Stakeholders in corporate governance and corporate social responsibility

Abstract

What we are witnessing is a shift in the content of the shareholder value norm, so that it comes to represent the idea that shareholders exercise their powers not as representatives of the market, but as agents of society as a whole. The corporate governance of the future will be centrally concerned with how this idea is worked out in practice. Simon Deakin, ‘The Coming Transformation of Shareholder Value’ (2005) 13 Corporate Governance: An International Review 16 To create an enduring society we need a system of commerce and production where each and every act is inherently sustainable and restorative. Business will need to integrate economic, biologic, and human systems to create a sustainable method of commerce. As hard as we may try to become sustainable on a company-by-company level, we cannot fully succeed until the institutions surrounding commerce are redesigned. Paul Hawken, The Ecology of Commerce (Harper Business, revised edn, 2010) xii Introduction As touched upon in Chapter 1, contemporary commentary on corporate governance can, in general terms, be divided into two main camps: those who consider corporate governance as being about building effective mechanisms and measures to satisfy the expectations of the variety of individuals, groups and entities (collectively, ‘stakeholders’) that inevitably interact with the corporation, and those who focus on it in relation to the narrower expectations of shareholders (shareholder primacy). This chapter focuses on the first of these objectives, with attention being given to the stakeholders of the company, how the law influences corporations to recognise and protect the interests of these stakeholders, and the relationship between these stakeholders and the underlying objective of companies of achieving and maintaining good corporate governance. Steve Letza, Xiuping Sun and James Kirkbride explain the difference between the two corporate governance paradigms, ‘shareholding’ and ‘stakeholding’, as follows: Such a division hinges on the purpose of the corporation and its associated structure of governance arrangements understood and justified in theory. On one side is the traditional shareholding perspective, which regards the corporation as a legal instrument for shareholders to maximise their own interests – investment returns. A three-tier hierarchical structure, i.e. the shareholder general meeting, the board of directors and executive managers, is given in company law in an attempt to secure shareholders’ interests …