Board of Directors and Stakeholders: Building Bridges of Understanding

Abstract

Complex and dynamic relationships exist among different corporate constituencies. In that context, boards of directors are increasingly expected to play a strong role in dealing with non-shareholder and non-management stakeholders. This article aims to contribute a better understanding of board-stakeholder relationships by offering views from two disciplines: law and management. It takes arguments from both disciplines which advocate that long-term value maximisation cannot be achieved without the board’s engagement with genuine stakeholders. By employing stakeholder theory, we place particular emphasis on normative and instrumental aspects of the board’s approach to stakeholders. Our study suggests that the board’s instrumental approach may lead to a strategic level of interaction (temporary and focused stakeholder participation), whereas a normative approach may steer towards an inclusive and long-term stakeholder dialogue.