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Concluding comments

The above analysis suggests that the proposed, but scrapped, mandatory reporting of social and environmental information via the OFR proposals was likely to be as ineffective as voluntary disclosure of such information in a special purpose report in terms of facilitating action on the part of organisational stakeholders. The common feature of both approaches lies in the fact that administrative (reporting) reform is viewed in isolation from any necessary institutional reform which may provide the means for stakeholders to hold company directors accountable for actions affecting their vital interests. As Williamson (1997) argues;

Disclosure of information can only have limited effect because the likelihood of it leading to action depends on the ability of others to use information in forums in which they have a legitimate voice. (p. 160)

It is quite impossible to envisage stakeholder accountability being established in a situation where company directors acknowledge enforceable duties only to shareholders and, at least in Anglo- Saxon capitalism, pursue a pre-occupation with maximising shareholder value (see Collison, 2003, Bakan, 2004). For stakeholder accountability to be established, a far more pluralistic form of corporate governance would be required. There would need to be a clear recognition that there are other normatively legitimate stakeholders than simply equity shareholders alone (Phillips, Freeman, & Wicks, 2003). Other groups after all, particularly employees, make firm specific investments and incur risks in the same way in which shareholders do. To deny them representation in the governance of the company therefore appears somewhat difficult to justify on moral grounds (see, for example, Gamble & Kelly, 2001).

What has to be recognised is that despite the claims of writers such as Sternberg (2004), for whom stakeholder theory is a deeply dangerous doctrine, the corporation is not coextensive with the shareholders. As Phillips et al. (2003) note;

It is an entity unto itself. It may enter into contracts and own property It has standing in a court of law. Limited liability assures that shareowners are not, in general, personally liable for the debts of the organisation Top managers are agents for the corporation and this is not merely a shorthand way of saying that they are agents for the shareholders. The corporation is meaningfully distinct. (p. 483)

Kay (1997) similarly rebuts the notion that shareholders in any real sense own the company, as opposed to having particular and specific claims upon it, and points out that the organic model of corporate behaviour (whereby the corporation has a life independent from its shareholders) describes the behaviour of large companies and their managers somewhat better than does the prevalent principal-agent perspective.

Criticisms of the organic, stakeholder, model of the organisation traditionally focus upon problems in pursuing multiple objectives and balancing benefits for all stakeholders thereby establishing an accountability that is so diffuse as to be ineffective (see, in particular, Sternberg, 2004). However, as Phillips et al. (2003) argue, the stakeholder model does not advocate that managers serve the interests of multiple masters, but rather the interests of one the organisation. They go on to point out that maximisation of shareholder wealth in itself is an indeterminate objective, given the innumerable ways in which it may be pursued. Furthermore, the diffuse accountability argument can readily be countered by establishing a stakeholder statute prescribing corporate objectives and responsibilities towards specified stakeholder groups (see Kay, 1997).

Whilst the corporate lobby apparently espouses a commitment to stakeholder responsiveness, and even accountability, their claims are pitched at the level of mere rhetoric which ignores key issues such the establishment of rights and transfer of power to stakeholder groups. Hierarchical (Roberts, 1996) and coercive (Habermas, 1992) power prevent the form of accountability that can be achieved through discussion and dialogue. This paper provides evidence that the executive management of organizations and, perhaps even more worryingly, the government make use of one-dimensional power (Lukes, 2005) within the decision-making process to favour shareholders over all other interested groups. In the words of Lukes (2005, p. 19), one-dimensional power:

involves a focus on behaviour in the making of decisions on issues over which there is an observable conflict of (subjective) interests, seen as express policy preferences, revealed by political participation. (emphasis in original)

The use of one-dimensional power was apparent in how the prominence given to stakeholders was reduced subsequent to the vehement corporate responses to the OFR Materiality Working Groups 2003 consultation document. We also saw that the proposed mandatory nature of the OFR itself, and particularly any potential social and environmental disclosures, was removed by Gordon Brown to ensure that not too great a burden was placed on business. Such government decisions observably favoured shareholder interests. It is much more difficult to comment upon whether organizations and the government also favour shareholders through the use of two-dimensional and three-dimensional power where decisions are prevented from being taken on potential issues (p. 25) and the ways in which potential issues are kept out of politics (p. 28) respectively. We could suggest that the failure of governments to even consider, or consult on, requiring significantly extended corporate social and environmental reporting is an example of three-dimensional power being used to protect corporations and their shareholders. Of course, as Lukes (2005) explained, it is very difficult to obtain evidence to support or refute such a suggestion.

Stoney and Winstanley (2001) point out that it is quite fallacious to imagine that stakeholding can change the corporate balance of power without the support of wider societal reform (p. 613). As we have argued in this paper, it is equally fallacious to imagine that accountability to stakeholders can be established by reporting reform alone. Significantly, the Company Law Review Steering Group, whose deliberations resulted in the 2002 White Paper, considered, and roundly rejected, the adoption of a pluralist approach towards defining directors duties (DTI, 2000). Under such an approach company directors would have owed an enforceable accountability to a wider range of stakeholders than merely capital providers. For one influential commentator (Cowe, 2000) its rejection simply ensured that stakeholder rights are no longer on the agenda, and Victorian age company law is set to stay. Certainly, the OFR proposals produced under the aegis of the preferred enlightened shareholder, or inclusive, model (DTI, 2000) did little to enhance corporate transparency and, even more fundamentally, it is quite impossible to envisage how stakeholders could have effectively utilised the information provided anyway. The latter point can equally be made about the, admittedly copious, information contained in stand alone social and environmental reports. Whilst sometimes not explicitly acknowledged, the same enlightened shareholder perspective underpins these latter initiatives, albeit going under the banner of the business case in this instance. It is indeed salutary to recall that some thirty years ago reporting reform was advocated on the grounds of establishing public accountability (Accounting Standards Steering Committee, 1975). Despite the level of administrative reform experienced since that time we have clearly gone backwards as far as moves to establish a wider corporate accountability is concerned. Such a situation cannot change unless the nettle of institutional reform is firmly grasped.

Acknowledgements

The comments of Rob Gray, Chris Humphrey, Bill Lee, Brendan ODwyer, Jeffrey Unerman, David Woodward, participants at the 2004 Corporate Governance and Ethics: Beyond Contemporary Perspectives Conference and staff seminars at the universities of Southampton and Wellington, together with those of two anonymous reviewers on earlier drafts of this paper are gratefully acknowledged.