The Evolving Paradigm for Sustainable Stakeholder Value Creation
The way corporations are doing business is changing. Will the current dominant (especially in Anglo-Saxon world) shareholder value maximisation model hold out as a long-term sustainable foundation for corporate governance in the 21st century? In our essay, we explore how the current flux of environmental, socio-political, and corporate governance issues, make adopting an integrated stakeholder approach to business an imperative for all corporations. We examine, what we see as a paradigmatic change in the way the "social contract" of a business enterprise is evolving, and how it would demand future management's responsiveness to value creation for all stakeholders. In the "knowledge" economy of 21st century, given the trend of investments in firm-specific human capital by many technology intensive firms, maximising the returns to employees might become almost as important as shareholder value maximisation. Empowerment in the networked economy will place information in the hands of consumers who will have the instruments to influence the success or failure of enterprises. We are already witnessing the impact of buzz marketing, blogging and other online endeavours through which various stakeholders, from celebrities who endorse a particular brand to the consumer who buys the product, come to influence a company's fortune. Unless institutional mechanisms incorporate wider, and sometimes, competing claims of multiple stakeholders into their strategic choices they could stand to lose in the future marketplace. To illustrate the above issues, we shall focus on the predicament of the health care and the pharmaceutical industry and explore the ideal of the creation of sustainable value for all stakeholders.
Keywords: Corporate Governance, Shareholder, Stakeholder, Agency Theory, Externalities, Institutional Shareholders
Dr. Debasish Talukdar
Student, Post Graduate Diploma in Management Course, Indian Institute of Management Calcutta
Affiliation not supplied