interests in the
ated with a unitarist view of the firm, but occurs when “centrali- firm, including the rights of employee representative groups to
zation and entrepreneurial forms of governance are combined” express and co-manage employee interests. As such, a communi-
(Courpasson, 2000: 131). Such softening of bureaucracy follows tarian stakeholder model of corporate governance aims to devise
from incorporating key professionals and other scarce, high value- structures to balance diverse interests (Lan & Heracleous, 2010).
adding employees into decision-making (Courpasson & Clegg, In this archetype, firms are considered to have both social and
2006). It is also a result of protecting and attempting to engage economic consequences as they affect the communities of which
more vulnerable, arguably less value-adding and scarce employees they are a part. These social responsibilities are externaldtowards
through inclusive, high-commitment HRM practices (Boxall & society at largedand internaldin terms of how employees are
Macky, 2009). treated by managers, given the impact of work on their lives (Chen,
Challenges. Just as Freeman et al.'s (2010) stakeholder theory 2011). They are not, however, perceived as competing logics: the
itself struggles with the minimalist need to reconcile market logics compatibility and centrality of both social and economic goals are
to maximize shareholder value with the broader ethical argument typically aligned (Besharov & Smith, 2014), although there is evi-
to satisfy other stakeholder (Mansell, 2013), this hybrid model is dence that this alignment may be subject to significant tensions
riven with inconsistencies in SHRM. The increasingly influential (Gospel & Pendleton, 2013). For example, in societies such as Ger-
exclusive talent management approach to human capital does not many that reflect a communitarian stakeholder approach, code-
always sit comfortably with an inclusive version of talent man- termination systems are mandated by law, ensuring an employee
agement for all segments of the workforce. Nor does the rhetoric of representative is present on the supervisory board of management
sophisticated HRM always match the reality (Legge, 1995/2005). to provide a voice for employees in managerial decision-making.
Thus the tensions between competing institutional logics for SHRM This helps to maintain the economic and social balance in the firm.
are often evident, for example, among banks that pay dispropor- Core corporate governance logics. As the most widely debated
tionately high rewards to an exclusive group of core employees, alternative to the shareholder value model, the stakeholder value
while simultaneously promoting distributional fairness and inclu- model has its origins in criticisms of unfettered free markets
sivity as principles of talent management (Martin et al., 2011). Thus, (Cooper, 2009; Daily et al, 2003) and neo-institutional theory
critical HRM theorists have suggested that this enlightenment (Powell, 2007). It proposes that sustainable economic performance
project is little more than sophisticated image management of organizations rests on creating more democratic corporate
(Edwards, 2010). Clegg, Harris, and Hopfl (2011) have argued that it governance structures that attempt to balance the legitimacy
is a form of ‘persuasive propaganda’ designed to send ‘honest’ claims of a wide range of corporate constituents (Lan & Heracleous,
signals to employees that management cares about them by 2010), both from a strategic and moral perspective (Jannsens &
espousing an inclusive talent rhetoric, but which are frequently Steyart, 2012; Noland & Phillips, 2010). This relational perspective
seen as ‘dishonest’ by employees as a result of firms pursuing (Paauwe, 2009) raises social obligations, especially to employees
exclusive talent management policies in practice (Legge, 1995/ and wider society, and sustainable value creation to the same (or
2005). An even more skeptical reading sees this soft power even greater) plane as economic performance. In essence, this is an
approach, often based on high commitment principles, as a argument for patient capital, ensuring that company boards include
manipulative disguise of an organizational agenda seeking to representatives of all stakeholders, including providers of finance
intensify work. This approach guarantees the job security enjoyed and labor (Kaufmann & Englander, 2005; O'Brien, 2006), and
by a small core of high value-adding and unique staff at the expense making a virtue of incorporating employee voice in key decisions
of job insecurity among a much larger number of non-core, readily (Gospel and Pendleton, 2005).
