A Discourse Theoretical Approach to the Board's Strategic Tasks in Small Danish Financial Institutions. Sparring or Inspection?

Transkript

1 A Discourse Theoretical Approach to the Board's Strategic Tasks in Small Danish Financial Institutions Sparring or Inspection? Annesofie Bjerre Cand.merc. Strategy, Organisation & Leadership Copenhagen Business School February 2011 Supervisor: Jakob Ravn, CBS Evaluation Characters/normal pages: / 79,8

2 Preface This thesis marks the end of my master degree in Strategy, Organisation & Leadership at Copenhagen Business School. I would like to thank Middelfart Savings Bank and Merkur Cooperative bank, their employees, chief executives and chairmen of their boards for their interviews and providing me with an incredible interesting empirical foundation for my thesis. I would also like to thank my advisor Jakob Ravn from CBS Evaluation for inspiration, ideas and constructive comments when most needed. I would also like to thank my friends and family, who have supported me through this process - your good advise, food, kisses, push and grammar check have made it possible to submit the thesis on time. Copenhagen, February 2011 Annesofie Bjerre

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4 Resumé Hvad er bestyrelsens opgave, når det gælder implementering af organisationens strategier? Hvordan ser forholdet mellem bestyrelsen og organisationen ud i dag? Svarerne til disse spørgsmål i forhold til pengeinstitutterne Middelfart Sparekasse og Merkur Andelskasse leder jeg efter i dette speciale. Med adgang til de to danske financielle pengeinstitutter spørger jeg indtil organisationernes strategiske arbejde og hvordan relationen mellem organisation og bestyrelse opleves af organisationens medlemmer og bestyrelsesformand. Formålet er at undersøge hvilke forståelser, der er i spil i forbindelse med bankbestyrelsers strategiske opgaver i mindre danske finansielle pengeinstitutter set i relation til den seneste financielle krise. I 2001 lancerede den danske regering Danmark s svar på de internationale Corporate Governance anbefalinger - også kendt som Nørby-rapporten. Anbefalingerne blev starten til en mere åben debat om bestyrelsens rolle i forbindelse med organisationens strategiske opgaver og mål. Bestyrelsen skulle være strategiske sparringspartnere til direktionen og tage aktiv del i organisationens værdiskabelse. Efter den seneste finanskrise er EU-kommissionen i 2010 kommet på banen og kræver fastere retningslinier og større kontrol med og af de financielle pengeinstitutters bestyrelser. Nu må strategi, værdi og sparring bøje for behovet af øget kontrol mellem bestyrelsen og direktionen af organisationen, hvis vi skal sikre os mod fremtidens finanskriser, melder EU-kommissionen. En forandring, der påny åbner for indholdet af bestyrelsens strategiske opgaver. Men et blik på den ønskede norm fra øverste myndighed, kigger jeg også nærmere på de enkelte organisationsmedlemmers forståelser af deres bestyrelses opgaver i Middelfart Sparekasse og Merkur Andelskasse. Forståelserne tydeliggøre, hvilke forventninger og krav, der er til bestyrelserens strategiske arbejde. De fundne forståelser kan være med til at sætte nye retninger for bestyrelsens strategiske arbejde. Dette speciale tyder på, at der er flere (og modstridende) forståelser i spil, når det gælder definitionen af bestyrelsens strategiske opgaver. Det kan betyde nye begrænsninger og nye muligheder for bankbestyrelsers fremtidige arbejde i deres organisation.

5 Table of contents Introduction 1 Problem area 3 Research question 4 The purpose of this thesis 4 The limitations of this thesis 5 The structure of analyses 6 Definitions and theoretical assumptions 7 Definitions 7 Corporate Governance 7 Strategic tasks 7 Internal and external actors 8 Theory of Choice 8 Limitation and critical reflection of my choice in theories 9 Review of new-institutionalism 10 What is an institution? 10 Roles and adaptation 11 Norms creates recognition 11 Review of discourse theory 12 What is a discourse? 13 Hegemony and antagonism 14 Dislocation and sedimentation 15 Considerations for an analytical strategy 16 A second-order observation 16 Blind spots 16 My analytical strategy 17 The empirical data 22 Empirical choice 22 The interviews 23 Choice of interviewees 23 Content of interviews 23 Anonymity 24 Comparison and induction 24 Generalisation 25 The institutional field of Corporate Governance 26 A theoretical development of Corporate Governance 26 A managerial definition 26 A shareholder definition 27 The theory of principal and agent 27 A stakeholder definition 28 A firm definition 29 Summary 30 From theory to recommendations 30 The institutional articulation of Corporate Governance in Denmark 31 From passive inspector to strategic sparring 33 The recent financial crisis 35

