Decoupling policy from practice: The case of stock repurchase programs

This study examines firms' decoupling of informal practices from formally a dopted policies through analysis of the implementation of stock repurchase programs by large U.S. corporations in the late 1980s and early 1990s, when firms were experiencing external pressures to adopt policies that demonstr ate corporate control over managerial behavior. We develop theory to explai n variation in the responses of firms to such pressures, i.e., why some fir ms acquiesce by actually implementing stock repurchase programs, while othe rs decouple formally adopted repurchase programs from actual corporate inve stments, so that the plans remain more symbolic than substantive. Results o f a longitudinal study of stock repurchase programs over a six-year time pe riod show that decoupling is more likely to occur when top executives have power over boards to avoid institutional pressures for change and when soci al structural or experiential factors enhance awareness among powerful acto rs of the potential for organizational decoupling. The study has implicatio ns for future research on decoupling, organizational learning, and corporat e governance.