This chapter introduces a theoretical framework for understanding how corporate governance impacts managerial effectiveness and stress mitigation by taking the mediating role of the capacity of mindfulness to enhance the overall efficacy of the organization. Existing literature talks about how governance structure impacts organisational and managerial performance and stress, but they are missing the underlying processes that link effective governance practices to improved performance and reduced stress; this framework provides the lens for analysing this process. By offering a more nuanced understanding, this framework will help improve the organisation's overall result by taking care of managers' well-being by reducing their stress and increasing their performance.
Top1. Introduction
Governance derives from the Latin word “gubanare,” meaning “to steer.” “The manner of directing and controlling the actions and affairs” defines governance. In 1992, the Cadbury Report (para. 2.5) noted that “corporate governance is the system by which companies are directed and controlled.” According to the IFAC (2009), the two elements of corporate governance are conformance and performance, which “together represent the entire value creation, resource utilisation, and accountability framework of an organisation.” In particular, the performance component focuses on three categories of routines, including plan execution and assessment, resource mapping to strategies, and value generation. In contrast, compliance focuses on three exercises dealing with accountability, assurance, and risk management. Business success in this complex world is determined by how effectively the tango between conformance and performance is managed (Jamali et al., 2008).
While being committed to ethical conduct and regulatory compliance (conformance), businesses must also aim for ambitious goals and surpass stakeholder expectations (performance) (Aguilera et al., 2015). According to Hodges et al. (1996), concerns concerning performance in the public sector should be addressed with a high priority on compliance. Williams & Seaman (2010) examined that capacity for mindfulness as the significant determinant of conformance and performance dimension of corporate governance, and further studies by Williams & Seaman (2014) addressed administrative performance, which found that among CFOs in Canadian firms, strong positive zero-order effects of CG(corporate governance) on mindfulness capacity hold for both CG dimensions. However, similarly strong positive direct effects from managerial performance to mindfulness capacity only hold for conformance dimensions of CG and not the performance dimensions of CG. Nevertheless, there has been a lack of studies investigating the influence of these traits on managers' well-being and stress reduction, which in turn enhances their managing effectiveness. Improved financial outcomes and market value have been linked to performance-oriented governance strategies such as identifying clear strategic goals, deploying effective performance management systems, and establishing strong communication channels(Rose, 2016). However, if compliance is ignored in favour of performance, managers may suffer unfair pressure, unethical actions, and increased stress (Abdul-Rahman, 1995).
Further conformance-oriented governance strategies emphasising accountability, transparency, moral behaviour, and regulatory compliance reduce management stress and improve well-being(Ton & Huckman, 2008). These strategies can provide managers with security and stability by building a trusting and psychologically safe environment. This will allow managers to focus on their tasks without worrying or fearing the repercussions.
However, much of the existing research misses the underlying processes that link effective governance practices to improved performance and reduced stress. Although the relationship between corporate governance and organisational outcomes has been explored, as mindfulness practices influence individual well-being, little is known about how governance techniques affect manager stress and performance. This study tries to fill this gap by looking into the role of mindfulness as a mediating factor in the link between corporate governance and managerial wellbeing. We intend to investigate the link between the performance and conformance dimensions of corporate governance and managerial performance and stress by using the capacity of mindfulness as a mediating factor because it is challenging to imagine a scenario where corporate governance is not applicable in comprehending managerial conduct and organizational effectiveness (Larcker & Richardson, 2007). The capacity of mindfulness is chosen as an intervening variable based on a theoretical argument linked to corporate governance.