6 From strategic-sparring to a proactive inspector? 36 Summary 40 Case preface 41 Case analysis of the board's strategic tasks 43 Analysis of Middelfart 44 Articulation of the chair of the board 44 Who are the 'board-we'? 44 A sparring discourse 46 Articulation of the internal actors 46 The interview with Jens 46 Who are 'we'? 46 Who are they/the board? 47 The interview with Anne 49 Who are 'we'? 49 Who are they/the board? 50 The interview with Lise 50 How are 'we'? 50 Who are they/the board? 51 The interview with Bo 52 Who are 'we'? 52 Who are they/the board? 53 The interview with Hans Erik, chief executive 54 Who are 'we'? 54 Who are they/the board? 55 A control-discourse 57 Analysis of Merkur 58 Articulation of the chair of the board 58 Who are 'we' (the board)? 58 The sparring discourse 59 Articulation from the internal actors 59 The interview with Lene 60 Who are 'we'? 60 Who are the board? 61 The interview with Peter 61 Who are 'we'? 61 Who are the board? 62 The interview with Lars, chief executive 63 Who are 'we'? 63 Who are the board? 63 A control discourse 64 Hegemony or antagonism? 65 Similarities and differences 65 A hegemonic project? 67 A situation of antagonism? 68 Reflections 71 Conclusion 72

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8 Introduction My original idea to this thesis was to look how strategies can be implemented and lived in organisations. I have had an experience my self at my former work place, where I participated in the development of a new corporate strategy. All levels in the organisation - student workers as directors were involved in forming the new corporate strategy. The strategy was articulated as a path for a top-5 placement in 'the best place to work'-competition. The strategy was approved by the directors after a long process of discussions, employee involvement, seminars, talks over the coffee machine and much more. But when the last dot was made and the strategy approved from highest place, the experience of me and my colleagues were, that the strategy was forgotten and never implemented in the organisation. The strategy was just words on a paper, which never came into real actions making a difference in our way of working. The experience made me reflect about who do the different tasks in connection with implementation of strategies in organisations or to cut to the bone I thought about what kind of role or responsibility do the highest body of the organisation have after the approval of a new corporate strategy? A bitter thought had probably given me the idea, that 'our' strategy was stranded in a drawers of the directors after its approval. My reflection and curiosity led me in the direction of exploring the relation between the 'strategy-approvers' and the organisation and how this relation is desired to be used in connection with implementations of strategies in organisations? Then it was time to write my thesis at Copenhagen Business School and my reflections needed a more theoretical approach in my search for answers. I decided to explore the relation between the organisation and the 'strategy-approvers', which in most cases is the board 1 of the company. The strategic work within this relation is the centre of rotation in this thesis. Several studies have indicated that implementation of a strategy is a difficult task. Previously, strategy was defined as being adopted from the Ancient Greek, designed to achieve goals or to lead the army in the battlefield. Strategy was thus about oscillating between order and uncertainty (Cummings & Wilson, 2003:9). Today strategic management is defined as the art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organisation to achieve its objectives. Strategic management is an ongoing process, nothing is final and all prior actions and decisions 1 Defined ad the supreme governing body or board of directors. I will continue to use the more familiar term ʻboardʼ Introduction page 1

9 are subject to modification in the future. Contemporary strategy theories today talk about that strategy actually happens at the base of the company and emerge from the bottom-up instead of earlier understandings, where 'the men at the top' those best placed to gain overview - also made the strategies (ibid:16). This tendency made my reflect that changes in the understanding of strategic work could simultaneously also could affect the relation between the board and the organisation. The Corporate Governance framework turned out to be the opener to my further work on the relation between the board and the organisation. Corporate Governance approaches the relation between the board and the organisation as it deals with the strategic guidance of companies, the monitoring of management by the board and the board's accountability to the company and stakeholders. Institutional investors have increasingly turned their attention to Corporate Governance, boards and their work, and during the 1990's many countries saw a mushrooming of codes of best practice. A strategic dimension is often included in theses codes. In this thesis I intend to highlight the strategic task dimension of Corporate Governance. The focus on the strategic tasks of Corporate Governance will help to understand the board's arena in implementing strategies in organisations and its relation to the organisation. In my desire to explore the relation between the board and the organisation in connection to strategic work, I gained access to two small Danish financial institutions: Middelfart Savings Bank and Merkur Cooperative Bank (hereinafter referred to as Middelfart and Merkur). The two financial institutions became the empirical beginning to my thesis, which unfolds itself over the following pages. The pivotal point of my thesis is how the concrete relation between the board and the organisation played its role in the financial institutions involved here. But in connection to my two empirical cases of small Danish financial institutions, I am also curious on what influence the recent financial crisis have had on small Danish financial institutions' strategic tasks. In this thesis my starting point reflects the institutional frame of the Danish Corporate Governance recommendations. I look deeper into what meaning this institutional frame has given the small Danish financial institutions as I dive into two concrete relations between a board and an organisation. Middelfart and Merkur, respectively, give a picture of how a board and an organisation construct the board's strategic tasks today. The construction of and the communication about the board's strategic tasks shed light upon the relation between the board and the organisation in two small Danish financial institutions. By interviewing the chair of board, the chief executive, head of sections and employees within the two organisations I observe page 2 Sparring or Inspection? February 2011