substitutable employees and contractors (Ramsay, Scholarios, and Stakeholder theory attempts to address a different set of
Harley, 2000). corporate governance questions from shareholder value, by
As such, these criticisms point to a response by firms to focusing on ethical questions including community, legitimacy,
competing logics as a de-coupling strategy (Pache & Santos, 2013), fairness and tolerance (Laplume, Sonpar, and Litz, 2008; Mansell,
in which organizations give the appearance of conforming to de- 2013). It also posits that shareholders are only one class of con-
mands for stakeholder involvement but fail to operationalize these stituents to take into account and may need to be monitored closely
in practice. Trust relations under such a regime might be described so that they do not follow their natural self-serving interests by
as calculative, whereby employees have little faith in boards to act exploiting the interests of other stakeholders (Lan & Heracleous,
in their best interests and show only limited willingness to trust 2010). The role of boards, with the help of their executive teams
senior managers (Fox, 1974; Siebert et al., 2015). Thus managing is to ensure that all interests are balanced, which often translates
trust relations in such a governance model becomes a key strategic into concession bargaining, the very essence of pluralism (Fox,
priority. 1974).
Inter-organizational relationships. Because of the need to
(3) Communitarian Stakeholder Archetype recognize multiple stakeholders and interest groups, inter-
organizational relationships tend to be complex. This is the case
Institutional logics. This archetype, like the agency-led share- in the financing of such enterprises, which has traditionally relied
holder value archetype, is based on a dominant societal logic, but, on bank loans, internal financing and, in some cases, local and
in this case, it is the democratic logic. Both of the previous share- national government investment to fund growth. Such sources of
holder value-based archetypes originate from Anglo-Saxon legal finance, it is argued, allow firms to take a longer-term perspective
systems (Blair & Stout, 1999; Stout, 2012), the American business and deal with the interests of multiple stakeholders (Buchan et al.,
model, and U.S.-influenced SHRM research (Batt & Banerjee, 2011), 2012). This creates a relational-insider system that allow firms to
the latter of which is firmly located in a unitary ideology of the firm take a patient capital perspective (Davis, 2009a; Pendleton &
 G. Martin et al. / European Management Journal 34 (2016) 22e35 29

Gospel, 2013). Stakeholder models, such as those associated with a greater balance between the interests of labor and capital than
coordinated market economies (Hall & Soskice, 2001), tend to be under the shareholder value model. Consequently there is a greater
associated with larger firms, more concentrated ownership, often emphasis in SHRM terms on labor interests such as training for high
in family firms, long term debt and so-called ‘thin’ equity markets, skill levels and job security (Gospel & Pendleton, 2003), and on
loans that provide equity rights, loans between corporations, and investment in social capital as a source of innovation (Cappelli,
under-developed markets for corporate control (Gospel & Singh, Singh, and Useem, 2010).
Pendleton, 2013; Mayer, 2014). Volkswagen in Germany provides However, stakeholder theory can be said to contradict a basic
a good illustration of this model, with the Porsche family owning premise of a market economy, whereby it is not clear which
nearly 51% of voting rights and the State of Lower Saxony holding ‘stakeholder’ is to provide the legitimate objective for the organi-
20% (Volkwagen Shareholder Structure, 2015). zation to pursue (Mansell, 2013). It is also unrealistic to expect that
Cultural-cognitive system. This is reflected in executive values all interests of all stakeholders can be equally represented simul-
that are intended to express trustworthiness through the expres- taneously (Gioia, 1999). Similarly, taking into account multiple
sion of benevolence and integrity, as well as competence (Mayer, voices can lead to a lack of flexibility, with decision-making process
Davis, & Schoorman, 2007), whilst being other-regarding rather taking considerably longer than in the more short-term share-
than self-regarding (Adams et al., 2011). The system recognizes the holder-driven corporate governance model.
