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Participation versus Consent: Should Corporations Be Run according to Democratic Principles?1

Published online by Cambridge University Press:  10 April 2015

Stefan Hielscher ,
Markus Beckmann  and
Ingo Pies
Stefan Hielscher
Affiliation:
Martin-Luther-University, Halle-Wittenberg
Markus Beckmann
Affiliation:
Friedrich-Alexander-University, Erlangen-Nuremberg
Ingo Pies
Affiliation:
Martin-Luther-University, Halle-Wittenberg
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Abstract:

The notion of “democracy” has become a much-debated concept in scholarship on business ethics, management, and organization studies. The strategy of this paper is to distinguish between a principle of organization that fosters participation (type I democracy) and a principle of legitimation that draws on consent (type II democracy). Based on this distinction, we highlight conceptual shortcomings of the literature on stakeholder democracy. We demonstrate that parts of the literature tend to confound ends with means. Many approaches employ type I democracy notions of participation and often take for granted that this also improves type II democratic legitimation. We hold this to be a mistake. We provide examples of the ambiguity of organizational procedures and show that under some circumstances a decrease in the degree of participation may actually increase legitimation because a governance structure that results in higher productivity can provide higher benefits for all parties involved, serve their interests and therefore meet their agreement. Less type I democracy may mean more type II democracy. We believe this to be an important insight for judging (and further improving) the legitimacy of both capitalistic firms and competitive markets.

Keywords

democracystakeholder theorylegitimacyconstitutional economicsconsentparticipation
Type
Articles
Information
Business Ethics Quarterly , Volume 24 , Issue 4 , October 2014 , pp. 533 - 563
Copyright
Copyright © Society for Business Ethics 2014

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