Understanding stakeholder salience and its influence on corporate governance practices in an emerging country

: An empirical study of the clothing industry in Bangladesh

Abstract

This study examines stakeholder salience and its influence on corporate governance practices in an emerging economy export-led manufacturing sector, particularly focusing on Bangladesh’s clothing industry. Despite challenges including corruption, collectivism, and high power distance, Bangladesh’s garment sector has become the world’s second-largest exporter, attracting substantial investment from world-renowned international brands mainly because of competitive pricing and availability of low-cost skilled workers. The research analyses how different stakeholders influence corporate governance practices, their roles in monitoring and addressing issues, and potential improvements within this industry. The study employs Mitchell et al.’s (1997) stakeholder identification and salience framework to categorise stakeholders and analyse their impact on corporate governance based on power, legitimacy, and urgency attributes. Using an interpretive paradigm and qualitative methods, the research includes case studies of three garment factories and 28 semi-structured interviews with diverse industry participants including managers, owners, academics, bankers, and government officials.
The findings identify eight key stakeholder groups with major influence on corporate governance practices: certification bodies, consumers, financial institutions, factory owners, government authorities, international buyers, trade associations, and workers. Their influence is subjective, and their levels of salience may vary based on the specific context and circumstances. Certification bodies, factory owners, and international buyers emerge as powerful influencers in shaping decision-making, and monitoring governance and operations due to their financial strength, ability to enforce compliance and market control - empirical findings raise questions about whether they are truly supporting the best governance practices or creating barriers. In contrast, workers show limited power despite their central role, while government authorities, though crucial for legal frameworks, face effectiveness challenges due to corruption and political influence. Trade associations receive criticism for prioritising self-interest over industry needs.
The analysis reveals that the traditional Anglo-American corporate governance model does not fully address the distinctive/subtle challenges faced in this context due to engrained cultural and operational norms, resource constraints, and leadership dynamics. Corporate governance commitment varies across factories, they prioritise Corporate Social Responsibility (CSR) initiatives, implement Standard Operating Procedures (SOPs). Factories are affiliated with national and international auditing organisations (e.g. BSCI, WRAP) and undertake regular audits to adhere to global standards and implement stringent safety protocols to protect workers. However, significant challenges remain in the sector, including lack of unity among factory owners, autocratic management styles, and the dominance of family-controlled leadership. Additionally, cultural and educational factors significantly shape governance practices, affecting transparency and ethical standards. While robust governance proves important for attracting Foreign Direct Investment, stricter enforcement may increase production costs and affect competitiveness.
The study introduces two theoretical frameworks - a stakeholder influence continuum showing varying influence levels, and an iceberg model depicting visible and invisible dimensions of corporate governance practices. This research advances the understanding of corporate governance in emerging economies by applying Mitchell et al.’s framework to examine stakeholder dynamics. The findings contribute to stakeholder theory and provide practical insights for industry practitioners, policymakers, and researchers addressing governance gaps in similar economic contexts. The study emphasises the importance of enhanced collaboration, education, and context-specific approaches to governance in emerging economies.

Date of Award	2025
Original language	English
Awarding Institution	University of Dundee
Supervisor	Bruce Burton (Supervisor) & Theresa Dunne (Supervisor)