value of distributed leadership and the vital role of followership in
constructing effective leadership (Thorpe, Gold, and Lawler, 2011). (4) Employee-Ownership
It also focuses on a moral and strategic case for employment di-
versity and the exercise of corporate social responsibility (Noland & Institutional logics. Our second multi-logic hybrid model of
Phillips, 2010). The nature of the cultural-cognitive system in based corporate governance is employee-ownership. This model has been
on pluralist values (Fox, 1974), which accords legitimacy to con- in existence in modern form since the 1970s in many developed
flicting interests and recognizes the need for managers to balance economies, often promoted by governments seeking to align
these interests to maintain a dynamic long-term stability in the employee (agents) and owner (principals) interests (Hansmann,
firm. 1996; Kaarsemaker et al., 2010). Lampel et al. (2014) argue that
SHRM approach. Such a system is consistent with a high- employee-ownership has been garnering greater attention because
commitment-collaborative SHRM approach, in which SHRM of its financial resilience to economic shocks such as the global
structures, processes and actor agency similarly reflect democratic financial crisis. They attribute such resilience to the mode of
principles of equality, co-determination and involvement of all governance, characterized by employee involvement and being
employees, an inclusive definition of talent, and a regard for long- able to take longer-term time horizons following input and funding
term sustainability and employment. The high commitment/ from employees. Since most employee-owned businesses operate
collaborative SHRM model is based on the relational aspects of the in liberal market economies, they are, however, also influenced by a
employment contract, such as those that stress employee partici- capitalist market logic that, from time to time, will come to the fore
pation and voice (Boxall & Macky, 2009). The underlying theory is in shaping organizational decisions and actions that may not al-
that employee involvement secures employee co-operation and ways be compatible with the dominant democratic logic.
commitment (Farndale, Van Ruiten, Kelliher, and Hope Hailey, Core corporate governance logics. Employee-owned firms are
2011). In turn, this involvement improves firm-level outcomes, likely to be influenced by a corporate logic that embodies mana-
but only if the benefits from this form of SHRM accrue to both the gerial capitalism (Lan & Heracleous, 2010), which focuses on
organization and to most, if not all, employees (Konzelmann et al., managers' concerns with growth and the market position of the
2006). firm (Thornton et al., 2012). The underlying aim, however, is to
Pluralist theory puts more emphasis on worker representation balance the long-term interests of diverse stakeholders by allowing
in governance, employee participation, long-term investments in employees to participate in financial and socio-psychological
employee development and well-being, and investments in social ownership but not necessarily overall control.
as well as human capital. There is still a requirement for financial Inter-organizational relationships. Employee ownership is not
returns to investors, but at the same time, there is a perceived need a simple concept and may embrace a range of options and gover-
to meet concurrent social demands from social partners. In this nance systems. These include: social ownership, worker/producer
context, labor unions are much more active in the SHRM arena, and co-operatives, direct ownership, and employee stock option plans,
are seen as legitimate partners for collective bargaining and valued the last of which has been heavily promoted in the U.S. and U.K.
members of company boards. We might refer to the model of SHRM (Pierce et al., 1991). A common theme is that a significant number of
as having a balance of economic and social demands, similar to the employees, usually more than fifty percent, are entitled to have a
enlightened shareholder value model. However, this latter model is capital stake in the organization, and to have a heightened level of
driven by a strong underlying profit motive, whereas the commu- voice and participation (in some form) in the decision-making in
nitarian stakeholder model is motivated and enacted more through the firm (Kaarsemaker & Poutsma, 2006). A corollary of this is that
democratic and humanitarian beliefs in the rights of employees to the governance structure is arranged so that employees receive
be treated as valuable and resourceful humans, rather than human enhanced communication and information and are seen as co-
resources (Jackson, 2002; Paauwe, 2004). Thus, Clegg, Courpasson owners, thus embracing a democratic logic as dominant.
and Phillips (2006) label this approach as a developmental ideol- Cultural-cognitive system. This is typically based on a pluralist
ogy that seeks to generate a high trust dynamic between boards frame of reference, in which competing interests are seen as a
and employees (Fox, 1974). natural state of affairs but are sufficiently compatible to be recon-
Challenges. Increasingly, stakeholder theory is being proposed ciled by employee ownership of stock and social-psychological
as a realistic alternative to the shareholder value model, especially ownership. Employee-owned businesses are seen to have strong
following the global financial crisis, and the growing importance of effects on staff attitudes, promoting greater participation and
government in key industries that are vital to economies' national through this encouraging psychological ownership, including
interests (Davis, 2009b; Jensen & Sandstro € m, 2011). In stakeholder increasing employee involvement, workers' responsibilities for
economies, focusing on longer-term returns is acceptable due to their jobs, and levels of trust between senior managers and em-
investors having a long-term relationship with the firm, so striking ployees (Lampel et al., 2014).
