Corporate purpose as a signalling mechanism to facilitate and guide stakeholder governance
- Publication Type:
- Conference Proceeding
- Citation:
- 2022, pp. 1-30
- Issue Date:
- 2022-06-15
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| Filename | Description | Size | |||
|---|---|---|---|---|---|
| Article Euram Corporate purpose signalling and stakeholder governance.pdf | Accepted version | 381.99 kB |
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There are strong indications that acceptance of the shareholder primacy view of the corporation is on the decline and a stakeholder theory approach to corporate governance is becoming more mainstream. Yet we have very little idea on how stakeholder governance can be achieved in practice, nor how it might be understood theoretically. Certified B Corps are at the front of this movement with their commitment to achieving both profit and a positive impact on society and the environment. Through interviews with 18 B Corp leaders in Australia and New Zealand we explore emerging theories of stakeholder governance and how it interacts with corporate purpose. We use signalling theory to understand stakeholder governance as a proactive process of communication of priorities rather than a reactive process of stakeholder management. We find that an organisation-specific corporate purpose acts as a signal to pre-empt and prevent stakeholder conflicts. A unique corporate purpose makes conflicts less likely but also provides an ethical compass for decision-making in situations where conflict is unavoidable. Together, corporate purpose and a commitment to stakeholder governance raise the legitimacy of non-shareholder stakeholders and increase their relative salience.
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