10 how the relation between the board and the organisation on strategy work emerge and how the two parts in the relation of exploration see each other in certain perspectives. And turn out to set my bitterness on board's missing involvement in the organisation's strategic life to shame. Problem area Recent media attention highlights that, more than ever, boards of financial institutions are being held accountable for the organisations they govern. The judgements after the recent financial crisis have shown high profile bank collapses, accounting irregularities, remuneration excesses and inadequate disclosure practices, that have significantly affected public confidence in markets and focused the media spotlight clearly onto Corporate Governance. Many financial institutions that were commonly perceived at too big to fail did exactly that. Many have blamed the boards of the financial institutions for the recent financial crisis. Regularly these days, almost on a daily basis, we hear in the media about boards and governance issues. Generally, we read about mal-governance, cases in which boards are not doing what they are supposed to do. A blame which have started the discussion on what tasks the boards of the financial institutions actually are a discussion, which put question mark against those recommendations on Corporate Governance the board until now have lived under. The response has been a significant increase in attention to structural governance solutions, manifest in legislative interventions and best practice governance guidelines. A key aspect of this performance role is boards' involvement in strategic work of the organisation, there seem to be little consensus on the nature of this involvement, despite considerable debate in the literature and media. So, what are the board's strategic tasks today? In the centre, where all of this happens in the board room and in organisation behind them, what happens there? How does the relation between the board and the organisation looks now? The board sits in a critical position in the modern financial institutions. It has the responsibility, as well as the opportunity, to make a significant difference. The expectations within the board's organisation and the institutional frame have much to say for its failure or success. Within this thesis I will look at the interpretations of the board's strategic tasks articulated by the institutional frame of Corporate Governance and articulated in the two organisations of exploration. Introduction page 3

11 Research question Therefore the following research question is to be answered within this thesis: What interpretations are in play for the boards of small financial institutions in Denmark in relation to strategic tasks in the wake of the financial crisis? Sub-questions to be answered: What are the overall development of Corporate Governance within the Danish financial business? What interpretations are there in the boards and in the organisations, respectively, of my two financial institutions of exploration in relation to the board's strategic tasks? The purpose of this thesis The purpose of this thesis is to observe how the boards in the small Danish financial institutions make use of their understanding of Corporate Governance in the strategic work in the organisation. This thesis wish to establish a gaze for the relation between the board and its organisation in formulation, implementation and monitoring the strategic work in the smaller financial institutions. The focus on Corporate Governance will shed light upon how Corporate Governance appear as an institutional frame, which are to be created by different actors with different intentions. This perspective can contribute with a new understanding of Corporate Governance, when the 'game' is played on the organisational level and brought to this thesis as different strategic discourses. Therefore the puzzlement of the thesis is the relation between the board and the organisation in strategic work. The interpreted possibilities of the board's strategic tasks as a Corporate Governanceunderstanding to the organisation are found in the discursive field between the board and the organisation. In this perspective the interpretations open the lid to the black box of board behaviour, and thereby contribute to a different understanding of Corporate Governance recommendations on the board's strategic tasks than previously known. My work is in that relation also based on an assumption, that the normative descriptions on the board's strategic task do have a relevance, thus my further exploration make use of both institutional normative side and the individual experience to get an insight of the board's strategic tasks. page 4 Sparring or Inspection? February 2011

12 Finally, this thesis will contribute to a deeper understanding of governing mechanisms in the board's strategic work - its possibilities and potential pitfall. Those observations are important to boards of small Danish financial institutes in their evaluation of their own delivery of strategic work within their organisation. The limitations of this thesis It has of course been necessary to consider the limitations of this thesis. This thesis concentrates on the voluntary part of Danish Corporate Governance recommendations. Furthermore the thesis is looking at the strategic tasks and responsibility of the board. Discussions on the board composition, fee, and external revision are thereby not a part of this thesis. Hence, this thesis is limited to alone analyse the different interpretations of the board's strategic tasks. Further limitations will be met in chapters, where this is relevant. I am aware that my empirical exploration in the two boards from small Danish financial institutions only shows a flash of their relations in strategy work. The response needed for this thesis is not a challenge of 'facts' or the board's, managers' or employees' knowledge about the content of their board's strategic tasks, but an invitation to go deeper into the interpretations in play in Corporate Governance and in the understanding of the board's strategic tasks. Here, the strategic processes are emphasised more than strategic contents. Introduction page 5

13 The structure of analyses Figure 1: General approach to layers Individuals Groups Organisations Institutional frame Perspective Figure 2: Specific layers of analyses Interviewees The board Internal actors Middelfart Savings Bank Merkur Cooperative Bank The Danish financial business Corporate Governance page 6 Sparring or Inspection? February 2011