30 G. Martin et al. / European Management Journal 34 (2016) 22e35

SHRM approach. Studies have shown that employee-ownership To-date, the Anglo-Saxon dominated SHRM literature has
involves a move towards greater adoption of high commitment/ clearly emphasized how SHRM supports the agency-led share-
collaborative HRM practices. For example, Pendleton and Robinson holder value archetype of corporate governance and the principles
(2011) showed that employee share ownership plans have a posi- of agency theory. The challenges of such a model are, however,
tive relationship with employer-provided training and develop- clear, whereby significant financing decisions largely based on
ment. In worker-controlled organizations, Bacon, Wright, and shareholder whims heavily influence SHRM activities (Aoki &
Demina (2004) showed, in a sample of 140 U.K. buy-outs Jackson, 2008; Appelbaum & Batt, 2014) and trust in the organi-
completed between 1994 and 1997, that employee buy-outs zation (Appelbaum, Batt and Clark, 2013). Exclusive talent man-
caused increased incidence of high commitment/collaborative agement produces an imbalance between strategically valuable and
HRM practices. Such practices included: a more strategic approach non-valuable employees, whilst people management is about
to HRM; labor unions recognized for collective bargaining both short-term exploitation of the human resources to the benefit of
before and after the buy-out; the protection of employment levels; the firm, largely guided by compliance demands (Wright &
a greater number of methods used by management to communi- MacMahan, 2011).
cate with employees; harmonized terms and conditions; annual Such challenges combined with recent events have produced an
appraisals alongside merit pay and employee share-ownership; increased interest in a strategy-led enlightened shareholder value
and employee involvement in quality circles and teams. In promi- archetype, recognizing the claims and interests of employees,
nent cases of employee-ownership, including Mondragon, John which has led to a greater focus on a high commitment/collabo-
Lewis and Lafour (Guy, 2009), these clearly show how an approach rative SHRM approach (Appelbaum, 2013; Gooderham et al., 2008).
to employee participation and involvement is supported by core Nevertheless critics (e.g. Delbridge & Keenoy, 2010; Fox, 1974;
developmental, progressive HRM practices. Keenoy, 1999; Van Buren et al., 2011) have variously pointed to
Challenges. The core of employee-ownership may become the the sophistry of such theory, especially its inability to restore
subject of dispute resulting from multiple expectations and declining levels of trust in corporations and a genuine employee-
inconsistent practices (Besharov & Smith, 2014). Thus, the gover- focus, and the failure to bring back ethics into management. We
nance challenge focuses on devising a structure that allows em- have also highlighted the complexity of managing the tensions of
ployees to participate in financial and social-psychological such a model from a competing logics perspective. Whilst rejecting
ownership, while allowing managers sufficient control and flexi- the pluralist, legitimacy-led stakeholder model, its one-size-fits-all
bility to meet the demands associated with operating in a market nature fails to take into account some of the major contingencies
economy and the pursuit of growth. Such problems are influenced facing corporations operating across diverse business systems
by the complexity of inter-organizational relationships and the (Gospel & Pendleton, 2013) and, from a critical HRM perspective, its
nature of financing of employee-owned businesses. Such arrange- ideological nature (Delbridge & Keenoy, 2010).
