S is for stakeholders, not shareholders: The shift in board responsibility

  • The corporate governance landscape is changing and at an accelerated rate.
  • In this environment, the focus of board responsibility is moving from solely on shareholder interests towards stakeholder interests.
  • This is evidenced by APRA’s Report of the Prudential Inquiry into the Commonwealth Bank and proposed changes to the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations.

Person at computer viewing the word 'stakeholder'

The hot subject right now is corporate governance, or lack thereof (ahem, banks). Questions have been raised on the role of boards and what exactly their responsibility is to stakeholders (not just shareholders).

A community backlash is brewing against the concept of the primacy of ‘shareholder value’, predominately as a result of a number of recent corporate scandals. Two particularly interesting developments in the shareholder/stakeholder debate have been APRA’s independent report into the Commonwealth Bank’s governance, culture and accountability; and the ASX Corporate Governance Council’s consultation paper on its proposed fourth edition of its Corporate Governance Principles and Recommendations (Principles and Recommendations).

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