Toward Responsive Corporate Governance: Engaging Stakeholders from Beyond

Toward Responsive Corporate Governance: Engaging Stakeholders from Beyond

Paul van Seters (Tilburg University, The Netherlands) and Rob Maessen (Province of Noord-Brabant, The Netherlands)
DOI: 10.4018/978-1-4666-9864-2.ch012
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Abstract

Since the early 1980s, globalisation has deeply affected the way in which corporations typically conduct their affairs. This is true not only for business organisations that are active in the OECD countries but also for those operating in the emerging markets of the less affluent parts of the world. New social and ethical perspectives have become relevant for management strategy and have highlighted the need to acknowledge the existence of stakeholders—old and new—in a way that may benefit the interests of firms as well as those of local communities and society at large. In this chapter we argue that of all possible stakeholders the ones beyond the present periphery of the firm have the most potential for its long-term survival. Responsive corporate governance, therefore, will seek to engage with stakeholders from beyond.
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Paradigm Shift In Management Strategy

Economic globalisation seriously took off after the fall of the Berlin Wall in November 1989, when the number of participants in the global market grew almost overnight from one billion and a half to six billion people—thus tremendously expanding the possibilities for trade and consumption. The globalising economy has come with the discovery of new management territories to be explored for companies operating from multiple nations, including the so-called emerging economies of the BRICS countries: Brazil, Russia, India, China, and South Africa (Guest, 2011). New social and ethical perspectives, sometimes embodied in new codes of conduct, have become relevant and have prioritized the need to deal with stakeholders in a way that may benefit the interests of firms in the long run as well as those of local communities and society at large (Van Tulder & Van der Zwart, 2006; Crane & Matten, 2010; Griseri & Seppala, 2010; Chandler & Werther, 2013). This shift in perspective is a trend in management strategy that we refer to as a move toward responsive corporate governance.

The story of the role of stakeholders in management strategy starts, of course, with the work of Edward Freeman and with the huge impact of this prominent American business school professor. In 1984 Freeman published his seminal book, Strategic management: A stakeholder approach. Freeman explicitly addressed a corporate audience, for which he defined the concept of “stakeholder” as “any group or individual who can affect or is affected by the achievement of the organization’s objectives” (Freeman, 1984, p. 46). Freeman’s own objective was pragmatic: to provide corporate managers with an instrument for dealing with the important, unexpected changes that were taking place in society at the time. From the 1960s onwards, corporations had been confronted with new groups, events, and issues that until then were not part of standard corporate affairs and which the traditional managerial view of the firm was not able to address. For Freeman, the stakeholder approach was a way to make managers more responsive to these changes in the world outside. This new approach intended to make not only traditional interest groups (owners, customers, employees, and suppliers) but also these newly emerging groups (governments, competitors, consumer advocates, environmentalists, special interest groups, and the media) relevant for management strategy development. Freeman’s main message was that every single one of these groups of stakeholders could play an equally vital role in the success of the business enterprise (Freeman, 1984, p. 25).

A few years later, Freeman’s stakeholder approach took off in a slightly new direction to become the hallmark of corporate social responsibility or CSR. It was increasingly used to describe and clarify the responsibilities of corporations towards society with a growing concern for social, ethical, and environmental issues. Subsequently the concepts of “stakeholder management” and “multi-stakeholder dialogue” have come to play a central role in discussions concerning CSR (Clarkson, 1995; Jones & Wicks, 1999; Kakabadse, Rozuel, & Lee-Davies, 2005; Waddell, 2005, 2011; Kakabadse & Morsing, 2006; Visser, 2011; Blowfield & Murray, 2011; Crane, Matten, & Spence, 2013; Beal, 2014).

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