Comparative analysis of corporate governance strategy impact on workforce satisfaction: traditional V/S tech sector industries

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Gueydan, Victor
Issue Date
MBA in Finance
Dublin Business School
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In 1992 The Cadbury Committee described corporate governance as: "the system by which companies are directed and controlled." Since then, various theories have been proposed to determine the best corporate governance practice. The two most used approaches are the shareholder and the stakeholder strategies. Milton Friedman was the first to theorize the shareholder approach of corporate governance. For him, the sole responsibility of business is to increase profits for stockholders. This idea is based on the fact that managers are hired as the agent of shareholders to run the company for investors benefit. Thus, they are morally & legally compelled to serve their interests. The shareholder theory is now considered as traditional approach of doing business with companies. However, this approach has clear disadvantages, indeed concentrating solely on the interests of shareholders is creating several problems. The focus on short term strategy and higher risk-taking are just two of the inherent dangers involved by this strategy. As an example, we could quote Enron and Worldcom cases, where continuous pressure on managers to increase returns to shareholders led them to manipulate the company accounts. Edward Freeman has first theorized the stakeholder theory, this theory tried to identify the responsibilities of corporations in today's' world, whether they be economic, legal, ethical, or even philanthropic. Indeed, the stakeholder theory states that a company has a responsibility not only toward stockholders but to a broader group of stakeholders, including workforce, customers, suppliers, creditors, and even community and competitors. Nowadays, some of the world's largest Tech corporations claim to implement the stakeholder approach to build their corporate governance strategy. This paper will try to determine which of these two corporate governance strategies is creating the highest Workforce satisfaction. In order to achieve this goal, a comparative approach will be used in this research. This approach will compare the Tech sector (who is known to apply a Stakeholder corporate governance) to a company in a more traditional sector, in our case, the Financial sector (who is known to apply a Shareholder corporate governance).