20
Therefore, under the systems of governance, policies and strategies can be conceptualized as a kind of voluntary agreements among stakeholders. In other words,
any system of governance cannot guarantee its stable operation without consent by
overwhelming number of stakeholders. This kind of voluntary arrangement, of
course, is at the risk of collective action problems. Therefore, any stakeholder agreement must be accompanied by well-articulated mechanisms that prevent free riders
from the framework.
Why do they have to reach an agreement, assuming that these stakeholders might
be able to live alone without interacting with other stakeholders? Two kinds of argument are forthcoming. First, the mutual dependence between these stakeholders is
so important in this global economy that an option of not collaborating with other
stakeholders entails a massive loss or a huge risk. In particular, the volume of international trade has increased – for instance, by as much as 9.5% only in 1 year of
2010 – and every individual on the planet would be affected somehow by international agreements. For instance, how is it likely for a palm oil plantation owner to
negate an internationally accepted sustainability standards on its production? Such
a plantation owner can be easily expelled from the international market and will lose
his/her competitiveness particularly because the crude palm oil is now one of the
major internationally traded commodities. Not participating in world trade organization and other international mechanisms would risk the economy of a nation.
Climate change and other transboundary environmental issues are another representation of mutual dependence that brings nations together. Due to their massive
size of externality, a variety of stakeholders need to make a commitment to a governance mechanism that circumvents the risk of catastrophes at the global scale. We,
including the future generations, share a risk of so-called lose-lose outcome in the
classic prisoner’s dilemma situation.
Second, stakeholder collaboration can also be conceptualized as an opportunity
for value creation. For instance, the involvement of nongovernmental organizations
(NGOs) around the world in the implementation of global arrangement can reduce
the cost of implementation and monitoring, compared to a supranational organization taking over the whole responsibility of implementation. This kind of networked
governance can be sustained through the mutual gains to all parties involved in such
arrangement.
Negotiated agreements are said to produce fair, efficient, stable, and wise solution, compared to the conventional command and control decisions (Susskind and
Cruikshank 1987). One example is the negotiated rulemaking programs by the US
Environmental Protection Agency. When the agency intends to issue a regulation,
stakeholder representatives are convened to reach an agreement on a draft regulation. When the EPA issues the regulation by adopting the draft prepared by stakeholders, the risk of the EPA being sued for the regulation is lower because the
stakeholders previously agreed to the regulation. Therefore, stakeholder-based
approaches are far better than the traditional command and control approaches
based on the rational.
M. Matsuura and H. Shiroyama
Therefore, under the systems of governance, policies and strategies can be conceptualized as a kind of voluntary agreements among stakeholders. In other words,
any system of governance cannot guarantee its stable operation without consent by
overwhelming number of stakeholders. This kind of voluntary arrangement, of
course, is at the risk of collective action problems. Therefore, any stakeholder agreement must be accompanied by well-articulated mechanisms that prevent free riders
from the framework.
Why do they have to reach an agreement, assuming that these stakeholders might
be able to live alone without interacting with other stakeholders? Two kinds of argument are forthcoming. First, the mutual dependence between these stakeholders is
so important in this global economy that an option of not collaborating with other
stakeholders entails a massive loss or a huge risk. In particular, the volume of international trade has increased – for instance, by as much as 9.5% only in 1 year of
2010 – and every individual on the planet would be affected somehow by international agreements. For instance, how is it likely for a palm oil plantation owner to
negate an internationally accepted sustainability standards on its production? Such
a plantation owner can be easily expelled from the international market and will lose
his/her competitiveness particularly because the crude palm oil is now one of the
major internationally traded commodities. Not participating in world trade organization and other international mechanisms would risk the economy of a nation.
Climate change and other transboundary environmental issues are another representation of mutual dependence that brings nations together. Due to their massive
size of externality, a variety of stakeholders need to make a commitment to a governance mechanism that circumvents the risk of catastrophes at the global scale. We,
including the future generations, share a risk of so-called lose-lose outcome in the
classic prisoner’s dilemma situation.
Second, stakeholder collaboration can also be conceptualized as an opportunity
for value creation. For instance, the involvement of nongovernmental organizations
(NGOs) around the world in the implementation of global arrangement can reduce
the cost of implementation and monitoring, compared to a supranational organization taking over the whole responsibility of implementation. This kind of networked
governance can be sustained through the mutual gains to all parties involved in such
arrangement.
Negotiated agreements are said to produce fair, efficient, stable, and wise solution, compared to the conventional command and control decisions (Susskind and
Cruikshank 1987). One example is the negotiated rulemaking programs by the US
Environmental Protection Agency. When the agency intends to issue a regulation,
stakeholder representatives are convened to reach an agreement on a draft regulation. When the EPA issues the regulation by adopting the draft prepared by stakeholders, the risk of the EPA being sued for the regulation is lower because the
stakeholders previously agreed to the regulation. Therefore, stakeholder-based
approaches are far better than the traditional command and control approaches
based on the rational.
M. Matsuura and H. Shiroyama