Article ID Journal Published Year Pages File Type
1015335 European Management Journal 2007 17 Pages PDF
Abstract

One of the critical distinctions between shareholder theory and stakeholder theory rests on the role of management in the resolution of the firm’s internal conflicts. Whereas managers are considered as a source of conflicts by agency/shareholder theorists, they are often viewed as useful mediators in the stakeholder approach. This paper proposes an alternative theory on the role of management in corporate governance, the so-called short term salient stakeholder theory, and illustrates it with a longitudinal case study of Eurotunnel, the Channel Tunnel operator. When the firm’s legitimate stakeholders have very different information levels and bargaining strengths, this theory predicts that (i) firms are governed in the interests of a unique stakeholder group (ii) managers have a minor role and are prone to collude with the most powerful interest group (iii) this autocratic type of governance is unstable in the long-term as the legitimate stakeholders expropriated at one period use influence strategies to gain power in the next period (iv) the chronic conflicts associated to short-term salient stakeholder management lead to poor organizational performance.

Related Topics
Social Sciences and Humanities Business, Management and Accounting Business and International Management
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