GOVERNANCE UNDER UNCERTAINTY: TASK ASSIGNMENT IN PRODUCER CONTROLLED RESEARCH ORGANIZATIONS

Abstract

In Canada, Australia, United States, and a number of other countries there are considerable number of producer controlled research organizations (PCROs) in the agricultural sector, charged with the task of investing hundreds of millions of dollars in research and development (R&D) projects. Given the impact of PCROs on productivity of agricultural sector and food security, the primary objective of this study is to improve the governance of PCROs by providing knowledge of the decision-making process and governance structure of these producer-led entities. The information related to the current governance structures and decision-making processes of PCROs is attained through analyzing a series of interviews with managers and directors of key PCROs in Australia, the U.S. and Canada. A great deal of similarity was observed across PCROs both in terms of the decision-making process and governance structure. In particular, PCROs do not tend to separate management and oversight tasks. The producers elected directors of these organizations are involved in management decisions. This observed practice is in contrast with most of the theories and empirical studies focusing on the governance structure of non-profit (NP) and for-profit (FP) organizations (Brown & Guo, 2010; Fama & Jensen, 1983; LeRoux & Langer, 2016; Miller-Millesen, 2003). Based on information gained from the interviews, observable characteristics of PCROs explained in the literature, and agency theory this dissertation develops a theoretical model to describe the unusual task assignment in the PCROs. The theoretical model suggests that because of the long investment horizons in the PCROs, the compensation of management teams based on their contributions to return on investments is not feasible. Therefore, the PCROs have to reward their executives on the basis of a measure of efforts exerted. Hence, the directors’ involvement reduces the volatility of managers’ compensation. Motivated by the theoretical model, a survey whose participants are the directors of Saskatchewan’s PCROs was conducted to examine the consistency of theoretical model’s implications and the task assignment practices of PCROs in the real world. The examination of the survey results suggests the presence of consistencies between the theoretical model’s implications and observed outcomes.