ments can vary from situations in which employees own all shares, The communitarian stakeholder archetype attempts to redress
where employees buy out the business, or where owners gift the the balance between control and commitment, giving greater pri-
business to employees through a trust fund, to those in which ority to the interests of a broad range of stakeholders. In so doing, it
employees have a minority stake, such as the majority of ESOP also creates its own set of challenges, namely the ability to actually
schemes. address this variety of interests sufficiently for all stakeholders to
In addition, alongside the high commitment/collaborative remain committed and have their full interests represented. Finally,
SHRM approach, there is also expected to be evidence of the the employee-ownership archetype again highlights the com-
employee efficiency practices as seen in the control/calculative plexities of hybrid organizations: balancing interests of a specific
approach. As noted, the employee-owned business archetype is group of stakeholdersdemployee-ownersdwith control issues for
influenced by a market logic in which employees themselves are management. We argue that a combination of both high-
looking for financial returns on their investment. We might commitment and calculative SHRM are required to strike this
therefore expect such firms to have practices in place such as balance.
performance-based pay, and other quantifiable elements in In summary, we argue that there are a number of fundamental
contractual agreements. corporate governance challenges related to SHRM that cut across
each of the archetypes presented here. First, at the societal level,
3. Discussion institutional logics theorists point to tensions between a market
and democratic logic, and in achieving a balance between the two.
We have argued that the approaches to, and enactment of SHRM Second, at the organization level, the cultural-cognitive systems
within an organization is heavily conditioned by the ways in which again switch between unitarist and pluralist goals, supporting short
corporate governance is conceived and enacted. We have also or long-term aims. Finally, the SHRM approach adopted takes on
proposed that these four governance-SHRM relationships are either a control/calculative role, or one focused on high commit-
deeply embedded in societal and organizational level institutional ment and collaboration. The result of these dichotomies raises is-
logics (Almandoz, 2014; Friedland & Alford, 1991; Thornton et al., sues such as an inherent lack of independence of boards, and a lack
2012) triggering institutional complementarities (Aoki & Jackson, of trust between management and employees. Thus, the challenges
2008; Hall & Soskice, 2001). To make our case, we have reasoned posed by all four corporate governance archetypes concerning
from a definition of corporate governance as the arrangements put whose interests should be paramount in ownership and how to
in place to control the generation, protection, and distribution of balance of the control with the commitment of stakeholders, can be
the wealth invested in a firm, which identifies the rights and in- seen as corporate sustainability issues. Therefore, recourse to this
terests of different actors involved, as well as the accountabilities of literature may help to explore potential solutions, which we now
boards and senior executives. As such, we have developed a typo- turn to as a potential contribution to normative theory in the
logical framework comprising four ideal types of corporate gover- governance/SHRM literature.
nance derived from the literature, each having major implications Sustainability in its broadest sense is fast becoming a societal
for managing employees to the benefit of shareholders or a broader logic that is beginning to shape corporate governance (Dunphy,
stakeholder group. However, we have also highlighted the chal- Griffths, & Benn, 2014; Lo & Sheu, 2007). By this, we mean sus-
lenges inherent in these archetypes, which we now address. tainability is a perspective on the long-term survival and prosperity
 G. Martin et al. / European Management Journal 34 (2016) 22e35 31

of societies and, indeed, the planet (Dunphy et al., 2014). This so- model is typically based on a pluralist frame of reference that
cietal logic is reflected in the governance regimes of some large recognizes the legitimate interests of customers, employees, short
corporations, such as GE, Honda and Toyota, in what has become and long-term investors, suppliers and the communities that are
known as corporate sustainability, which integrates the short and affected by the firms operations, both now and in the future. For
long-term perspectives of firms (Dyllick & Hockerts, 2002). This example, Linnenluecke and Griffiths (2010) have drawn on a
extends beyond a simple market/democratic dichotomy, intro- competing values framework and Scott and Davis (2006) open
ducing other economic, social and environmental sustainability systems model to argue that organizations that are externally-
logics. focused and employ flexible structures to coordinate and control
This logic also extends beyond the sometimes instrumentalist their activities and people are more likely to emphasize social and
and short-term case for firms to adopt socially responsible policies environmental sustainability in their pursuit of corporate sustain-
as a means of securing legitimacy or strategic differentiation ability. However, they acknowledge that an integrationist
(Aguinas & Glavas, 2012; Doh, Howton, Howton and Seagal, 2010). perspective on culture (Martin, 2002), which assumes a firm-level
It does so by focusing on actions in the three domains of sustai- consensus on shared values, beliefs and assumptions, supported by
nabilitydeconomic, social and environmental. This corporate sus- strong leadership is not always possible or, indeed, productive in all
tainability model has recently been examined in the governance contexts. Instead, they propose that a differentiation perspective on
literature to propose ways in which governance and ownership culture, which acknowledges the co-existence of different sub-
structures might be changed to meet the aims of sustainable or- cultures in which employees may hold different attitudes to
ganizations. To an extent, the decision of US firms such as Apple, corporate sustainability, may be more realistic and lead to greater
Pfizer and AT & T in 2015 to give long term shareholders a greater innovation in the long run. Such an approach is supported by
say in boardroom appointments through so-called proxy access is Besharov and Smith (2014) alignment notion inherent in hybrid
step in this direction. Mayer (2014) goes further by arguing that organizations.
