The employee as a key stakeholder: a contested position

Corporate governance has had an increasing focus over the last decade as corporate collapses and fraudulent activity have occurred. Legislation has been tightened but even so, governance has failed. This paper argues that employees are key stakeholders in the corporate governance system of an organization and play a crucial role in organizational success, and as such the paper investigates the position of employees as a component of corporate governance. This research finds that despite all the rhetoric around employees being stakeholders, employees in Anglo systems continue to be viewed as ‘outsiders’ with governance primarily focused on shareholder concerns. Employees are primarily seen as constituents of legal and regulatory frameworks and employee codes of conduct. Australian corporate governance reforms in areas of disclosure and legal and regulatory enhancements over the last decade have not resulted in any significant advance in the recognition of employees’ interests in governance and perceptions of governance. In the public domain the rhetoric has often moved from shareholders to stakeholders, however there is lack of clear enunciation of employees in this stakeholder terminology. And for those organizations that are attempting to include employees in consultation, and as stakeholders, they need to do so consistently and across all organizational dimensions including governance, so that employees and other external parties are not confused as to the legitimacy and role of employees.