Corporate Governance and the Protection of Stakeholder Interests in British Banks
The emergence of stakeholder theory has been a major feature of the business management literature of the last three decades, although the term can be traced back at least to a 1963 internal memorandum at the Stanford Research Institute, which defined stakeholders as ‘those groups without whose support the organization would cease to exist’. In 1983, the management theorist R Edward Freeman published his influential text, ‘Strategic Management – A Stakeholder Approach’, which built upon earlier studies in this area [ ]. There is now a voluminous literature dealing with stakeholder management in the modern corporation, but it is beyond the scope of this paper [ ] to review this [ ] here.
As we have seen, Freeman defined stakeholders as ‘any group or individual who can affect or is affected by the achievement of the firm’s objectives’. Freeman’s list of such stakeholders included the following: owners, employees, suppliers, customers, competitors, consumer advocates, media, environmentalists, local community organizations and governments. Freeman noted that:
Each of these groups [ ] plays a vital role in the success of the business enterprise in today’s environment. Each of these groups [ ] has a stake in the modern corporation, hence, the term ‘stakeholder’, and ‘the stakeholder model or framework’ or ‘stakeholder management’.
We could add further groups, such as depositors and competitor banks, when discussing bank stakeholders. Freeman noted that this reality [ ] called for new theories or models of how each of these groups work so as to develop a strategy for each group; he added that there was also the need to develop integrated approaches for dealing with these multiple stakeholder groups of the corporation [ ]. As he explained, there was a need to consider how each strategic issue affected these stakeholders [ ], creating the need for ‘processes which help take into account the concerns of many groups’. Freeman and McVea subsequently noted that:
A stakeholder approach emphasizes the importance of investing in the relationships with those who have a stake in the firm [ ]. The stability of these relationships [ ] depends on the sharing of, at least, a core of principles or values.
This [ ] was seen as important, as the long-term survival of the firm depended upon a shared set of values, on the one hand, of the corporation and of its managers and, on the other hand, the values of its various stakeholders. Empirical evidence of the link between a set of core values in the company and the long-term success or survival of the company has been identified by a number of other researchers.
This [ ] is especially clear when we come to discuss bank governance where a failure to consider wider stakeholder interests in the pursuit of short-term gains (e.g., bonuses) by those controlling banks can undermine the survival of the bank and may trigger wider external intervention in the affairs of banks.
Drag each of the noun phrases (NPs) below into a suitable gap in the text on the left.
the involvement of multiple stakeholder groups in today's business environment
relationships between the firm and its various stakeholders
Tomasic, Roman (2012), ‘Corporate Governance and the Protection of Stakeholder Interests in British Banks’, European Company Law 9, no. 1 26–36 [or] Tomasic (2012)
the emphasis on investing in relationships
stake holding groups such as owners, employees, suppliers, customers, competitors, consumer advocates, media, environmentalists, local community organizations and governments
the investment in the establishment of relationships between a firm and its stakeholders based on shared principles or values
the link between a set of core values in the company and its long-term success or survival
any groups which can affect, or are affected by, the achievement of the firm's objectives
the literature dealing with stakeholder management in the modern corporation