Exit, voice, loyalty, and … disobedience: When a CEO opposes his principal

• Published date: 01 March 2021
• Author: Cyrille Sardais,Martin Blom,Josée Lortie
• Date: 01 March 2021
• DOI: http://doi.org/10.1111/corg.12352

ORIGINAL ARTICLE

Exit, voice, loyalty, and …disobedience: When a CEO opposes

his principal

Cyrille Sardais

1

| Martin Blom

2

| Josée Lortie

1

1

Department of Management, HEC Montréal,

Montreal, Quebec, Canada

2

Department of Business Administration, Lund

University, Lund, Sweden

Correspondence

Cyrille Sardais, Department of Management,

HEC Montréal, Montreal, H3T 2A7 QC,

Canada.

Email: cyrille.sardais@hec.ca

Abstract

Research Question/Issue: On the basis of a dynamic interrelation between the

assumptions of agency theory and stewardship theory, this study seeks to make

sense of disobedience at the highest corporate level. Departing from a processual

view in order to better understand how loyalty plays a critical role in the relationships

between a CEO and his/her principal, we propose a conceptualization of the options

open to a top executive in disagreement with the principal. We view the relationship

from “below”by primarily taking the CEO's perspective, resulting in a more complex

view on how “duty”is perceived and acted upon by the CEO.

Research Findings/Insights: We use the rich and abundant archives left behind by

the CEO of a large French firm. We had access to over 50,000 pages of documents

that allowed us to follow the CEO and his relationships with his principals, at times

from day to day. We found two competing loyalties (loyalty to the principal—agency

theory—and loyalty to the organization—stewardship theory) that gradually become

independent of each other, triggering different responses in terms of “exits”from the

relationship with the principal. This particular dynamic in which the CEO acted as a

guardian of the overall purpose of the organization enabled the emergence, develop-

ment, and consolidation of a disobedience process that over the years contributed to

the well-being of his firm as well as to the social changes occurring in France at

that time.

Theoretical/Academic Implications: This longitudinal study extends the corporate

governance literature by offering a process-oriented approach, quite rare in this

stream of research, and a more dynamic view of how agency theory and stewardship

theory interact. Then, by providing empirical support for the idea that the disobedi-

ence process can protect and allow an organization to first evolve positively over

time and eventually contribute to social improvements, our study proposes a form of

responsible stewardship.

Practitioner/Policy Implications: This study offers important insights for executives,

directors, and shareholders on how to make sense of, and in the long run potentially

benefit from, disobedience at the highest corporate levels.

Received: 29 January 2019 Revised: 21 September 2020 Accepted: 10 October 2020

DOI: 10.1111/corg.12352

188 © 2020 John Wiley & Sons Ltd Corp Govern Int Rev. 2021;29:188–207.wileyonlinelibrary.com/journal/corg

KEYWORDS

Corporate governance, agency theory, chief executive officers, government ownership,

stewardship theory

1|INTRODUCTION

“Cover this bosom that I dare not see.”–Molière,

“Tartuffe”

Compliance is a widely used concept when describing the

role and dynamics of corporate governance. Its antithesis—

disobedience—is much less talked about and scientifically explored. As

surprising as it might seem, to our knowledge, no scientific article

explicitly mentioning disobedience has appeared in a management

journal, whether in the title, the key words, or even in the abstract,

with only two exceptions: Stanley Milgraqm's (1965) article and

Bidhan Lalit Parmar's (2017) article which returns to Milgram's data.

Yet there is no doubt that disobedience exists within organizations.

The concept can readily be found, especially in law, philosophy, and

political science journals. But in the organization, management, and

administration literature, even in critical management studies (CMS),

there is nothing—not a single study of the phenomenon of

organizational disobedience exists (although related topics such as

organizational struggle and resistance have been targeted; see,

e.g., Courpasson, 2011; Courpasson, Dany, & Clegg, 2012; Fleming &

Spicer, 2007). Thomas Klikauer (2014, p. 950) raises this issue by

pointing out that “organizations remain factual expressions of

obedience to managerial authority.”

