Case Study

'As a separate legal person, a corporation has two objectives: To survive and to thrive. Shareholder value is not the objective of the corporation; it is an outcome of the corporation's activities. While shareholders entrust their stakes in a corporation to the board of directors, shareholders are just one audience among others that the board may consider when making decisions on behalf of the corporation.

These audiences, typically called stakeholders, may also include other financial stakeholders, such as bondholders, and nonfinancial stakeholders, such as employees, customers, suppliers, and NGOs representing various concerns of civil society. In the face of limited resources, no matter how large the corporation, directors must make choices regarding the significance of the corporation's many audiences.'

Source: Robert G Eccles and Tim Youmans (2015) 'Why Boards Must Look Beyond Shareholders', MIT Sloan Management Review.

Required -

Assume you have been employed as a corporate governance consultant by the Australian Institute of Company Directors (AICD). The AICD is concerned that many company directors hold the opinion that the company's board of directors has a responsibility to place the interests of shareholders above all other stakeholder interests.

Your assignment is to prepare a report to be submitted to the AICD evaluating the evidence that the responsibility of a company director is to place shareholder interests above those of other stakeholders. Specifically, the AICD has requested that your report contain evidence, examples and recommendations for company directors that will guide them when making board decisions so they are responsive to diverse stakeholder audiences. The AICD has advised you that they intend to make your report a public document and it will be uploaded to the website so it can be read by both corporate governance specialists and non-specialists.

Assessment Criteria:

• Demonstration of knowledge of the issues and evidence of wide reading to support your analysis
• Demonstration of your ability to apply the knowledge to identify keys issues leading to your recommendations
• Evidence of sound reasoning and the exercise of professional judgement to support your recommendations
• Development and statement of concise recommendations for presentation to the AICD
• Overall structure and professional presentation of the report to the AICD
• High quality written communication of concepts and terms in ordinary English as not all readers of the report can be assumed to be specialists competent in corporate governance.