Roles and responsibilities of boards of directors revisited in reconciling conflicting stakeholders interests while maintaining corporate responsibility

Abstract

The article analyses the business of business and comes to the view that the role of business is to balance all stakeholders’ interests while giving relative dominance to the interests of investors, over those of other stakeholders. Based on this understanding, we propose an economic model, which describes the nexus and interactions between the interests of stakeholders, and develops a set of functions aimed at achieving better management of risk through corporate socially responsible (i.e. CSR) investment. The model takes into account the utilities of the corporate officers, short term and long term investors. All three functions are considered by the Board of Directors, who are deemed the final arbiters with respect to firm decision-making and the body to whom executive management owes fiduciary duties. Finally, a decision rule is developed that defines the circumstances under which the Board of Directors will consider to invest corporate funds in CSR.

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Correspondence to Tal Shavit.

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Adam, A.M., Shavit, T. Roles and responsibilities of boards of directors revisited in reconciling conflicting stakeholders interests while maintaining corporate responsibility. J Manag Gov 13, 281–302 (2009). https://doi.org/10.1007/s10997-008-9076-3

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Keywords

  • Stakeholders’ interests
  • Corporate Socially Responsibility (CSR)
  • Risk management
  • Decision making
  • Long term investors
  • Short term investors