14 Definitions and theoretical assumptions In this section I will introduce the definitions of the thesis fundamental concepts, and following I will present my considerations in choice of theory, the interplay between the theories, limitations and a critical reflection of the use of theories. Thereupon, I present an overall review of my two theories of choice: new-institutionalism and discourse theory, respectively. The thoughts behind the theories will shortly be introduced to clear up, which theoretical ideas and conditions that will create the foundation for the analyses of an understanding different than previously known. This section is to the give the reader an insight in the universe this thesis makes its moves, when subscribing itself to exactly these two theories. Definitions Corporate Governance The term of Corporate Governance can be seen from two perspectives within this thesis. The first perspective: Corporate Governance is an entrance to the Danish financial business, and guide the analysis of the institutional frame, which Middelfart and Merkur is a part of and refers to the myriad of other organisations and institutions, which take decisions affecting others. Corporate Governance encompasses collective decisions made in the public sector, the private section, and in civil society and to be understood as the norms and rules of 'the game' (Peters,2005:117). The second perspective on Corporate Governance is on how 'the game' is played by its actors. Here governance is to be understood as the strategic discourses detected in Merkur and Middelfart. As the discursive interpretations arise Corporate Governance are to be understood as the predominantly understanding of and its surroundings and opportunities for action (Nielsen, 2005:13) Strategic tasks The board s strategic involvement is a central task of the board. The board s strategic tasks is here defined as the development, maintenance and monitoring of the organisation's core competencies with the purpose of achieving long-term results and survival. Strategic decision-making involves resolving uncertainty, complexity and conflicts (Huse, 2007:239). In general, board strategic tasks cover a set of activities such as: The development of the organisation s mission and vision, the formulation of business concepts, the evaluation and control of strategic proposals, and the implementation of approved strategies. The focus on strategic tasks are about task involvement, not about the results of task involvement. Introduction page 7

15 Internal and external actors In this thesis actors are divided into three groups internal actors, external actors and the board. The internal actors are those who make decisions and take actions, and the external actors or stakeholders are those who seek to influence and control decisions (Huse, 2007:16). In this thesis regulatory as EU Commission, Danish Financial Supervisory Authority, the Danish Bankers' Association and media are considered as external actors. The management and the employees are considered as internal actors. The board is included as a third group. One of the main discussions in Corporate Governance is whether the board should be regarded as an internal or external actor (Huse, 2007:17). In this thesis the board stands as a go-between and a boarder zone between the external and internal actors. However it is not always easy to identify who or what is inside or outside the organisation. Theory of Choice The theories are chosen with the aim of creating an analytical approach, which can shed light upon the problem area on Corporate Governance. The theories chosen for this foundation are March & Olsen's new-institutional perspective (1989,1995) and Laclau & Mouffe discourse theory (1985). Even though the two theories take their critical starting point in two widely different theoretical traditions Laclau & Mouffe as post-marxists and post-structuralists,, and March & Olsen as constructivist neo-institutionalists (Howarth & Torfing, 2005:9,95). Their theories together establish a symbiosis describing the interplay between politic and institutions. The strong side of discourse theory is its term on politic, and newinstitutionalism's strong side is its term on institutions. Oppositely, as in a symbiosis - what is the strong side of one is the weak side of the other (Nielsen, 2005:167). In common the two theories see institutions as a result of political actions. Institutions have their own independent effect on the actions of the actor, who at the same time constant reproduce and change the institution. Institutional components are to be seen in the category of the social, while the political category are seen as those practices, which change the institution (Thomas, 2008:142). To the claim that 'institutions matter' I can thereby add 'politics matters too'. Hence my entrance to the concepts of this thesis, presented in this section, springs from constructivism (Nielsen, 2005:167,169). The two theories can together shed light upon Corporate Governance as an institutional frame, which rules and norms are passed on, shaped and changed by its members. Ultimately, it is to create a possibility to observe the discursive field, where the relation between the board and the organisation in strategic work can be analysed. page 8 Sparring or Inspection? February 2011

