Corrective Governance in the Boardroom: A Negotiated Order Perspective

We leverage negotiated order theory to develop a model of board corrective governance concerning CEO leadership. We extend research on corporate governance to theorize that a board’s response to concerns about CEO leadership is a dynamic process of social order disruption and negotiation. When a disruption of an existing social order occurs, the CEO–board relationship is renegotiated by the board and, potentially, the CEO. We identify two critical relational dimensions—board affiliation with the CEO and board dependence on the CEO—that create four distinct negotiation conditions. Our model delineates the manner in which these negotiation conditions, in conjunction with the negotiation approach (cooperative or competitive) of the board and the CEO, give rise to a spectrum of first-order (i.e., retention, discipline, empowerment, dismissal) and second-order (i.e., changes to board dependence and affiliation) outcomes that influence the CEO–board relationship and subsequent corrective governance episodes. Our theoretical framework has important implications for governance research and practice, underscoring the need to view corrective governance decisions as interrelated negotiated outcomes shaped by evolving relational dynamics.