Richard Marens

Getting Real: Stakeholder Theory, Managerial Practice, and the General Irrelevance of Fiduciary Duties Owed to Shareholders

Stakeholder theorists have generally misunderstood the nature and ramifications of the fiduciary responsibilities that corporate directors owe their stockholders. This fiduciary duty requires the exercise of care, loyalty, and honesty with regard to the financial interests of stockholders. Such obligations do not conflict with the normative goals of stakeholder theory, nor, after a century of case law that includes Dodge Bros. v. Ford, do fiduciary responsibilities owed shareholders prevent managerial policies that are generous or sensitive to other corporate stakeholders. The common law recognizes a multitude of legal relationships between various corporate constituents, and fiduciary duties are only a subset of the obligations that arise from these relationships. This article argues that statute and case law can bring comparable legal protection to constituents other than stockholders, and suggests ways that these protections might be further strengthened. Implications for management education are also discussed.

Destroying the village to save it: corporate social responsibility, labour relations, and the rise and fall of American hegemony

The literature on Corporate Social Responsibility (CSR), produced largely by American business school academics, has, over the last generation, ignored an empirical record of corporate irresponsibility, especially in the area of employment relations. This neglect is puzzling given the skepticism of previous generations of CSR scholars and the importance these placed on labour-management cooperation. Arrighi’s (1994) theory of the rise and fall of hegemonic societies can explain this shift in perspective. According to Arrighi, American global economic hegemony emerged a century ago powered by its multi-divisional corporations, but the extraordinary autonomy exercised by this organizational form stimulated demands for the responsible use of its economic power. When American hegemony was still new and based on industrial development, the discourse on CSR focused on ‘the labour question’ in order to insure productivity and social peace. As the nature of American hegemony expanded after World War II, academic views on appropriate corporate responsibilities broadened accordingly, and CSR embraced a pluralistic perspective capable of competing with other systems. Once American hegemony began its decline, and new competitive and financial pressures shook the stability of its institutions, the field of Business and Society adopted a managerialist version of CSR that relied on nonconsequentialist ethical abstractions. This contemporary perspective has had no measurable impact on corporate behaviour, and as American hegemony dissipates, any future version of CSR will necessarily be less ethnocentric, perhaps originating within other societies.

Wobbling on a One-Legged Stool: The Decline of American Pluralism and the Academic Treatment of Corporate Social Responsibility

B. Readings (University in Ruins. Cambridge: Harvard University Press, 1996) argued that universities have abandoned their original project of promoting a national culture and have tried to substitute by embracing “globalization,” but the vagueness and incoherence of the concept has failed to return purpose to the University. The academic treatment of corporate social responsibility illustrates this dilemma. For a generation after H.R. Bowen (Social Responsibilities of the Businessman. New York: Harper & Row, 1953) founded the field, scholars struggled to fit the concept within a national system of pluralistic power-sharing among a variety of institutions that would define and enforce standards of responsibility necessary for the general good of American society. That understanding changed in the nineteen eighties, shortly after corporate executives had united to an unprecedented degree to direct the power of government in their interests, influence the public agenda, and roll back the power of unions. In response, business ethicists began to reformulate corporate social responsibility as a voluntary practice on the part of these same executives. Since the Kantian and Lockean principles upon which this approach was based were themselves problematic, it is not surprising that the experience gained over the last generation casts doubt on the efficacy of this reliance on voluntary restraint and personal initiative. However, circumstances that include the failure of globalization to deliver on its promises may have changed sufficiently in recent years to revive interest in approaches that acknowledge the importance of countervailing power for encouraging greater corporate social responsibility.

Cooperating with the Disempowered Using ESOPs to Forge a Stakeholder Relationship by Anchoring Employee Trust in Workplace Participation Programs

Although researchers have begun to examine how firms manage their entire web of stakeholder relationships, the component relationships also require theoretical and empirical examination. Several studies have found that Employee Stock Ownership Plans (ESOPs) have a positive impact on firm performance. The authors explain these results by hypothesizing that ESOPs, when combined with employee participation programs, forge a stakeholder relationship between management and employees. The authors offer criteria for identifying stakeholder relationships, provide background on ESOPs, analyze why they contribute to establishing such a relationship, and examine how published empirical research supports this analysis. The authors conclude by suggesting directions for future research.

What comes around: the early 20th century American roots of legitimating corporate social responsibility

Understanding why explicit, managerial-centred corporate social responsibility (CSR) which first developed in the United States, has recently spread globally requires an examination of the circumstances under which it first emerged. CSR arose out of the success of large American corporations of the early 20th century in preventing unionization or significant regulation of their workplaces, a success that required firms to assume responsibility for employee welfare, not only to promote efficiency and prevent a resurgence of labour activism, but also to reassure traditionalists concerned with new white collar employment relations. Corporate executives discovered that positive publicity with regard to personnel policies helped them manage other controversies, so after World War I, some began to extend claims of being responsible employers to argue for a more comprehensive set of social responsibilities. The onset of the Depression and its aftermath reduced the significance of managerial voluntarism for almost a half century, but the rise of neo-liberalism has revived managerial CSR, although once again it may not survive a global crisis.