16 With a starting point in the research question on what interpretations are in play in political project on Corporate Governance, has it been fruitful to combine the two theoretical views to capture the interpretations at the institutional level and at the group level in the groups of board and of internal actors, respectively. The analyses in this thesis are thereby to be seen as Chinese boxes. The different boxes indicate when Corporate Governance is talked about as an institution and when Corporate Governance is talked about as a discourse of the board's strategic tasks. The Chinese boxes-metaphor is a way to express how the subjects for analysis form an integral part of each other. The structures of relations among them are a product of the interaction between the various Chinese boxes that respond to changes in their environment and their own internal dynamics (March, 2008:220). Limitation and critical reflection of my choice in theories It is not the entire discourse theory, which are to be used with in this thesis, but a few parts, which has relevance to use in the answer to my research question. Laclau & Mouffe's theory is at a high level of abstraction, and because they never used their theory to analyse a longer empirical case, users of their theory are often in need of making their own or 'lighter' interpretations of the terms to make them operational in a concrete analysis (Jørgensen & Phillips, 1999:62). This is also the case within this thesis, where the high level of abstraction leaves me with a certain degree of freedom, when making Laclau & Mouffe's terms operational as my analytical tools. I will my use of the discourse theory clear in later the review of the theory and my analytical strategy. In the new-institutional perspective refer March & Olsen always to specific political institutions as the parliaments and the central administration, thus within this thesis politic is not topographical location, but a constitutive dimension in all social relations (Torfing, 1996:123). Similar comments can be made on my use of Laclau & Mouffe's political discourse theory. Its starting point in political and democratic conflicts are antagonism seen in a more radical meaning than within this thesis. When the concept in spite of that is to be used, is it because Laclau & Mouffe's radical understanding of politics and discursive 'fights' can shed light upon similar mechanisms on organisational level. A fundamental criticism of the approaches is that they are, in essence, not falsifiable. For instance, in a new-institutional perspective the criteria for the existence of a 'Logic of appropriateness' within an institution are sufficiently vague that it would be difficult to say that they did not exist and that they did not influence the behaviour of the members of the boards. Introduction page 9

17 Review of new-institutionalism In 1989 the political scientists James G. March & Johan P. Olsen published the book Rediscovering Institutions, which today are seen as a principal work within the sociological institutionalism. In this book they argue that an institutional analysis also consist of a neglected foundation in development of a more realistic social analysis. Society is not only to be seen as an amount of individuals, but on the contrary as collective entities. Individuals are placed in these organisational entities all through their life. These entities refer March & Olsen to as institutions. What is an institution? According to March & Olsen: Much of the behavior we observe in political institutions reflects routine way in which people do what they are supposed to do (March & Olsen, 1989:21). They define a political institution as...collections of standard operating procedures and structures that define and defend values, norms, interests, identities and beliefs (March & Olsen, 1989:17). From the point of view an institution can be making choices on the basis of some collective interest or intention (March & Olsen, 1989:18) and can be justified in analysis as a collectivity that acts coherently...coherence might be induced through constitutions, laws, stable rules, or by a community of moral obligation (March & Olsen, 1989:18). So what is appropriate or a particular person in a particular situation is defined by political and social institutions and transmitted through socialisation. March and Olsen are interested in how people take part in and acts according to institutions, institutions influence on the actors' perception, and on the construction of the context the actors can act within (March & Olsen, 1995:29). The concept of institutions has thereby a central meaning to the way the individuals perceive their environment and their opportunities for actions due to how the institutions provide individuals with consistent norms of behaviour and impression of reality (March & Olsen, 1995:30). Individuals are important and still ultimately they must make choices within institutions they belong to, but those choices are largely conditioned by their membership in a number of political institutions (Peters,2005:43). The contrast to the assumptions of the sociological institutionalists is the school of rational choice institutionalists. Rather than being guided by norms and values, scholars working within this framework argue that behaviour are a function of rules and incentives. Institutions are systems of rules and inducements to behaviour in which individuals attempt to maximise their own utilities (Peters, 2005:19). March & Olsen attach great importance to the norms, which direct the individuals understanding of problems and possible solutions to them. When individuals enter an institution, they try to discover and are taught the rules of the specific institution. When they encounter a new situation, they try to associate it with a situation for which rules page 10 Sparring or Inspection? February 2011

18 already exist (March & Olsen, 1989:160). March & Olsen formulates in a cultural sociological perspective two institutional levels: Political actors are found in a certain 'opportunity structure', which reduces the opportunities for action and they are thereby also found in a certain structure of meaning, which limits the thoughts opportunities for development (Ibid:94). March & Olsen's new-institutionalism is relevant in relation to organisations and society as a whole. Their theory is relevant in terms of my understanding how the mechanisms of Corporate Governance recommendations can be seen in the Danish financial business. This political project can be seen as having fostered specific cognitive rules to the Danish boards. Roles and adaptation March & Olsen do not significantly connect politics with conflict, power-seeking or pure selfish behaviour. Political actors are driven by institutional duties and roles as well as, or instead of, by calculated self-interest;... the making of choices; routines, rules, and forms evolve through history-dependent processes... (March & Olsen, 1989:159). The process involves determining what the situations is, what role is being fulfilled, and what the obligations of that role in that situation are (March & Olsen, 1989:160). It is always persons who act, but the 'rules of the game' depends upon the specific institution. Thus the parliamentary arena follow certain kinds of rules and norms and the judicial arena other kinds of rules and norms. Political institutions frame the setting in accordance with their interest or preferences. It means that the institution frames its own conditions for meaningful and appropriate behaviour or as March & Olsen put it: Action is taking on the basis of a Logic of appropriateness associated with roles, routines, rights, obligations, standard operating procedures, and practices (1995:30). The point here is that in every organisation there is an amount of institutional logics to drawn on when a decision is to be made. But no institution are able to dictate the appropriate behaviour in every possible situation. Thus, the individual action also depends on the answers to the following three questions: What kind of a person am I? What kind of a situation is this? What does a person such as I do in a situation such as this? (March & Olsen, 1995:7). The possibilities produced by the institution are thereby interpreted and managed by the individual. But institutions and their norms are not monolithic. Moreover, rules, norms, and their applicability to particular situations are often ambiguous (March & Olsen, 1989:24). Norms creates recognition The de-emphasis on the self-interest is linked to the discussion of, what rules and norms mean to the relation between citizens and the political-administrative system. March & Olsen point out that an essential premise for a political system's maintenance is that it needs Introduction page 11

