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Materiality In Corporate Governance: The Statement Of Significant Audiences And Materiality

Materiality In Corporate Governance: The Statement Of Significant Audiences And Materiality

Robert G. Eccles

Harvard Business School

Timothy Youmans

Harvard Business School

September 3, 2015

Harvard Business School General Management Unit Working Paper No. 16-023

Abstract:

Under the prevailing ideology of “shareholder primacy” most boards of directors believe that they are prevented from considering stakeholders other than shareholders in determining material issues and materiality for strategy and reporting. New research is showing that legal foundations exist for directors to indeed consider other stakeholders. To many boards, this is new thinking. In order to assist boards in this new realm of taking into account multi-stakeholder significance, we have structured this paper in four parts and a conclusion. In Part I we review fiduciary duty focusing on to whom this duty is owed. In Part II, we review the relevance of materiality in corporate governance. In Part III, we review our audience-focused materiality determination approach and in Part IV we discuss the new idea of an annual board “Statement of Significant Audiences and Materiality.” We conclude with some preliminary research results, ideas for future research, and next steps.

Materiality In Corporate Governance: The Statement Of Significant Audiences And Materiality - Introduction

Under the prevailing ideology of “shareholder primacy” most boards of directors believe that they are prevented from considering stakeholders other than shareholders in determining material issues and materiality for strategy and reporting. New research is showing that legal foundations exist for directors to indeed consider other stakeholders. To many boards, this is new thinking. In order to assist boards in this new realm of taking into account multi?stakeholder significance, we have structured this paper in four parts and a conclusion. In Part I we review fiduciary duty focusing on to whom this duty is owed. In Part II, we review the relevance of materiality in corporate governance. In Part III, we review our audience?focused materiality determination approach and in Part IV we discuss the new idea of an annual board “Statement of Significant Audiences and Materiality.” We conclude with some preliminary research results, ideas for future research, and next steps.

Much of the material presented in this paper has been...


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