independent management boards are an essential element of sus- If firms are able to adopt aspects of corporate sustainability
tainable organizations or what he calls ‘the trust firm’, whose thinking we propose that this may form the basis of a new approach
principal objective is to balance the diverse interests of present and to SHRM, which aligns the tensions between a firms' economic,
future stakeholders. However, board independence and focus on social and environmental aims, its modes of financing (especially
the long term can only be guaranteed if it is accompanied by the the balance between long and short-term investors), and the needs
establishment of an elected board of trustees, whose principal to balance an integrationistist-differentiation perspectives on
function is to exercise governance over the commitment of the firm organizational culture (see Fig. 1). It requires a balancing act in
to a sustainable future by establishing a set of corporate values and which firms adopt SHRM policies that reflect the needs of a firm to
shaping a culture consistent with corporate sustainability. Such be simultaneously legitimate and different with multiple stake-
boards of trustees would be elected by shareholders to select di- holders (Bitektine, 2011; Deephouse & Suchman, 2008; Paauwe,
rectors and oversee the performance of management boards that 2004). By legitimate, we are referring to the generalized percep-
have to determine the balance between commitment and control tion of an organization by multiple stakeholders that its actions and
objectives. cultural attributes are desirable or appropriate from the perspective
In a similar vein, a team production legal theory of corporate of a society's socially constructed system of norms, values, beliefs
governance (Blair & Stout, 1999), asserts the need for strong, in- and definitions (Suchman, 1995). Firms in a market-driven econ-
dependent boards to govern not only in the interests of share- omy, however, also require to be differentiated from others because
holders but to act as ‘mediating hierarchies’ to maximize the they are competitive rivals for resources and their ranking in
interests of selected stakeholdersdinternal and externaldthat relation to others matters to their short and long-term success.
create long-term value, risk their human and social capital in- Thus, they have to seek ways of claiming symbolic or material
vestments, and have the capacity to provide strategically important distinctiveness or uniqueness whilst remaining legitimate
information (Lan & Heracleous, 2010). Team production theorists (Bitektine, 2011; Doh, Howton, Howton, & Siegel, 2010).