And although disobedience in organizations—or rather the risk

of it—is a fundamental underlying assumption in much of the

corporate governance literature influenced by agency theory

(e.g., Eisenhardt, 1989; Fama & Jensen, 1983; Jensen &

Meckling, 1976), it is rarely empirically explored (see Garg &

Eisenhardt, 2017 for a notable exception) but treated as an abstract

taken-for-granted assumption of managerial behavior (cf. Davies,

Schoorman, & Donaldson, 1997). Oversight of the CEO is a funda-

mental activity explored in agency theory, but the literature tends to

take the perspective of corporate boards, and one of their major roles

is to ensure CEO compliance (Cornforth, 2003). However, in a more

recent study, Garg and Eisenhardt (2017) have begun to explore this

issue from the perspective of the CEO rather than that of the board.

These authors have clearly put the spotlight on the active role of ven-

ture CEOs in the strategy-making process involving a neutral, or even

harmful, board. More specifically, they showed how the power of

CEOs who are well aligned with organizational goals allows them to

proactively act to convince their board about the way to keep the

organization moving ahead. That being said, when a CEO is concerned

by board directives that prevent him/her from implementing a viable

strategy and ultimately from acting responsibly for the good of the

organization, what are the alternatives that can allow for a way to

achieve this if the parties remain in disagreement? The objective of

this paper is to demonstrate that disobedience can be such an alterna-

tive and can allow an organization to evolve positively over time.

Accordingly, we ask the following research question: how does

disagreement with board directives trigger a disobedience process on

the CEO's part?

However, we are forced to note that studying disobedience in an

organization certainly presents difficulties, as Courpasson, Dany, and

Martí (2016) already recognized when it came to productive resis-

tance. The “Uses of the Past”whose relevance was recently

highlighted in management and organization studies (Mordhorst,

Popp, Suddaby, & Wadhwani, 2016) lets us bypass this thorny issue.

In this study, we use the rich and abundant archives covering the

years 1945–1955 left behind by the CEO of a large French firm. We

had access to over 50,000 pages of documents, which allowed us to

follow, at times from day to day, the evolution of this executive and

his relationships with the company's sole shareholder (the State) and

its representatives. This access allowed us to identify the different

critical moments when he threatened to disobey or even actually

disobeyed, directly or indirectly, for the good of the organization.

Because disobedience takes place in a context in which the actor

is not satisfied with the situation, in this paper, we use Albert

Hirschman's framework, “exit, voice, loyalty”(Hirschman, 1970, 1974,

1981, 1992, 1993): on some level, faced with an order that, if

executed, can cause harm to the organization, the actor may express

his/her reservations (voice), resign (exit), or accept (compliance). And

of course, he/she may also disobey, which, as we will argue, is a fourth

possible way to respond to problematic situations.

Considering the dynamic interrelations between the assumptions

of agency theory and stewardship theory (Chrisman, 2019;

Grundei, 2008; Hernandez, 2012; Van Puyvelde, Caers, Du Bois, &

Jegers, 2012) and inspired by the work of Garg and Eisenhardt (2017)

that clearly spotlights the power of CEOs in boards' processes, we

propose disobedience as a productive answer at the highest corporate

level in situations where a top executive is in disagreement with

shareholders (board, superiors, etc.) but motivated by a sincere desire

to serve the organization.

Our article offers three main contributions. First, we shed some

light on the phenomenon of (productive) disobedience in organiza-

tions; more specifically, we show how it develops over a long period

of time (over a decade in our case). In so doing, we fill a serious gap in

organizational and management literature, especially because the

processual approach we use allows us to demonstrate how the

construction of disobedience over time not only transforms the orga-

nization but also enables a significant social innovation in a larger

political and social context. Last but not least, by introducing the

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