Working Paper: CEPR ID: DP17616
Authors: Dirk Schoenmaker; Willem Schramade; Jaap Winter
Abstract: There is a heated debate on shareholder versus stakeholder governance. The stakeholder view recognises that companies have broader responsibilities to society than just making profit. But the lack of an integrated measure makes it difficult to hold management accountable against multiple goals. Moreover, the traditional stakeholder model tends to focus on stakeholders who are directly involved with the company, such as employees and customers, with only a minor role, if at all, for stakeholders without such a direct relation but who are affected by the company’s conduct, for example through ecological damage and climate change, including future stakeholders. This paper develops an integrated model of corporate governance including current and future stakeholders. It also presents an integrated measure for corporate value. The board can use this integrated value measure to balance the interests of the various stakeholders in a structured way. The new measure can also be used to hold the board accountable for their decisions. Finally, the paper examines the mechanisms to include the interests of the various stakeholders in the board.
Keywords: stakeholder model; sustainable finance
JEL Codes: K22; G31; G34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Traditional shareholder model (G38) | Environmental degradation (Q53) |
| Traditional shareholder model (G38) | Social harm (Z13) |
| Stakeholder model (G34) | Managerial slack (D22) |
| Stakeholder model (G34) | Lack of clear direction (D80) |
| Integrated value measure (C43) | Improved accountability (H83) |
| Lack of consideration for future stakeholders (G39) | Ecological degradation (Q53) |
| Mechanisms for inclusion of future stakeholders (O36) | Mitigation of ecological degradation (Q57) |
| Integrated value measure (C43) | Enhanced decision-making processes (D91) |