advocate that boards should be more representative of such In some respects and in certain contexts, the corporate sus-
stakeholders and draw on their expertise, especially those em- tainability SHRM approaches will resemble those of the hybrid
ployees, managers and outsiders, who “bring the firm's know-how enlightened shareholder value and employee-ownership arche-
to the table” (Kaufmann & Englander, 2005: 9). This also includes types in balancing control and commitment/collaboration. How-
those who incur above average risk to their human and financial ever, we propose that there are also legitimacy issues that also need
investments, which involves developing partnerships through incorporating, building an internal and external form of moral
mutual gain agreements on economic, social and environmental legitimacy with past, present and future stakeholders (Bitektine,
issues with key groups of labor (Lucio & Stuart, 2005). 2011). Based on these ideas on organizational legitimacy and
A corporate logic (Gospel & Pendleton, 2003; Thornton et al., Mayer (2014), and extending the ideas of Shen and Benson (2014)
2012), which favors independent boards and the rights of man- and Wright et al. (2014), we propose here that the high-
agers to set firm-level strategy, is advocated and can play an legitimacy practices associated with such an approach to SHRM
important check on the excesses that sometimes accompany mar- might include the following ten elements: (1) focus on creating a
ket and democratic-participative logics (Lan & Heracleous, 2010). high trust dynamic among all levels/types of employment; (2)
For example, the enlightened shareholder value thinking raises the sustainability, ethics and diversity as key principles of the man-
need for boards to govern on a more sustainable basis, and address agement of legitimacy; (3) training for high skill levels, including
criticisms of the egoist ethical basis of agency theory in the hope of environmental, ethical and diversity issues; (4) a focus on job
restoring declining levels of trust in modern corporations (Gillespie sustainable employment practices; (5) investment in social capital
& Dietz, 2009). We draw heavily on the importance of independent as a source of innovation; (6) providing for employee voice and
boards and executives in emphasizing the potential contribution of employee involvement in a corporate sustainability agenda; (7)
corporate sustainability to ensure that current and future stake- employee share ownership linked to long-term commitment to
holders' interests are taken into account, including those of em- firm and market value; (8) employer branding focused on sus-
ployees, customers and society at large (Mayer, 2014). tainability, ethics and diversity; (9) preventing the negative impact
The culturalecognitive system in the corporate sustainability of employee actions on environment, ethics and diversity, and
32 G. Martin et al. / European Management Journal 34 (2016) 22e35

supporting implementation of environment-friendly systems; and which these archetypes exist in practice e the empirical question.
(10) performance appraisal and rewards linked to sustainability, Second, we may also want to understand the potential for senior
ethics and diversity. managers and professionals, including HR professionals, whose
values and morals are inconsistent with a particular archetype, to
4. Conclusions lead rather than follow archetypal change (Farndale et al., 2011).
Third, researchers may wish to explore alternative corporate
The preceding discussion can be summarized according to the governance archetypes. We have suggested a normative overlaying
choices of key actors in firms in balancing economic and social of corporate sustainability interventions across all archetypes to
legitimacy aims, and the claims and rent-seeking of single interest address some of the challenges that they pose. However, there may
groups such as those of shareholders or powerful executives versus also be other archetypes that already address these issues. Thus, for
stakeholders and the wider society in which organizations exist. example, focusing on the importance of national business systems
From a theoretical perspective, to explain this balancing act, we and different national legal frameworks regarding incorporation as
have drawn on institutional logics and institutional complemen- key influences on corporate governance (Gospel and Pendleton,
tarities to explore corporations' need for legitimacy. We have also 2005), Aguilera et al. (2008) propose a context-dependency
drawn on modern theories of bureaucracy and hybridization model of governance: what can we learn from Chinese state capi-
(Battilana & Lee, 2014; Besharov & Smith, 2014; Courpasson & talism and its governance approaches? To what extent will the
Clegg, 2006; Pache & Santos, 2013), which are aligned with these global financial crisis and sovereign debt crisis influence the
corporate governance theories, to explain the nature of SHRM communitarian stakeholder archetype evident in the Eurozone,
approaches. already under strain from global forces of competition?
By building archetypes, we have assumed a level of coherence Fourth, there is the managerialist model (Lan & Heracleous,
within each archetype that “comes from the consistent relationship 2010), which is both a description of how corporate governance
between an interpretive scheme and an organization's structure often works in practice (i.e., boards being merely figureheads rub-
and systems” (Greenwood & Hinings, 1993: 1056). Two of the ar- ber stamping powerful CEO decisions), and a prescription proposed
chetypes are well-known, and can be seen as embracing a single by some legal theorists of how it should work in the future (i.e. by
dominant logic central to the organizations' functioning, with devising a structure that provides managers with the maximum
others peripheral at best (Besharov & Smith, 2014): the agency-led amount of discretion for innovation, risk-taking, and flexibility).