19 to communicate to its observers, that the decisions they make are legitimate (March & Olsen, 1989:49). This means that politicians and government officers are forced to act in coherence with formal and informal rules. 'Logic of appropriateness' emphasis those mechanisms, which maintains a legitimate social order. Any politician feels obliged to take on the role given to him or her. If the obligations are neglected will the general recognition of the political system decrease and appear as a system characterised by random and narrow-minded actions (Ibid:49). The political system's legitimacy thereby depend of the individuals within the system also act according to the general expectations. This means that those in power and decision-makers have to legitimate their actions. To a large extent they do that by following the rules of 'the game'. Ultimately, in this view the procedure of decision means that the way the politicians make decisions are more important than the final result of those decisions (March & Olsen, 1989:51). By shaping meaning, political institutions create an interpretive order within which political behaviour can be understood and provided continuity (ibid:52). Below is mention the essential points in relation to the newinstitutional approach to this thesis study of boards' strategic tasks: Norms of appropriateness and rules and the elaboration of meaning are central features of an political institution Institutions are organised around the interactions of a collection of individual actors or events supplemented with (or replaced by) rules and norms The political institution simplify the potential confusions of action by providing action alternatives Review of discourse theory In 1985 The political theorists Laclau & Mouffe wrote Hegemony and Socialist Strategy. The aim was to develop a synthetic post-marxist, post-structuralist, and postmodern political theory, where the social is to be understood as a web of meaning created processes (Jørgensen & Philips,1999:35). As an attempt to analyse a political phenomenon through the use of a linguistic theory (Thomsen, 2008:67) they argued that the seemingly non-discursive phenomena like technology, institutions, and economic processes are ultimately constructed in and through discursive systems of difference. From that, they draw the conclusion that discourses is co-extensive with the 'social' (Howarth & Torfing, 2005:9). The discourse theory focuses neither on observable facts nor on deep meanings, but on the historical formation of discursive conditions of social being (ibid:10). A main point in Laclau & Mouffe's considerations is that politic is what change the social (Laclau & Mouffe, 2002:29). Politic is primate in discourse theory - page 12 Sparring or Inspection? February 2011

20 meaning that it is political articulations, which qualify what ever we say, think, or do is conditioned by a more or less sedimentary discourse which is constantly modified and transformed by what we are saying, thinking, and doing. Politic is not to be understood as for instance party politics, or only conscious decisions taken by some central decision makers on the basis of rational calculation, but rather about the endless series of de facto (political) decisions, which result from a myriad of decentred strategic actions undertaken by political agents aiming to forge a hegemonic discourse (Howarth & Torfing, 2005:15). Or in case of the opposite, if the current conditions are not problematic, the conditions will stay the same without any actual political conflicts. Politics is determined for the forming of the 'social' relations (Laclau & Mouffe,2002:29,30). But one thing is to defined politic as the starting point. Another thing is to defined the medium, where in the definition of politic happens. In discourse theory the medium is called a discourse, which I will elaborate below. What is a discourse? Another central concepts of the discourse theoretical analysis is, of course, discourses. Laclau & Mouffe's own definition of a discourse is complex, and contains other terms from their theory as well: [W]e will call articulation any practice establishing a relation among elements such that their identity is modified as a result of the articulatory practice. The structured totality resulting from the articulatory practice, we will call discourse. The differential positions, insofar as they appear articulated within a discourse, we will call moments. By contrast, we will call element any difference that is not discursively articulated (Laclau & Mouffe 1985:105). I understand this definition in this way, that a discourse is to be understood as a structured 'whole' or totality, which are to be establish as a result of an articulated practice. It is articulation, when a relation between elements is established, and the identity of the elements mutually changes. Elements, which articulated into a discourse and take a position within the discourse, is to be called a moment. A discourse exists in that way as a roughly fixation of the 'social' (Nielsen, 2002:8). In this thesis a discourse is to be understood as the amount of statements in a certain relation to one another, or in other words as a fixation of meaning within a specific field (Jørgensen & Phillips, 1999:36). The statements determinate what there are to talk about, while the specific mutual relations determinate how to speak or write. A discourse is in that way also a construction of the world, where elements attached to each other, create a meaningful 'whole'. But because the moments of the discourse have a 'surplus' of meaning, and therefore always can be articulated in new correlations, a discourse will never be able to close up around itself and become a complete Introduction page 13

