TOP MANAGEMENT CHANGES AND STAKEHOLDER ORIENTATION: CASE OF CROATIA

Abstract

Stakeholder theory of the corporation was developed as an alternative to the prevalent system of corporate governance with shareholders being the only group managers are responsible to. Top management’s responsibility goes far beyond shareholders alone, because the corporation is not merely an instrument for maximizing shareholders’ wealth, but also is a social entity with broader and more complex purpose and role. Top management should balance multiple interests, demands and claims of various stakeholder groups and therefore top management’s success can not be easily and unambiguously described using traditional performance measures based on return on equity. The challenges top managers are facing can be better expressed by a question: How can they satisfy (often conflicting) stakeholders’ demands while maximizing firms’ wealth creating capacity at the same time? Top management’s position and role within the structure of corporate governance are determined by firm’s stakeholder orientation ; power constellations, shifts in negotiating positions and interactions between various stakeholder groups, so our main research goal was to expand the understanding of the context, reasons and circumstances of top management changes, starting from the basic premises of the stakeholder theory of the corporation. The results of this research indicate that there are differences in stakeholder orientation regarding top management changes, and the observed differences are even larger when the change was forced. The results of this research also suggest that managers may engage in active stakeholder management as to protect their own position-as part of a managerial entrenchment strategy.