Does Zattoni Establish A Contingency Stakeholder Model

Satisfactory Essays
Historically, its owners control a corporation, but as shareholders and stakeholders became more dominant in the success of a corporation, owner control shifted. Shareholders are stakeholders in a corporation, but stakeholders are not always shareholders. A stakeholder is mostly interested in the performance of a corporation for motives other than stock appreciation, while shareholders actually own part of the corporation through financial shares. Stakeholders can be employees who rely on the company for income, bondholders who intend to see success in the company, customers who rely on the company for a good and/or service, or suppliers who depend on the company for stable revenue. Zattoni established a contingency stakeholder model for the distribution of ownership rights. This model is based on the concept that corporations increase their ability to thrive in the long run if the major stakeholders that supply the crucial investments are in control of decision-making.
According to Zattoni’s model, these crucial investments include: contractual conflicts due to certain investments and long term commitments, the question of uncertainty which every company experiences, and finally, the supply of limited and valuable resources. A central idea discussed is how the allocation of ownership rights contributes to solve governance problems. Stakeholders provide necessary resources to increase the company’s ability to survive, while companies provide a certain distribution of the profit made to its stakeholders. This is a prime example of the reciprocal dependency relationship between the company and its stakeholders that can potentially lead to many problems. For example, stakeholders who are unpleased with their returns from the company...

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...ents occur that were not previously predicted, it is up to the top managers to make decisions at balancing all interests. For example, if the company was not thriving as much as predicted, top managers should not despoil any stakeholders even if they had the opportunity to get away with it. Top managers should recognize the importance of any contributions given, and should create an atmosphere that encourages and rewards corporation growth. The article states that if ethical behavior is consistent, it will limit the amount of problems that result from contractual errors. A second solution is giving ownership rights to stakeholders who provide highly crucial contributions to a company and letting them partake in governance decision-making. The benefit of this solution is allowing stakeholders to full decision rights, but at the cost of company’s risk potentially.
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