Abstract:
Trust is a central feature in corporate-governance theory and practice. While trust is
advanced as a motivational factor in dominant organisational theories and practices, it is
conspicuously absent in corporate-governance literature. At one extreme, scholars discount
trust, which leads to theories that characterise the relationship between governance actors
as goal-conflicted and as something that potentially exposes organisations to distress. At
the other, scholars approach trust as a given and characterise governance actors as locked
in mutually beneficial relationships that inspire trust, even if organisational distress also
occurs. Neither extreme characterisation has been useful in explaining how governance
actors organise themselves to avoid or escape financial distress. Using a multiple-casestudy method, underpinned by a critical-realist perspective, this study provides an explicit
exploration of trust and its complement—distrust—and explains the complexity of the trust
relationship between governance actors such as chief executive officers, board chairmen,
and board directors.
This study seeks to demonstrate that distrust, as characterised within agency theory, and
trust, as portrayed within stewardship theory, detract from understanding effective board
task-performance. Some scholars have relied on proxy variables such as board composition
and financial performance to assess board task-performance, but this often leads to weak
theoretical explanations. Moreover, this study specifies how optimal levels of trust and
distrust could explain effective board task-performance, which scholars have shown partially
contributes to financial performance. This study proposes that optimal trust and distrust
between governance actors occurs where levels of trust and distrust are simultaneously
high. This study develops a theory of moderated-trust governance that is underpinned by
generative processes with supporting propositions. Therefore, this study contributes to
literature on both trust and corporate governance.
