The Corporate Governance approach in the light of classical approaches: The shareholder versus the stakeholder. The case of Rwanda

Abstract

The concept of “Corporate Governance” derives from an analogy between the government of nations or states and the governance of corporations. Corporate Governance has had no precise and commonly accepted  definition to date mainly due to the standing point of departure of the one defining it. Each definition has necessarily to be influenced by the locally existing agency problems, which themselves stem from the socio, cultural as well as legal traditions of different jurisdictions. The most dominating and fashionable definition is that, it is the way how corporate institutions are governed and controlled. This paper seeks not to investigate the deep history of, but to expound on the distinctions between the traditional  approaches of; Anglo-American (shareholder value) and the Continental European 9Stakeholder value) corporate governance approaches on one hand, and on the other, assess which approach would befit the Rwandan context given its political and corporate legal history, the existing corporate landscape especially on the ownership structures, and the existing  economic level. The paper starts by the discussion about the two  models/theories/ approaches referred to as the classical ones and tries to distinguish one from the other. It further looks at Rwanda’s contemporary corporate institutional and regulatory evolution and thereafter examines which model of corporate governance would then fit better in such  circumstances. A conclusion and some recommendations are drawn at the end.

Key words: Corporate governance, Shareholder value, stakeholder value.