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Beyond stakeholder engagement: the challenges of stakeholder participation in corporate governance

Low, Christopher and Cowton, Christopher J. (2004) Beyond stakeholder engagement: the challenges of stakeholder participation in corporate governance. International journal of business governance and ethics, 1 (1). pp. 45-55. ISSN 1741-802X

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    Abstract

    The UK Government is presently conducting a consultation process focused on the introduction of a new legal form of company, that of the Community Interest Company (CIC). Organisations choosing this form of incorporation would be subject to a legal requirement to involve their stakeholders in the governance of the company. This development is just the latest example of an increased interest generally in making companies more responsive to their stakeholders. The statutory duty placed on companies taking the CIC form raises the possibility of further legislation being introduced to compel all companies to involve their stakeholders more formally in their governance. This paper examines the participation model of stakeholder involvement proposed in the CIC legislation. This model is already widely employed in the not-for-profit company sector. A comparison is made with the engagement model of stakeholder management which is the most popular form found within the corporate sector. Conclusions are subsequently drawn about the appropriateness of a participation model for corporations in the for-profit sector by examining the challenges that emerge from giving stakeholders such a prominent role in the strategic management of the organisation.

    Item Type: Article
    Additional Information: Reproduced by permission of International Journal of Business Governance and Ethics, published by Inderscience Enterprises Ltd. Copyright © 2004 Inderscience Enterprises Ltd..
    Uncontrolled Keywords: stakeholder management; corporate governance; participation; engagement; not-for-profit companies.
    Subjects: H Social Sciences > HF Commerce
    H Social Sciences > HB Economic Theory
    H Social Sciences > HJ Public Finance
    Schools: The Business School
    The Business School > Financial Ethics and Governance Research Group
    Related URLs:
    References:

    1 For the most prominent and readable of recent critiques of corporate activity see Klein, Naomi (2000) No Logo, Flamingo, London. 2 Donaldson, T. and Lee P. (1995) ‘The stakeholder theory of the corporation: concepts, evidence, and implications’, Academy of Management Review, Vol. 20, No. 1, pp.65–91. It is worth noting that the authors accept that the stakeholder concept is sometimes used to primarily serve the interests of shareholders but is dressed up as an intention to serve the interests of stakeholders. 3 (2003) ‘Department for trade and industry’, Enterprise for Communities: Proposals for a Community Interest Company, DTI, June 25, p.8, http://www.dti.gov.uk/cics/pdfs/condoc.pdf 4 Walmsley, K. (2003) ‘Community interest companies’, Chartered Secretary, August 2003, p.3. 5 Monsanto (1999) ‘Monsanto confirms stakeholder dialogue approaches’, September 27, http://www.monsanto.co.uk/news/99/september99/260999_monsanto.html 6 (2003) ‘Premier oil’, Sustainability Report 2002, July 29, p.12, http://www.premieroil.co.uk/asp/uploads/uploadedfiles/1/113/premier_oil_sust_03.pdf 7 (2003) ‘Corporate governance’, Network Rail, July 14, http://www.networkrail.co.uk/corpgov/index.html 8 Tickell, James (2003) ‘National Housing Federation’, The Housing Association Model: A Template for the Social Enterprise Sector?, pp.12, 18 and 20. This paper, which was presented internally was made available by the author on request. 9 R.E. Freeman’s definition of stakeholders in his landmark book Strategic Management: A Stakeholder Approach, Pitman, London (1984) included not only those affected by the organisation but also those that could affect the organisations achievement of its objectives. This has the effect of significantly increasing the number of stakeholders that should be identified by the focal organisation. 10 (1998) OECD Corporate Governance, OECD, Paris, pp.17, 49. 11 Sternberg, E. (1998) ‘Corporate governance: accountability in the marketplace’, Institute of Economic Affairs, London. 12 (2002) DTI ‘Social enterprise: a strategy for success’, Social Enterprise Unit, p.62. 13 Walker, D. (2003) ‘Fissure price’, The Guardian, January 8, p.10. 14 (2002) ‘Strategy unit’, Private Action, Public Benefit: A Review of Charities and the Wider Not-for-profit Sector, Cabinet Office, p.69. 15 (2003) ‘Review of the role and effectiveness of non-executive directors’, DTI, January 20, http://www.dti.gov.uk/cld/non_exec_review/pdfs/higgsreport.pdf 16 Rhodes, R.A.W. (2000) ‘Governance and public administration’, in J. Pierre (Ed.), Debating Governance, pp.54–90, Oxford University Press, Oxford. 17 Goodpaster, K. (1993) ‘Business ethics and stakeholder analysis’ in E.R. Winkler and J.R. Coombs (Eds.) Applied Ethics: A Reader, pp.229–248, Blackwell, Oxford. Goodpaster believes that attention to stakeholder interests does not have to result in a dilution of shareholder interests but it is difficult to see how this could be sustained in practice.

    Depositing User: Sara Taylor
    Date Deposited: 12 Mar 2007
    Last Modified: 03 Nov 2011 13:10
    URI: http://eprints.hud.ac.uk/id/eprint/160

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