Stakeholder Theory of Corporate Governance - Explained
What Does it Mean for Officer and Director Decision Making?
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What is the stakeholder theory of corporate governance?
The stakeholder theory of corporate governance focuses on the effect of corporate activity on all identifiable stakeholders of the corporation. This theory posits that corporate managers (officers and directors) should take into consideration the interests of each stakeholder in its governance process. This includes taking efforts to reduce or mitigate the conflicts between stakeholder interests. It looks further than the traditional members of the corporation (officers, directors, and shareholders) and also focuses on the interests of any third party that has some level of dependence upon the corporation. Stakeholders are generally divided into internal and external stakeholders.
- Internal Stakeholders - Are the corporate directors and employees, who are actually involved in corporate governance process.
- External Stakeholders - May include creditors, auditors, customers, suppliers, government agencies, and the community at large.
These stakeholders exert influence but are not directly involved in the process. Key to the stakeholder theory is the realization that all stakeholders engage in some manner with the corporation with the hope or expectation that the corporation will deliver the type of value desired or expected. The benefits may include dividends, salary, bonuses, additional orders, new jobs, tax revenue, etc.
Back To: Corporate Governance
How do you feel about the stakeholder theory of corporate governance? Should external stakeholders have rights or even be considered in the governance process? Why or why not? To what extent does the current state of corporate governance law focus on the external stakeholder? How, if at all, do you see this trend changing in corporate governance laws and practice?
- Corporate Governance Law (Intro)
- What is Business Governance?
- Berle-Means Thesis
- Corporate Governance Rating Definition
- Who are the members of a corporation?
- Corporate Charter
- Shareholder Register
- Common Stock
- Preferred Stock
- Par Value
- Authorized Shares
- Issued Shares of Stock
- Unissued Shares of Stock
- Outstanding Shares
- Institutional Shares
- Dual Class Shares
- What is a closely-held corporation?
- Close Corporation Plan Definition
- What is a Private Company vs a Public Company?
- What is the role and purpose of the corporation?
- What is the Agency theory of corporate governance?
- Shareholder-Centric Perspective
- Shareholder Value
What is the Stakeholder theory of corporate governance?
What is the role & rights of Shareholders in the corporation?
- Shareholder Democracy Definition
- Quorum Definition
- Information Circular
- Straight and Cumulative Voting
- Cumulative Voting
- Plurality Voting
- Class Voting Shareholders
- Changing the Voting Rules
- Supermajority (Voting)
- Shareholder Sponsored Proposal
- What are the variations on attributes of Ownership structure?
- Stock Split
- What are the fiduciary duties owed by shareholders?
- When is a shareholder personally liable for corporate obligations?
- Appraisal Rights
- Dissenter's Rights
- Say on Pay Rights
- How can shareholder enforce their rights (direct and derivative actions)?
- What is the process for bringing a Derivative action?
- What are corporate vote Proxies?
- Proxy Statement
- Proxy Fight or Contest Definition & Explanation
- What is Shareholder Activism and the significance of Institutional Investors?
- Activist Investor
- Overview of Board of Directors
- Board Decision Making
- Advisory Board (Observer Directors)
- What is the role of the Board of Directors?
- Board of Trustees
- Board of Governors
- What is the composition of the board of directors?
- Chairman of the Board
- CEO as Chairman of the Board
- Outside Director
- Outside Director or Non-Executive Director Definition
- Independent Outside Director
- Budget Committee
- Audit Committee
- Compensation Committee
- Nomination Committee (Corporate Board)
- What standards govern the actions of the board of directors?
- Duty of Candor Definition
- Duty of Care (Board of Directors)
- Duty of Loyalty (Directors)
- Board Evaluation Definition
- What is the Business Judgment Rule?
- What is D&O insurance?
- Codetermination (Foreign)
- What is the role of Managers of the corporation?
- What standards govern manager actions?
- Chief Executive Officer (CEO)
- Chief Financial Officer
- Chief Information Officer (CIO)
- Chief Investment Officer (CIO)
- Chief Legal Officer
- Chief Operating Officer
- Chief Risk Officer
- Chief Security Officer
- Chief Technology Officer (CTO)
- What are the primary state and federal corporate governance laws?
- What is the role of the state in corporate governance?
- What is the role of Securities Laws in corporate governance?
- What is the role of the Foreign Corrupt Practices Act in corporate governance?
- What is the Sarbanes-Oxley Act (SOX) effect on corporate governance?
- Sarbanes-Oxley Act (SOX)
- What is the Dodd-Frank Wall Street Reform and Consumer Protection Act effect on corporate governance?
- Corporate Monitors
- What industry organization standards affect corporate governance?
- How do proxy advisory firms affect corporate governance?
- What is the role of ethics in corporate governance?
- What are the major causes of corporate governance issues?
- What are the access to information issues?
- What are decision-making structure issues?
- What are the power struggle or competition issues?
- Holding Company
- What are hostile takeovers and defenses to hostile takeovers?
- Williams Act
- Staggered Board
- Shark Repellent Defenses?
- Poison Pill Defenses?
- Flip Over Poison Pill Definition
Flip In Poison Pill Definition
- Voting Poison Pill Plan
- Delay-Tactic Defenses?
- Legal Lockup Defenses?
- White Knight and Pac Man Defenses?
- Jonestown Defense
- Lady Macbeth Strategy
- Macaroni Defense
- Yellow Knight
- Back-end Plan Definition
- Backflip Takeover Definition
- Dead Hand Provision Definition
- Kamikaze Defense
- Operating Company Property Company Model
- Scorched Earth Policy Definition
- Revlon Rule
- What are benefit-alignment issues?
- Cadbury Rules Definition