The Levers of Control in the Boardroom

Abstract

Purpose: The paper challenges agency and stewardship theories’ straw person conceptions of human behaviour and discusses how the board of directors can use accounting and control systems to effectively moderate a realistic model of the CEO’s behaviour.

Design/methodology/approach: The paper uses a pragmatic approach in reconciling agency and stewardship theory.

Findings: As well as a framework for implementing strategy, Robert Simons’ levers of control can be used to regulate the behaviour of the CEO. Beliefs and interactive control systems encourage pro-organisational behaviour, whereas boundary and diagnostic control systems constrain self-interested (or opportunistic) behaviour.

Originality/value: Assuming people are opportunistic leads to accounting and control systems which encourage opportunistic behaviour and discourage pro-organisational behaviour. Assuming people are pro-organisational leads to accounting and control systems which an opportunistic CEO can exploit. This paper shows how, theoretically, organisations can employ the levers of control to resolve this paradox.