Abstract
This chapter is based on the theoretical integration of stakeholder management in a governance approach and attempts to answer questions on the boundaries of a firm, the nature of its relationship to society and the nature of the firm in general. The basic assumption is that the firm can be understood as a social form of governance for bilateral and multilateral, contractually organized stakeholder relationships. In this outline stakeholders are self-interested owners of resources who form a team for the utilization of these resources and the creation of economic added value as long as a cooperation rent can be achieved for all the participants. As the owners of resources, stakeholders constitute and reproduce a team through their transactions and they are not, as a wide-spread assumption in the discussion suggests, to be understood as “claimant groups” external to the firm but as its internal assets, whose efficiency and effectiveness for the team and its members depend on the form and the organization of its governance structure. In this theoretical perspective economic cooperation is always the result of social cooperation and stakeholder dialogues, multi-stakeholder forums, deliberative discourses etc. represent an opportunity for managing the resources of a team, which is needed because of the specific nature of the resources involved in the implementation of a particular transaction. In this sense corporate governance cannot be restricted to a monitoring function. Instead it must be seen as the capacity to lead, manage and monitor the resources of a cooperative project designed to generate factor income and a cooperation rent. This approach implies that stakeholder management is a fundamental strategic task of corporate governance and not simply the business of a firm’s communication department. This includes participation in networks of stakeholders which have the task of contributing to the solution of the social and hence also of the economic problems of the firm.
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Notes
- 1.
For the viewpoint that this is one of the reasons for the success of West European societies see North 2005, p. 42ff.
- 2.
- 3.
On the irritations expressed in the socio-political discussion running under the heading “Corporate Citizenship” see Moon et al. 2005.
- 4.
As in Coase’s famous article of 1937.
- 5.
On this point see also Williamson 1999.
- 6.
Machlup summarizes the development of neo-classical theory in a completely apt fashion when he emphasizes that the concept of the “firm” only describes a heuristic fiction, “a theoretical link, a mental construct helping to explain how one gets from the cause to the effect.” (Machlup 1967, p. 9)
- 7.
The legal sciences and politics recognized this fact much earlier. With the “Limited Liability Act” of the English parliament of 1855 at the latest the firm faces its shareholders and stakeholders as an independent form.
- 8.
The uncertainties this can create in regard to the determination of the nature of the firm can perhaps be recognized in the formulation of Jensen and Meckling only a page before: “By legal fiction we mean the artificial construct under the law which allows certain organizations to be treated as individuals.” (Jensen and Meckling 1976, p. 310, footnote 12). The paradox is overcome via the difference market/law: although the firm is not an individual but a market process striving for equilibrium, from a legal standpoint it can be treated as if it were an individual.
- 9.
Jensen, however, developed his idea on this theme further: “Stockholder value maximization has been wrong from the social viewpoint from the start. There is nothing special about stockholders in the firm. I’ve said this many times before this, and it is time we take it as given that maximizing the value of a firm’s equity will not produce maximum value of the firm as a whole. And it will certainly not produce maximum value for society. […] My answer is that we want our corporations to behave so as to maximize the total long run value of the firm.” (Jensen 2008, p. 167), whereby it remains an open question how long “the long run” is.
- 10.
On this point see Freeman (2000) and his separation thesis.
- 11.
Kaufmann and Englander 2005 call this a new function perspective (function of value) on the nature of the firm and see it above all as an argument for the composition and independence of the governing bodies of a firm in its work. It is also worthy of note in this connection that the firms are no longer interpreted in terms of price theory but of value theory.
- 12.
The politicization of the firm seems, however, to be a specific concern of the advocates of discourse ethics (cf. Palazzo and Scherer 2008).
- 13.
Porter and Kramer associate it with a market access strategy. In the context of governance ethics shared value is a collective concept of value creation which stands for the value which is achieved for all of the stakeholders of an organization, including society. It can be measured by the relevant financial commitment of a firm in relation to the overall costs or revenues of the firm. These indicators fulfil the condition of the reduction of complexity and enable on this basis the comparability of a firm’s performance (cf. Wieland and Heck 2013).
- 14.
On this point see also the already mentioned proposal of Hill and Jones 1992, p. 131.
- 15.
Teece et al. 1997 argue along the same lines.
- 16.
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Wieland, J. (2014). The Firm as a Cooperation Project of Society. In: Governance Ethics: Global value creation, economic organization and normativity. Ethical Economy, vol 48. Springer, Cham. https://doi.org/10.1007/978-3-319-07923-3_8
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