The concept of the balanced company and its implications for corporate governance

Abstract

PurposeThe concept of the balanced company refers to a company that is in good relations with its internal and external constituencies. Establishing such a balanced company largely depends on the corporate governance of the firm. The paper, therefore, aims to develop new insights into the appropriate design of corporate governance that fits with the notion of the balanced company.Design/methodology/approachThe paper is conceptual and integrates various perspectives from stakeholder as well as norm theories to substantiate the appropriate governance system of a balanced company.FindingsThe proposed system of corporate governance rules that the interests of multiple stakeholders have to be considered and adequately balanced when corporate decisions are made. In this system, the interest of the enterprise provides the ultimate criterion to evaluate corporate decisions rather than the interest of one single group of constituencies. Corporate decisions have accordingly to serve the interest of the enterprise and to ensure its sustainable creation of value. This requires a principle based balancing of competing interests when the stakes of diverse constituencies collide.Originality/valueThe paper explicates the notion of the interest of the enterprise, explores the corresponding responsibilities of the board, and explains how competing interests of various constituencies have to be balanced.