Abstract
This chapter begins with the reforms that have taken place during the last 10 years and points out that although these reforms may be necessary for a system of appropriate corporate governance, they will not be sufficient. I then briefly review stakeholder theory with a special emphasis on Freeman’s suggestion that corporate boards consist of stakeholder groups. The most important part of the chapter explains my model of stakeholder governance. Finally I consider some objections to stakeholder governance and provide some suggestions as to how these criticisms can be answered.
This chapter is a greatly revised version of a paper I read at the Transatlantic Business Ethics Conference, Wharton, University of Pennsylvania, April 6, 2006.
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Notes
- 1.
For more on the ethical issues surrounding the financial crisis of 2008–2009, see Chap. 9 written with Ronald Duska.
- 2.
Koehn, Daryl. (2004). “What Form of Business Regulation is Workable?” Business and Professional Ethics Journal, 12(1 and 2), 43–63 and Jamal, Karim. (2004). “After Seven Decades of Regulation, Why is the Audit Profession in Such a Mess?” Business and Professional Ethics Journal, 12(1 and 2), 65–92.
- 3.
Bowie, Norman E. (1988). “Accountants, Full Disclosure, and Conflicts of Interest.” Business & Professional Ethics Journal, 5(3 and 4), 59–73.
- 4.
Bebchuk, Lucian A. and Jesse M. Fried. (2006). “Pay Without Performance: Overview of the Issues,” Academy of Management Perspectives, 5–24.
- 5.
Jamal, op.cit.
- 6.
Harris, Jared and Philip Bromiley. (2007). “Incentives to Cheat: The Influence of Executive Compensation and Firm Performance on Financial Misrepresentation,” Organization Science, 18(3), 350–367.
- 7.
See Weaver, Gary R. and Linda K. Trevino. (1999). “Compliance and Values Oriented Ethics Programs: Influences of Employee Attitudes and Behavior,” Business Ethics Quarterly, 9(2), 315–335 and Reynolds, Scott J. and Norman E. Bowie. (2004). “A Kantian Perspective of the Characteristics of Ethics Programs,” Business Ethics Quarterly, 14(2), 275–294.
- 8.
Bebchuk and Fried, op.cit.
- 9.
Dworkin, Ronald. (1977). Taking Rights Seriously. Cambridge: Harvard University Press.
- 10.
Ibid., 22.
- 11.
Jamal, op.cit., 74.
- 12.
Staff Report, “A Conceptual Framework for Auditor Independence” Independence Standards Board, July 2001, 6.
- 13.
Ibid., 9.
- 14.
Evan, William M. and R. Edward Freeman. (1988). “A Stakeholder Theory of the Modern Corporation: Kantian Capitalism” in Tom L. Beauchamp and Norman E. Bowie (eds.), Ethical Theory and Business, 3rd ed. Englewood Cliffs: Prentice Hall Inc., 100.
- 15.
Ibid., 104.
- 16.
Freeman, R. Edward. (1997). “A Stakeholder Theory of the Modern Corporation” in Tom L. Beauchamp and Norman E. Bowie (eds.), Ethical Theory and Business, 5rd ed. Englewood Cliffs: Prentice Hall Inc., 74.
- 17.
Freeman, R. Edward, Jeffrey S. Harrison, Andrew C. Wicks, Bidhan L. Parmar and Simon E. DeColle. (2010). Stakeholder Theory: The State of the Art. Cambridge: Cambridge University Press, 19.
- 18.
Ibid., 112.
- 19.
For details see Johnson, J.L., C.M Daily, and A.E. Ellstrand. (1996). “Boards of Directors: A Review and Research Agenda,” Journal of Management, 22(3), 409–438. See also, Stearns, L.B. and M.S Mizruchi. (1996). “Board Composition and Corporate Financing: The Impact of Financial Institution Representation on Borrowing,” Academy of Management Journal, 36(3), 603–618.
- 20.
See the marvelous history of the development of the concept in Freeman, Harrison, Wicks, Parmar and DeColle, op.cit., Chapter 2.
- 21.
Mitchell, Ronald K., Bradley R. Agle, and Donna Wood. (1997). “Toward a Theory of Stakeholder Identification and Salience: Defining the Principle of Who and What Really Counts,” Academy of Management Review, 22, 853–886.
- 22.
In what follows mentally add “almost always” to “should.”
- 23.
Moriarity, Jeffrey. (2010). “Participation in the Workplace: Are Employees Special?” Journal of Business Ethics, 92, 373–384.
- 24.
See Harris and Bromiley, op.cit.
- 25.
Jensen, Michael. (2002). “Value Maximization, Stakeholder Theory, and the Corporate Objective Function,” Business Ethics Quarterly, 12, 235–256.
- 26.
Williamson, Oliver. (1984). “Corporate Governance,” Yale Law Journal, 93, 1197–1230.
- 27.
Pfeffer, Jeffrey and Robert I. Sutton. (2006). Hard Facts, Dangerous Half Truths, and Total Nonsense: Profiting from Evidence-based Management. Boston: Harvard Business School Press.
- 28.
Freeman, R. Edward and William M. Evan. (1990). “Corporate Governance: A Stakeholder Interpretation,” The Journal of Behavioral Economics, 19, 337–359.
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Bowie, N.E. (2013). Stakeholder Board Representation as a Means of Governance. In: Business Ethics in the 21st Century. Issues in Business Ethics, vol 39. Springer, Dordrecht. https://doi.org/10.1007/978-94-007-6223-7_10
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