The Board of Directors as the Corporate Conscience - The Mediating Role of the Board and Stakeholder Engagement

Graeme Cocks, Melbourne Business School
Jens Mueller, Waikato Management School
Coral Ingley, Auckland University of Technology

Abstract

The underlying assumption in corporate social responsibility is that corporations have obligations not just to their shareholders, but to other stakeholders such as employees, suppliers or community groups. Such commitments raise complex questions about the changing role of the central agency of corporate governance, the board of directors, as the guardian or “conscience and critic” of the organisation it leads. The paper considers whether, as the key corporate decision-making body, boards can work as mediators on behalf of their organisations, going beyond their legal obligations to identify and prioritise a variety of potentially competing interests confronting a corporation. The study highlights the service role and tasks of the board, rather than the more usual agency role with its emphasis on non-executive monitoring and control of the organisation’s executive. The paper shows the difficulties for non-executive directors despite, or because of, the general broadening of the domain of governance. Because the service role includes initiating and formulating strategy and aiding in the acquisition of resources critical to organisational success, serious tensions underlie active stakeholder or shareholder participation on boards. Thus boards might need new structures for considering social and environmental questions, which traditionally may not have been theirs to address. If boards are to function as mediators among corporate constituents, they will require new competencies, feedback mechanisms and leadership skills to aid active engagement through collaboration, cooperation and effective communication in their interactions with their external environment.