What are the main implications of the ‘shareholder’ and ‘stakeholder’ models of corporate governance for the development of long-term human resource strategies?

Seminar Paper, 2007

7 Pages, Grade: 1,0


Table of Contents


‘Shareholder’ model vs. ‘Stakeholder’ model

Impacts of differences in human resource strategies and policies

Adaptability of long and short-term HR strategies in different types of corporate governance




The purpose of this essay is to point out how far a particular type of corporate governance determines human resource (HR) strategy and to what extent different HR strategies can be and are used in different systems of corporate governance. In this case the covered types of corporate governance are the ‘shareholder’ and the ‘stakeholder’ model. Generally, corporate governance is a matter of who owns the rights and the authority to make and influence companies’ decisions, which objectives are aligned and how it is controlled if executed decisions are together good ones. Corporate governance systems differ especially from the unequal role of shareholders and stakeholders, wherefore there exists the distinction between the ‘shareholder’ and the ‘stakeholder’ model of corporate governance (SCHMIDT/WEISS 2003: 1f). These differences have an important impact on the orientation of organizations’ HR-strategies, which are becoming more important for enhancing companies’ success. It suggests for this analysis to make a comparison between German and US corporations, which represent both a different type of corporate governance, as we are going to show. Before reviewing the implications concerning the specified above issue, first of all it is necessary to confront and define the main differences between the two mentioned models of corporate governance in Germany and the United States.

‘Shareholder’ model vs. ‘Stakeholder’ model

The shareholder model of corporate governance dominates especially in the Anglo-American environment thus in countries like the US or UK, while the stakeholder model is more common in continental Europe -particularly in Germany- or Japan. The main objective of US organizations is the maximization of shareholder value, whereas the primary goal of German companies is to balance the interests of a wide range of different stakeholder groups, such as investors, employees, suppliers, customers and managers (VITOLS 2001: 337). These different main objectives result from the differences in corporations’ ownership. Companies in the shareholder model are in widespread shareholdings by many private individuals. In the ‘stakeholder’ model the corporations are more in concentrated ownership by one or more large shareholders with strategic motivation for the ownership. These owners are generally other enterprises, financial institutions or the public sector (KAY/SILBERSTONE 1995: 87f).

Beside dispersed ownership and the so involved aim of maximisation of share prices, the shareholder model is characterized by management control and low agency costs because the companies’ management is directly controlled by its shareholders. But due to arm’s length control and the principal-agent problems involved, it is still difficult for the shareholders to monitor if the salaried managers always act in shareholders’ interests (KAY/SILBERSTONE 1995: 86ff). Furthermore, this model is denoted by its short-term orientation. US companies are under pressure to achieve short-term profitability and increase share prices. Therefore most corporations make short-term decisions and follow a short-term market strategy. They move quickly into new markets and at the same time they also leave quickly stagnating or declining industries (VITOLS 2001: 345ff and WEVER 1995: 609). Because of the dispersed ownership, hostile take-overs of corporations are very common and easy realisable for US companies, as well as is replacing the management (KESTER 1996: 113-117).

In contrast, companies in the stakeholder model are more long-term orientated. Since German firms are in concentrated and reciprocal ownership by few shareholders like banks and other major companies, objectives and profitability are long-term orientated. They set value on corporations’ growth, development and market share to persecute the interests of all stakeholder groups without having preferences for any particular one (KAY/SILBERSTONE 1995: 88f and VITOLS 2001: 345 -352). Shareholders, furthermore, have an active involvement in companies’ policy, because they are often represented in the supervisory board which observes the managerial decisions of management and executive board. Hostile take-overs are infrequent and associated with greater difficulties as a consequence of concentrated ownership (VITOLS 2001: 344).


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What are the main implications of the ‘shareholder’ and ‘stakeholder’ models of corporate governance for the development of long-term human resource strategies?
London School of Economics
International and Comparative Human Resource Management
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ISBN (eBook)
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Kommentar der Dozenten: "Excellent. This essay shows a clear understanding of the issues and conveys them with clarity and confidence. I especially liked the way you used Appelbaum et al. (...) I also liked the emphasis you put on the institutional context. Altogether a very pleasing essay!"
What, International, Comparative, Human, Resource, Management
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Michael Hoffmann (Author), 2007, What are the main implications of the ‘shareholder’ and ‘stakeholder’ models of corporate governance for the development of long-term human resource strategies?, Munich, GRIN Verlag, https://www.grin.com/document/80065


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