Ownership and control of the modern publicly held corporation are separated. All stakeholder groups must be involved in the firm’s decision making because they have a stake. Shareholders retain some degree of control when it comes to electing directors, and they may adopt, amend, and repeal the corporation bylaws (Evan& Freeman1988).
Responsibilities of Corporate Board of Directors
The corporate board of directors runs the firm to benefit all their stakeholders to maintain their stay at the firm. They ensure the rights of all these stakeholders are respected and allow them to participate in decisions that significantly impact their welfare.
They oversee the corporation’s management and represents stakeholders’ interests. They attend all board meetings and those of committees for advice and counsel between formal meetings. They have the responsibility to select a chairperson of the board among the directors to serve the needs of the corporation.
The corporate board of directors prioritizes to defending all stakeholders’ interests. They set the values and standards within the firm through decision making regarding strategy, incentives, and internal control systems. Working according to the expectations of firms ensures their survival, safeguarding future stakes of all groups.
The corporate management groups running the corporation oversee all the firm’s everyday executions. They have diverse duties and have authorities to perform on the firm’s behalf. The board of directors has the overall responsibility of appointing the management personnel with specific positions varying from one firm to the other. The top corporate manager is responsible for the firm’s duties, and signing of contracts and other official documents; they report directly to the board of directors. The role of the management is to safeguard the welfare of the corporation as an abstract entity. They do this by balancing the multiple claims of conflicting stakeholders to improve the corporation’s health and make more financial returns to sustain customers, employees, and the local community. They act on their fiduciary duty, as interpreted by the board or court of law to safeguard innovation, and research and development.
Interests of stakeholders in the stakeholder model
Shareholders have stakes in firms, and the performance of the firm dictates whether they fail or succeed. Their central work is to make sure that they obtain favorable returns on their stake. They are mainly interested delivering a superior shareowner performance and ensuring the firm operates to produce quality. They build the firms’ reputation with workers and the society for improving the firm’s returns, and profitably increasing their shares. The model gives the managers duty to maximize the returns of shareholders. The model requires stakeholders to prioritize their interests in the order of importance to drive them in the engagement strategy. That allows them to direct all their capabilities on the highest groups of concern while issuing sufficient information to keep the firm’s operations moving.
The corporate law gives shareholders a pre-eminent position of the owners of the business. They have the mandate to elect most members of the board responsible for hiring or firing a senior executive. The board can also approve or reject fundamental firm strategies and policies. Stakeholders communicate to the management by controlling the board to ensure the firm respects their legal and contractual obligations. The stakeholder bill of rights allows all stakeholders to have rights and freedom of speech, and right to grievance procedures within the firm or court.
Their power of influence in electing directors meets their interest in profit growth, and increment of share prices and dividends
Evan, W. M., & Freeman, R. E. (1988). A stakeholder theory of the modern corporation: Kantian capitalism.