Upper Echelon Theory and Ethical Behaviour
An Illustration of the Theory and a Plea for Its Extension Towards Ethical Behaviour
Abstract
This paper gives an illustration of the Upper Echelon Theory and presents arguments for more research on the relationship between upper echelons, strategic choices, and ethical behaviour. Its central theme is: What is the effect of the Sarbanes-Oxley Act implementation on the composition of the Board of Directors of companies that are listed on a U.S. stock exchange? In this research we examined whether the composition of companies’ top management teams is influenced by the issue of ethical behaviour. We used a sample of fifty listed companies, containing the members of the Board of Directors registered in the period 2000 - 2005.
The underlying question in this research is whether companies actually change the composition of their Board of Directors because they believe that personal characteristics, such as age, tenure, and specialisation, play an important role in decision making and hence in the degree of their ethical behaviour. In this paper we test three hypotheses. The conclusion is that two of our hypotheses support the Upper Echelon Theory.
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