The Role of Stakeholders in Corporate Governance

The Role of Stakeholders in Corporate Governance: A View from Accounting Research reviews the empirical evidence on stakeholders' influence on managerial behavior focusing on stakeholders - employees, the general public, the media, related firms, the government, private regulators, gatekeepers, and foreigners - rather than shareholders and debt-holders. In analyzing the role of stakeholders in corporate governance, the focus is on their ability and incentives to discipline corporate managers. The question addressed is whether under the current institutional design, stakeholders can help reduce managerial behavior that is socially undesirable. For each stakeholder, the review analyzes the economic forces that determine how and to which extent the stakeholder contributes to discipline managerial behavior. The author first discusses the incentives of each stakeholder to influence managerial actions. Second, the author describes the mechanisms through which stakeholders influence managerial actions, and third, the author identifies the frictions that potentially prevent stakeholders from disciplining managerial behavior. In addition to more specific conclusions, the following broad points emerge. First, all the analyzed stakeholders appear to influence managerial actions to some extent, suggesting that corporate governance should consider the monitoring roles of many actors and implies that stakeholder monitoring could substitute for costly corporate governance mechanisms. Second, the efficacy of the stakeholders' monitoring role is not clear-cut calling for further research.