shareholder value archetype linked to the traditional control/cal- The descriptive version of such a model has been severely critiqued
culative SHRM approach, and the communitarian stakeholder as being associated with the rise of the managerialist ‘caste’ (Locke
archetype aligned with the high commitment/collaborative SHRM & Spender, 2011), governance failure, financial crisis, and spiraling
approach. However, our two proposed additional archetypes have executive pay, especially in situations where regulation has been
multiple logics that vie for attention in relation to the organiza- weak (Varoufakis, 2011). It is also associated with a view of director
tions' functioning. The strategy-led enlightened shareholder value selection as a socialized rather than rational economic process,
archetype attempts to deal with tensions created by the which emphasizes biases and other social processes rather than
differentiation-legitimacy problems faced by corporations (e.g. attempts to meet the governance and shareholder needs of firms
Schultz, 2012). As such it is a hybrid, embracing Courpasson (2000) (Withers et al., 2012).
concept of soft bureaucracy and soft power, and the notion of so- These are exactly the situations that agency theory, shareholder
phisticated SHRM (Guest, 2001). The employee-ownership arche- value, and stakeholder theory have been developed to counteract.
type is also a hybrid, drawing on democratic and market logics. Yet the managerialist model does have its proponents, especially if
These hybrid models are tension-laden with a confusion of multiple regulatory constraints can be built in to curb excessive managerial
logics, which if not managed effectively, can lead to system power. To some extent, team production theory is an attempt to
breakdown and demands for change (Besharov & Smith, 2014; deal with this issue. Thus, an important line of research could focus
Pache & Santos, 2013). on the extent to which SHRM can exercise a rational and moral
Our integrative framework is typological, which offers concep- influence in dealing with these problems of unchecked mana-
tually and empirically derived archetypes, answering Snow and gerialism by influencing board selection, development and values.
Ketchen (2014) call for new typologies on governance structures The corporate sustainability idea of independent management
and Delbridge and Fiss (2013) call for typologies in organizational boards takes this argument one step further. Additionally, are there
studies. As Doty and Glick (1994) note, in developing theory from people in senior HR positions who would be credible and skilled
typologies, three important steps must be taken. First, the con- enough to exercise such influence, whether or not formally
structs (archetypes) must be identified and incorporate multiple appointed as board members? A related question concerns the role
dimensions. Second, relationships among the multiple dimensions of diversity in boards and the extent to which SHRM policies on
within each archetype must be specified (elemental categories). diversity have impacted board selection, values and practice: does
Third, is the requirement of falsifiability; this involves the ability to this provide a further check on self-serving managerial power?
measure the deviation between actual organizations and the ar- Finally, future research might also theorize about the kinds of
chetypes, and to use this deviation to predict how organizations institutional work or internal governance (Hansmann, 1996) un-
and individuals behave. This final step of falsifiability requires dertaken by senior HR managers that reproduces or transforms the
empirical research to test the integrative framework developed corporate governance structures which impinge on SHRM (Kraatz
here. & Block, 2008; Lawrence, Suddaby, and Leca, 2009; Suddaby &
We believe we have provided a starting point for how SHRM Greenwood, 2005), and how they are cast as actors in governance
researchers might understand the implications of different corpo- systems (Delbridge & Edwards, 2013). This would move the static
rate governance models, which are embedded in societal logics, for representation of archetypes represented here to a more dynamic
their field of study and to apply this in empirical research. The level. At the structural level, there is also the opportunity to explore
descriptions provided have, however, been at a strategic level, how a more dynamic perspective of SHRM strategies and practices
rather than exploring detailed HRM practices. Therefore, there are may potentially reinforce or change the institutions of corporate
multiple lines of research that may stem from this initial review. governance at societal and organizational field level. For example,
First, researchers may wish to understand more about the extent to just as the shareholder value model has implications for talent
 G. Martin et al. / European Management Journal 34 (2016) 22e35 33

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