21 structure. This creates a space for the actors. The actors play an active role within the ongoing articulation and in forming of the discourses (Nielsen 2002:8). Not understanding the discourse as a closed entity, means in other words that it constantly is to be negotiated and remoulded in the contact with other discourses. Hegemony and antagonism According to Laclau & Mouffe is it through articulation, that the construction of a hegemonic discourse is possible. Through the discursive fights attempt different discourses, each representing a certain way to express and understand the social world, to seek hegemony (Jørgensen & Phillips 2008:15). In this fight the actors will try to establish one discourse by linking the different identities and political power to one common project, and hegemony arise by creating a common expectation, which also contains the range of different political projects. It is presenting a political project as being the concrete understanding of a project with universal meaning that move the discourse from having particularly meaning to be a universal horizon of direction or action (Nielsen, 2002:8). Though, when all practices are discursive, and no practice-system is completely immune to the effect of others, the ultimate determination becomes impossible (Howarth 2000:145). It is when the ultimate determination is impossible, that the hegemonic processes arise. No matter the success of a certain political project's discourse has, in dominating a discursive field, will it in principle never be able to articulate all elements. There will always be 'contra'-discourses (Howarth, 2005: ). A discourse is thereby the concept of the individual unambiguous meaning fixation, whereas all what is not contained within the individual discourse is categorised as the discursive field the outer side of the discourse (Jørgensen & Phillips, 1999:69). With the starting point of the discourse theory, that no discourse is able to establish the totality; a discourse will always be in conflicts with other discourses, those defined reality different and thereby constitute other directions for social action (Jørgensen & Philips, 1999:60). Antagonism is the discourse theory's term for conflict and may be defined as an interpretation contrary to the very deepest sense. Those, who adhere to one interpretation can not agree with those who adhere to a second (Thomsen, 2008:77). An antagonism signify thereby a relation between two groups, in which one group deliberately tries to block the other group's identity (Laclau & Mouffe, 1985:125). An antagonism requires diversity, but diversity trigger in itself not a conflict. The antagonistic conflict arises only when one group deliberately attempts to disregard the interpretation another group identity with. When such a contrast is made is the social order divided roughly into two political camps: There are 'them' and there are 'us', which corresponds to a division in friends and foes. page 14 Sparring or Inspection? February 2011

22 Antagonism builds on two linguistic logics: chains of equivalence and differential lines, Both logics are present within a discourse, and they will at the same time be active in relation to another discourse (Laclau & Mouffe, 1985: ). Equivalence refers to expressions, which are similar in that regard that they fill the same meaning-making function a kind of simplifier of the social order (Thomas, 2008:78). A chain of equivalence in a discourse is only meaningful, when simultaneously defined as different from other concepts. The differential line is a linguistic expression, which defines such differences. The creation of antagonisms lies on a intentional manipulation of reality a deliberate creation of political myths. The discourses is not tangible phenomena, but represent instead metaphors with secondary symbolic meaning. The social order is in other words not objective, but symbolic. Hereby captures the term metaphor also the actual content in political antagonisms, since antagonisms are symbolic constructions (Laclau & Mouffe, 1985: ). The transformation of the social reality to a symbolic order has relatively far-reaching consequences. For on might ask: who is right? The radical is that there are no objective apolitical answers to that question. An antagonism can not be removed by factual arguments, but only by the establishment of an alternative discourse, that is able to construct the social order in a new way. A society is sustained through certain actors acceptance and enforcement of hegemony. It is therefore clear that the establishment of hegemony constitutes a political process, while the hegemony's subsequent consolidation is depoliticising as hegemonic constructions are grounded in active support and not open conflict. Thus, the broader and deeper one hegemony becomes, the more appropriate is the designation of a society's social order. In other word the hegemony become institutionalised (Thomas, 2008:82). Dislocation and sedimentation For a hegemonic fight to happen, it must be assumed that a form for dislocation has appeared. A dislocation splits the discursive order by separating the signifier from the signified, which means that it is no longer given how to articulate the signified, and speaks about an empty signifier. The dislocation mean that the structure floats, and the fight to establish a new discursive order begins. An experience of the dislocation could be that political processes try to chain previously known in new ways. A dislocation is to be understood as a hegemonic projects beginning (Esmark et al. 2005b:180). The opposite of dislocation is sedimentation. Sedimentation is periods, where a given structural order is stabilised. Sedimentation is here understood as a milder degree of hegemony. Introduction page 15

