Protecting Internal and External Stakeholders

Abstract

We have noted in Chapter 1 that the modern global corporation must typically serve multiple constituencies. It has a large number of stakeholders with specific needs that must be addressed and protected. In most companies shareholders, as providers of risk capital, remain primus inter pares; without equity capital a company simply cannot exist, so defending the financial and legal rights of shareholders becomes the overriding goal of the process. Indeed, some feel that shareholder interests alone merit consideration, since they are the only stakeholders that possess an open-ended contract without specific protections (creditors, for instance, have finite contracts with protections such as collateral or covenants, suppliers have performance contracts with defined terms, and so on).¹ But while access to equity is essential, the availability of other forms of capital funding (such as retained earnings, bonds, and loans) and the growing belief that companies need to work cooperatively with other constituents suggests that other stakeholders also deserve attention. In fact, many parties contribute to the prosperity of a corporation, and their interests must be considered as well. If they are treated poorly and repeatedly lose out to shareholders they will soon depart, leaving companies without the critical mass and mix of human resources, clients, suppliers, or credit needed to continue in business.²