Employees as a component of governance models: divergence between rhetoric, systems and practice

Corporate governance has gained increasing importance in the last decade as organisations have been involved in bankruptcies and frauds alongside decreases in organisational value and jobs. Researchers have signaled a need for new perspectives and models of governance, especially one that clearly identifies and embeds employees as part of the system. In using the authors' newly developed holistic model of governance, this paper explores the importance of human resources and industrial relations as key components of the governance system. It discusses whether organisational rhetoric in relation to stakeholders and social responsibility matches organisational human resource systems. In doing so it delves into the concept of labour as a key stakeholder, and investigates whether the new approach to industrial relations which focuses on individuality is at odds with the stakeholder approach. It is argued that when divergence occurs between rhetoric, systems and practice there is a failure of governance.