Examining the relationship between corporate governance, stakeholder structure and associated firm performance can be of paramount significance for an investor to ensure ROI and secure investment. Interestingly, major difference among the various counties corporate governance systems is the difference in the ownership and control pattern of firms that exist across
The more powerful the stakeholder, the more control they have to the company so more pressure will be given to the company to fulfill the stakeholder expectations and interest (Deegan, 2014). Thus, stakeholder theory is concerning on how company can strategically manage their particular powerful stakeholders and balance the often conflicting demands of different stakeholder groups (Chen and Roberts, 2010). In this theory, the ‘community’ may be perceived as a ‘powerful’ stakeholder to influence company decisions and that may then have further impact on the operations and future of company growth. Without community pressures, there might be no environmental initiatives established by companies. One of the ways for the company to meet stakeholder expectation is by providing an environmental reporting in order to gain their support.
The three key elements for stakeholder management are the following: Leadership: The best organization work with clear set of priorities and shared vision targeted to achieve goal, and articulate this directly by top management or via their sub ordinates. Staff: A good stakeholder is build up over by many days of interaction and staffing, the strength of staff determines the strength of project, staff at all level need to be credible, consistent and share their organization objectives. Communication: Organization need to communicate their objectives in well-defined internally and externally, two way conversation and taking feedback from each stakeholder is essential to understand them. (Cited from Ipsos Mori (2009,November 3).Understanding your
According to Freeman, “a stakeholder in an organisation is (by definition) any group or individual who can affect or is affected by the achievement of the organisation’s objectives.” (Freeman, 2010, p. 46). This is the most cited definition in literature. (Mitchell, Agle, & Wood, 1997, pp. 853-886). Since a stake can be defined as “something of value, some form of capital – human, physical or financial – that is (placed) at risk, either voluntarily or involuntarily” (Clarkson, 1998, p. 2), organisational stakeholders can be understood as “individuals or groups who incur and/or impose risk in their relationships with the organisation.” (Vidaver-Cohen, 2007, pp.
In Stakeholder theory, the employees are viewed as individuals with specialized skills, which provide value to the company. According to Berens (2012), the relationship between the company and employees is very important. By involving the employees in decision making process such as long term planning and short term planning provide an in depth contribution as they are working in the company, they have unparallel knowledge of the inner company workings thus have insight in to what will or won't work in the company. Example employees are the one creating a brand, respect and reputation for the company. They spend countless hours with customers thus they know and understand what they want.
There are various division of stakeholder but we will focus more on the primary and secondary stakeholders. The primary stakeholders are the most important type of one or five stakeholders because without them the organisation would not be in existence or cannot survive such as the shareholders, board of directors and management and secondary stakeholders are the other groups who can be affected by the organisation or indirectly affect the organisation objectives (Verdeyen, 2004). Shareholders and other investors are seen as the most prominent external actors in agency relationship that exist between the board of directors and the shareholders where the board of directors are referred to the agent and the Shareholders are referred to as the principal (Benedicte and Ronald, 2010). The agent is expected to observe fiduciary duty towards the principal by acting in their best interest. The principal incurs agency cost when monitoring the behaviour and activities of the agent.
3.0 Stakeholder power Stakeholder knew as the prime source for the organization unit (Kristen, 2015). Stakeholder refers to any group or individual who can be affected or affected by the entities achievement (Mayers, 2005). In fact, Mayers divided the stakeholders into four categories; first, the business partner sector includes employees, suppliers, and distributor. Second, the external influencers are media and society. Third, the regulatory authorities involve government agencies.
Greenwood (as cited by Appiah, 2016) said that employees were the 41 most essential and primary stakeholder groups; hence, employee involvement is likely to lend legitimacy to the causes taken up by organizations. Stakeholder theory has been used to inform research in the hotel industry, where stakeholder groups are classified as internal or external. Most organizations, including hotels, have a complex structure according to Jones & Lockwood (as cited by Appiah, 2016) with various types of engagements or activities. Those undertakings in the hotel industry included accommodations, meeting space rentals, restaurants, leisure, and community involvement. Altinay and Miles (as cited by Appiah, 2016) suggested that stakeholders are a uniform group who display individual forms of stakeholder relationships.
The Shareholder and the Director have totally different roles in a limited liability company. Normally a shareholder is the individual who owns the said Company by holding shares whereas the directors have managing powers. In fact, it appears that there is confusion as to the separation of these two positions and as to the distinction of important factors when it comes to corporate governance. This article aims to provide a clear distinction of the roles of both the Shareholder and the Director in a company and demonstrate the fundamental right of a shareholder. Subject to the provisions stipulated in the Articles of Association of a company and/or to any decision given by the General Meeting, the Board of Directors is empowered to manage
Management of Shareholder Expectations Speaking of an organization and its running or functioning, shareholders are very important in it. Before going on to depth of explanation of defining what are the duties, effects of shareholders on any organization, what an organization can get from shareholders, we need to define the term shareholder. Shareholder could be a single person, a group containing few people or even an organization having huge list of people working in it that apply either a direct or an indirect stake or effect in an organization’s operations and functions but at the same time, an organization’s policies, procedures, actions and objectives can easily effect this shareholder. Managing stakeholder’s expectation is considered