How to Combine a Group Strategy with Subsidiary Governance?

40 Pages Posted: 1 Jul 2009

See all articles by J. Strikwerda

J. Strikwerda

Universiteit van Amsterdam - Amsterdam Business School

Date Written: June 28, 2009

Abstract

The traditional policy of most multinational corporations (MNC) with respect to their subsidiary boards was or even still is to reduce these boards through composition, information and superseding these through an integrated management system to the bare local legal requirements and not having these play a role in the control of the firm. As far subsidiary boards play a role in the control it is for ownership control, not for (value creating) coordination control. Although this policy appears to be reinforced by requirements induced by the international finance market to the governance of firms, especially the requirement to be in-control, and by NGOs with respect to social accountability, two other opposing forces can be identified. First is that immobile local sources and the emancipation of host country’s political and economic system increase the power of subsidiary boards. Second is that the changing strategies of MNCs, new operating models, mobility of people as resources and the declining costs of information, force MNC to switch from resource allocation and its corresponding type of control to resource mobilization. Thus creating up the need to include the boards of subsidiaries in the process of coordination control, not just ownership control. This will MNCs make to reconsider the tasks, roles, composition and the powers of their subsidiary boards.

Keywords: International management, MNC, corporate governance, subsidiary governance, organization forms, in-control, social accountability, COSO

JEL Classification: F23, G18, G38, G30, K33, M10

Suggested Citation

Strikwerda, Hans, How to Combine a Group Strategy with Subsidiary Governance? (June 28, 2009). Available at SSRN: https://ssrn.com/abstract=1426806 or http://dx.doi.org/10.2139/ssrn.1426806

Hans Strikwerda (Contact Author)

Universiteit van Amsterdam - Amsterdam Business School ( email )

Plantage Muidergracht 12
Amsterdam, NH 1018TV
Netherlands

HOME PAGE: http://www.strikwerda.org

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