The making of right choices between shareholders and stakeholders in corporate operations in South Africa

Abstract

For a considerable period of time the primary goal of corporations was seen as being to increase the wealth of the investors (shareholders). Priority was given to shareholders’ profit maximisation at the very expense of stakeholders` interests in corporate governance. Stakeholders` interests were seen to be falling outside the range of the needs and objectives of the corporate world. However, in contemporary times, schools of thought have emerged which proposed that the corporations should not solely focus on maximising profit for the benefit of shareholders but should consider the interests of stakeholders in the management of their affairs. This issue has attracted enormous debate and arguments have been brought forward to support the view that those in management positions should consider stakeholders` interests in the corporate governance. However, there is no unanimity among scholars on what should be the right approach. It is against this backdrop that the study therefore assesses how companies are practically run in order to determine whether the interests of stakeholders are considered in corporate governance as much as they should. This dissertation explores, through doctrinal and empirical methods, the conflicting theories and existing debates on corporate governance and to show that it is for the good of the company as an entity that there be equal recognition and treatment of the two groups of the competing interests in corporate operations. The research employed the doctrinal research approach in order to evaluate the positions advocated by the different schools of thought as well as to give a comparative analysis of the position of the law in cognate jurisdictions on this matter. The empirical research approach, through questionnaires, was used to collect qualitative data from different stakeholders of different categories of chosen companies in order to ascertain from the perspective and actual experiences of stakeholders the extent to which companies consider the interests of stakeholders. The research established that, in the main, companies do not consider the interests of stakeholders and in cases where they do, the interests of shareholders are still dominant to those of stakeholders. Recommendations are made from inferences drawn from the study on how to guarantee an enhanced protection of the stakeholders’ interests in the corporate scheme.