Corporate governance on stakeholder issues: shareholder activism as a guiding force

Publicly traded corporations are under increasing amounts of pressure from society at large to redirect resources toward maximizing the value that accrues to non‐shareholding stakeholders of the organization. Building on the management and public relations literature, this study proposes a shareholder–stakeholder engagement model on corporate social responsibility (CSR)—the totality of corporate actions to meet societal norms and expectations. The study argues that shareholder activist–corporate engagements on CSR issues can enhance the corporation's sensitivity to stakeholder issues through improvements in the stakeholder governance mechanisms—institutions that safeguard stakeholder interests and maximize stakeholder welfare—within the corporations. Social shareholder activists, a special type of stakeholders, can be a viable source of pressure in influencing corporations to improve weaknesses in stakeholder governance mechanisms. Copyright © 2014 John Wiley & Sons, Ltd.