How does the shareholder model of corporate governance impact in the management of labour - Essay Example

According to Peterson (2005), transparency, from the shareholder perspective, allows for an opportunity to judge performance of a corporation (p. 59). Because there are measurable differences between the goals of managers and shareholders, corporate governance structures are put into place to ensure that appropriate needs are met. Because the shareholder model of corporate governance is restricted towards the goals of only the investors, most businesses will eventually evolve into a stakeholder form of governance.

In this model, all parties that have an interest in the business are taken into consideration. This would identify investors, managers, suppliers, customers, employees, the government and the community all as partners within the goals of the corporation. This type of structure acknowledges that the function of a corporation extends beyond the boundaries of the interests of the investors. Without this acknowledgement and governance that takes the needs of all parties into consideration, a company will not always have the mechanisms in place to sufficiently satisfy the needs of all the interested parties, thus ultimately impacting the needs of the investors.

The shareholder model of corporate governance, therefore, impacts the way in which labour is managed because it does not have the interests of employees as stakeholders as part of the structure. According to Hoffman (2007), the shareholder model is a predominate corporate structure in both the U.S. and U.K., where the stakeholder model is more predominant in the rest of Europe and Japan (p. 29). Companies that are designed with the shareholder model of corporate governance are more oriented towards short-term goals.

Achieving short term goals and increasing immediate profits dominate the structure of the businesses. Short term oriented decisions and market strategies that involve higher yields in a shorter time frame are more prevalent than long term