54 Pages Posted: 1 Nov 2022
Date Written: October 31, 2022
There has been extensive discussion recently of how corporate stakeholders other than shareholders should be treated within corporate governance, but little examination of whether and how companies actually involve stakeholders in decision-making. This Article surveys disclosure by the S&P 100 companies as to how they engage with their stakeholders. It finds that employees are the most engaged group, followed by customers, and then by nonprofits, suppliers, and government regulators. The most used forms of engagement include meetings and surveys. Employee resource groups are near-universally used. Partnerships, social media, and councils are used less frequently, but still somewhat regularly.
The article also surveys how companies incorporate stakeholders within their internal governance arrangements. Most companies assign oversight of ESG matters to a specific board committee, with a significant minority creating a special committee for that purpose. New Chief Sustainability Officer and Chief Diversity Officer positions have become quite widespread. An increasing number of companies are experimenting with ways to tie executive compensation to ESG practices and performance.
But the current reality falls well short of the future possibilities of stakeholder engagement. Current engagement mostly involves companies listening to what stakeholders have to say. It does not empower stakeholders to be more actively involved in corporate decision-making. The stakeholders most worthy of extensive empowerment are employees, who could be given more power through unionization, board representation, or works councils. Other stakeholders (especially customers) could be given more limited power through advisory stakeholder councils. These could be encouraged through various forms of regulatory relief to companies adopting stakeholder empowerment mechanisms.
Keywords: stakeholders, stakeholder engagement, corporate governance, corporate purpose, stakeholder governance
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