Employee as Corporate Governance Stakeholder in South Africa

Abstract

“The 19th century saw the foundations being laid for modern corporations: this was the century of the entrepreneur. The 20th century became the century of management: the phenomenal growth of management theories, management consultants and management teaching (and management gurus) all reflected this pre‐occupation. As the focus swings to the legitimacy and the effectiveness of the wielding power over corporate entities worldwide, the 21st century promises to be the century of governance.” This is a reflection and manifestation of how the world of work has changed over the last three centuries. The entrepreneur of the 19th century usually owned his business. The business was usually small and the employer was also the individual who owned the business. Because there were only a few employees the relationship between employer and employee was usually a personal relationship. As the era of Fordism emerged in the 20th century, the economies of scale dictated that in order for an enterprise to survive it had to be large (ie many employees) and production was dictated by post‐war Keynesian economic policies. In order to exercise control over these many employees, they had to be arranged into a hierarchy beginning at the bottom with unskilled labourers going up through a number of levels of supervisors and eventually management. Management was also divided into various levels in a hierarchical structure, beginning at lower management, going through to middle management and eventually reaching top management. This hierarchical structure resembling an army was typical of the large corporations of the 20th century. With such large enterprises, a natural consequence was the fact that the relationship between the employer (now usually a company and not an individual) was no longer a personal relationship. In the 20th century employee interests in the industrialized economies were generally protected by trade unions and collective bargaining. Collective bargaining regulated employer‐employee relations, institutionalized conflict and protected employees from “arbitrary management action”. The need to remain competitive in the global economy has resulted in a quest for flexibility. The result is inter alia flatter management structures, an ever‐increasing number of “atypical employees”, decentralization of collective bargaining, the individualization of the employer employee relationship and a general world‐wide decline in union membership and power. Given these facts it becomes necessary to look to alternate means to protect the employee against employer abuse of power in a relationship where the balance of power between the parties is inherently uneven. The possibility of corporate governance and acceptance of the stakeholder theory as a protector of employee interests is explored in this article.