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The stakeholder corporation: Introduction to the special issue
THE
STAKEHOLDER
CORPORATION
The Stakeholder Corporation: Introduction to the Special Issue Thomas Clarke
J U S T AS ECONOMIES GO THROUGH cycles, so do e c o n o m i c ideas. The concept of stakeholding has recently
become popular in the United States and the United Kingdom, but has experienced cycles of interest for much of this century. For many years stakeholder institutions and practices have been firmly established in north European economies such as Germany and Scandinavia, and in Asian economies, particularly Japan. But, as the Anglo-Saxon economies begin to see the attractions of stakeholding, Germany and Japan have fallen under the spell of shareholder value. Now western companies are taking more interest in what stakeholder management actually means in practice. The commercial successes of companies practising stakeholder strategies suggests that the Stakeholder corporation may be a model for the future rather than a return to the past. This is an argument I make in the first article, which surveys the origins of stakeholding, and examines the relevance of the concept for contemporary corporate governance. Pitelis and Wahl review the work of Edith Penrose, the unsung heroine of stakeholder economic theory, who taught Will Hutton at INSEAD, and probably had a good deal of influence upon his subsequent championing of the stakeholder economy. Margaret Blair of the Brookings Institution pursues further the economic logic of stakeholder theory, identifying the implications for the governance of firm specific investments and 'knowledge capital'. This leads to fundamental questions about how corporations generate and distribute wealth, and how the process might be improved. Pursuing this theme, in a closely argued analysis, John Plender emphasises the role of
Pergamon PII: S0024-6301(98)00036-3
trust and implicit contracts in creating competitive advantage, and questions the legitimacy of management practices that break this bond. He explores how the employees' contribution might be more effectively rewarded in an equity return. The next three articles assess how managements may implement stakeholder strategies. Wheeler and Sillanpaa, executives from The Body Shop International, show how the stakeholder approach can become the basis of a dynamic process of dialogue and decision-making. Scholes and Clutterbuck demonstrate how companies have problems managing their relationships with increasingly demanding stakeholders. They suggest ways of achieving more integrated communication strategies that acknowledge the pivotal role of employees. Martin Huse shows how stakeholder relationships impact upon the work of a board of directors. The article provides a refreshing insight into the way executives are pulled in different directions by stakeholder influence, and how complex the job actually is in contrast to the simple assumptions of financial economics about management-shareholder relationships. In the final contribution, D. Yuxing and I explore the relevance of the stakeholder model in the explosive growth of the Chinese economy. The basic philosophy of an inclusive stakeholder approach has a particular relevance in a country which is rapidly evolving into a new kind of mixed economy. Together, the contributions to this special issue demonstrate that stakeholding cannot be dismissed as a passing fashion, it is a business philosophy which can help us to understand and manage the modern corporation.
Long Range Planning, Vol. 31, No. 2, p. 181, 1998 O 1998 Published by Elsevier Science Ltd. All rights reserved Printed in Great Britain 0024-6301/98 $19.00+0.00
STAKEHOLDER
CORPORATION
The Stakeholder Corporation: Introduction to the Special Issue Thomas Clarke
J U S T AS ECONOMIES GO THROUGH cycles, so do e c o n o m i c ideas. The concept of stakeholding has recently
become popular in the United States and the United Kingdom, but has experienced cycles of interest for much of this century. For many years stakeholder institutions and practices have been firmly established in north European economies such as Germany and Scandinavia, and in Asian economies, particularly Japan. But, as the Anglo-Saxon economies begin to see the attractions of stakeholding, Germany and Japan have fallen under the spell of shareholder value. Now western companies are taking more interest in what stakeholder management actually means in practice. The commercial successes of companies practising stakeholder strategies suggests that the Stakeholder corporation may be a model for the future rather than a return to the past. This is an argument I make in the first article, which surveys the origins of stakeholding, and examines the relevance of the concept for contemporary corporate governance. Pitelis and Wahl review the work of Edith Penrose, the unsung heroine of stakeholder economic theory, who taught Will Hutton at INSEAD, and probably had a good deal of influence upon his subsequent championing of the stakeholder economy. Margaret Blair of the Brookings Institution pursues further the economic logic of stakeholder theory, identifying the implications for the governance of firm specific investments and 'knowledge capital'. This leads to fundamental questions about how corporations generate and distribute wealth, and how the process might be improved. Pursuing this theme, in a closely argued analysis, John Plender emphasises the role of
Pergamon PII: S0024-6301(98)00036-3
trust and implicit contracts in creating competitive advantage, and questions the legitimacy of management practices that break this bond. He explores how the employees' contribution might be more effectively rewarded in an equity return. The next three articles assess how managements may implement stakeholder strategies. Wheeler and Sillanpaa, executives from The Body Shop International, show how the stakeholder approach can become the basis of a dynamic process of dialogue and decision-making. Scholes and Clutterbuck demonstrate how companies have problems managing their relationships with increasingly demanding stakeholders. They suggest ways of achieving more integrated communication strategies that acknowledge the pivotal role of employees. Martin Huse shows how stakeholder relationships impact upon the work of a board of directors. The article provides a refreshing insight into the way executives are pulled in different directions by stakeholder influence, and how complex the job actually is in contrast to the simple assumptions of financial economics about management-shareholder relationships. In the final contribution, D. Yuxing and I explore the relevance of the stakeholder model in the explosive growth of the Chinese economy. The basic philosophy of an inclusive stakeholder approach has a particular relevance in a country which is rapidly evolving into a new kind of mixed economy. Together, the contributions to this special issue demonstrate that stakeholding cannot be dismissed as a passing fashion, it is a business philosophy which can help us to understand and manage the modern corporation.
Long Range Planning, Vol. 31, No. 2, p. 181, 1998 O 1998 Published by Elsevier Science Ltd. All rights reserved Printed in Great Britain 0024-6301/98 $19.00+0.00