Getting Past the “Government Sucks” Story How Government Really Matters

American business scholars have crippled their own work by ignoring the positive contributions of government spending and regulation. Because of the efforts made by corporate executives over the past generation to limit the power of government, business school academics have had little incentive to take a realistic view of the contributions governments make to business success. As a result, these scholars rarely acknowledge either the Keynesian or the Schumpeterian functions of government. This neglect has crippled scholarship, because these two functions have a significant effect on business strategies, organization, entrepreneurship, innovation, marketing, ethics, and business—government relations. Governments Keynesian function stimulates demand for goods and services through purchases and income redistribution. Governments Schumpeterian function lowers the cost of innovation through regulatory requirements, R&D subsidies, and the procurement of expensive new technology. Additional research is required to determine whether business scholars of other nations employ a more nuanced understanding of governments effect on business.

Getting it right the first time

Purpose – This paper reconsiders the criticisms of the most influential theory of the rise of the large corporations, and to see how these criticisms can be met without entirely abandoning the basic elements of the theory.Design/methodology/approach – This problem is approached by first analyzing the weaknesses inherent in Chandlers theory as presented in The Visible Hand, and then by reworking elements of the theory by relying on data generated by other historical accounts.Findings – The author found that the theory could be salvaged by reordering the evolution of managerial practices based on a variety of historical studies, many not considered by Chandler, but even some of his own earlier work. Given these changes in historical order, vital managerial reforms can be placed sufficiently early that organizational techniques existed to solve the problems and exploit the opportunities that Chandler identifies as creating the pressures necessary to generate the large industrial corporation, thus responding...

Two, Three, Many Enrons: American Financial Hypertrophy and the End of Economic Hegemony

Organizational theorists certainly do not require a world system theorist to tell them that many classic assumptions regarding the structure and stability of business organizations have eroded over the last generation. Davis et al. (1994) provide one of the most perceptive analyses of these changes, drawing important lessons for organization theory from the rise and fall of the American business conglomerate. For them, the haphazard and opportunist architecture of conglomerates ultimately strained ‘the very idea of the corporation as a bounded social entity analogous to a sovereign body’ (p. 565) since no one could creditably attribute a conglomerate (e.g. Beatrice) with any kind of body-like structural or functional unity. Having weakened the metaphor of the firm as body, the conglomerate builders opened the door to a new dominant view of the corporation as a nexus-of-contracts that would completely discard the metaphor. From this new, highly influential, perspective, corporations were viewed as ‘voluntary and impermanent social arrangements— as mere conventions not institutions’ (p. 565) and ‘as a result a new range of social structural arrangements for production [italics mine] has emerged’ (p. 567). As profound an insight as this is, it is incomplete because the authors held back from connecting it to any broader economic and political trends that might have explained the timing of both the rise and fall of conglomerates and the sudden dominance of the nexus-of-contract theory of the corporation, which was only one of many competing theories that arose over the past century or so.1 Furthermore, by taking for granted that these supposedly voluntary contractual relationships were entered into in the service of ‘production’, they also missed a massively important implication of their argument. A more realistic view is that such ‘contracting’ individuals would view production, at best, as a means to a personal end: money, security, job satisfaction, etc. Moreover, as long as they could obtain these, actors would likely prove indifferent to the actual quantitative or qualitative results of production, and some might Volume 10(3): 588–593 Copyright

Going to War With the Army You Have Labor's Shareholder Activism in an Era of Financial Hegemony

According to Arrighi and Silver, the United States faces a crisis of declining hegemony historically characterized by stagnating wages, hypertrophy of the financial sector, and the shifting of production overseas. Previous cycles suggest that the fate of workers within the hegemonic core depends in part on their political and organizational response. For a generation, organized labor in the United States has sought ways to exercise influence over private and public pension funds. As a result, union staffers have become sophisticated shareholder activists. Recent financial scandals have created a new opening for these activists, who have responded by forming coalitions to reform executive pay. The recent dismissal of a California Personnel Employees Retirement System official implies limits to this investor “pluralism,” but the situation is hardly settled. Another economic downturn might move the interests of investors and workers closer together, and shareholder activists could play a role settling the resulting conflicts over the distribution of income.

Laying the Foundation: Preparing the Field of Business and Society for Investigating the Relationship Between Business and Inequality

With the growth in income inequality now regarded as a crucial social issue, business and society scholars need to prepare themselves for the ambitious task of studying how corporate practices, intentionally or not, contribute to this trend. This article offers starting points for scholars wishing to explore this topic but lacking the necessary background for doing so. First, it offers suggestions as to finding the extant empirical work necessary for informed analysis. This is followed by an examination of alternate methods of theory construction relevant to this topic, which transcend the limitations of the experimental science model of theory building. It then provides an example of a social science theory that exemplifies how empirically informed open theory can illuminate the dynamics behind growing inequality. The article concludes by suggesting that progress in this area requires embracing the spirit of earlier approaches to business and society scholarship while abandoning some outdated assumptions.