23 Considerations for an analytical strategy There is no knowledge, which just and pure reflects the objectives it says to know something about everything is discursive constructed (Fuglsang & Olsen,2004:397). Having said that, it is central, that observations are made trough a certain gaze. The analytical strategy can be defined as the practice, which forms the scientific gaze to bring 'the social' to emerge in observation (Esmark et al, 2005a:9). Analytical strategy is thereby my programme for how I will construct my subject for analysis and how I appear as observer and writer of this thesis. A second-order observation The analytical strategy does not consists of methodological rules, but rather a strategy that address how 'the epistemologist' will construct the observation of others to be the object of their own observations in order to describe the space from which they describe (Andersen, 1999:14). The analytical strategy is characterised by second-order observations, which are observations of others observations (Andersen,1999:12). The question being asked is how to view the world as it arises, when individual, organisations and systems view their surroundings through certain glasses, which make the world turn up in a certain way for them (and simultaneously happens the same for me as an observer) (Andersen,1999:14). A second-order observation enables me to analyse the interpretations of the board's strategic tasks in Middelfart and Merkur respectively as observation of others. The relation between the board and its organisation are seen as a social construction and I am to ask about the construction of it. A first-order observation would see the phenomenon social construction as irrelevant - what you see is what it is. The observations of the boards' strategic tasks could be seen as the formal texts in the annual report of the organisations and no further questions are being raised. Blind spots When the analytical strategy, which has its specific gaze at the subject of analysis, spots some aspects of the observed field, it will be blind to other aspects. Thus the development of the analytical strategy is in question deliberate choices, which have consequences for how 'the social' emerges and creates the frame for an scientific conclusion of the analysis (Esmark et al, 2005a:12). The construction of the board's strategic tasks is thereby to be seen as a complex process, where no result is given in advance, but are found through the discursive institutional and individual influence (Esmark et al, 2005b:180). My own background at Copenhagen business School as BSc in Business page 16 Sparring or Inspection? February 2011

24 Administration & Organisational Communication and now finishing my master in Strategy, Organisation & Leadership has shaped my glasses of the world and thus brought me accesses to observe the world as it emerge as well as providing me with blind spot, that disable me from seeing the full picture. Against this background I am aware that the choices I make affect my analyses and conclusion of this thesis. My analytical strategy In this thesis I wish to analyse, what interpretations on the board's strategic tasks there are to detect within Corporate Governance as a political institution and within my two organisations of exploration. The two levels of the analyses are interlinking by the boards' membership in the Corporate Governance institution. The detected interpretations are understood as the way the different actors try to attribute meaning to the empty signifier 'the board's strategic tasks'. I see the discursive attribution of meaning as written and spoken articulations within my empirical data. An articulation is in itself empty and receive meaning, when written and spoken about in relation with other objects (Andersen, 1995:19). The empty signifier 'the board's strategic tasks' is filled up by the articulations from the analyses of policy documents and my interviews, when for example the board articulates its strategic tasks and the internal actors articulate what the board's strategic tasks are. In these analyses the articulations on the board's strategic tasks are written and spoken about in relation to Corporate Governance recommendations and in relation to the specific strategic work of the two organisations of exploration. The articulations analytical function is simply to constitute the discursive problem as an opportunity in the understanding, that the problem always is a reflection of, what is being fought to achieve (Andersen, 1995:19). A discourse must therefore be understood as the one reflection of both sides of the same coin. This means, that a discourse will emerge in my empirical data, when a range of differentiated elements are unfolded in relation to each other (Laclau & Mouffe, 2002:53). With analytical tools based on the new-institutional perspective and discourse theory, I stay within the hermeneutic tradition. Thus my interpretation of the empirical data is to be seen as a hermeneutic process, where I attempt to read the general characteristics and connection in the data. The different analytical chapters is to be understood as a part of the whole, and opposite the whole can only be understood through the different analytical chapters. Pointing out the importance of the individual parts of the analyses can result in a change in how we understood the 'whole' to begin with (Kristiansen & Krogstrup, 1999:174). Introduction page 17

25 The first analysis of my thesis is to answer the sub-question: What are the overall development of Corporate Governance within the Danish financial business? This analysis will serve as a background for the situation in which I observe the relation between the board and the organisation within this thesis second analysis. The purpose with analysing Corporate Governance as a political institution is to observe the rules and norms of Corporate Governance. The point of observation is the Danish financial business and the subject of analysis is the board's strategic tasks as they appear in the policy documents on Corporate Governance. The first analysis is divided into two periods. One before and one after the recent financial crisis. The first period runs from 2001 until 2008 and the second period from 2008 until today. The articulation on Corporate Governance in both periods will be based on policy documents representing the political authoritative and opinionforming level. The senders of these policy documents are the Danish government (including the Danish supervisory authorities), the EU Commission, and The Danish Bankers' Association. In the policy documents from the first period is a re-articulating the board's strategic tasks justified, which leaves the board's strategic tasks as an empty signifier. The Danish government attribute meaning on the basis of a new discursive order within the frame of a problem/ solution discourse. At this point the recent financial crisis (dislocation) has not yet happen in Corporate Governance the government's articulation of the board's strategic tasks is seen within the frame of an discursive order. The analysis will show how the elements through articulation are placed in relation to nodal points and thereby gain status as moments. The figure 3 illustrates this. page 18 Sparring or Inspection? February 2011