Shareholder Theory Or Stakeholder Theory - 1325 Words

#1 Shareholder theory or stakeholder theory â€Å"There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.† (Friedman) Friedman’s word perfectly defines the shareholder theory. However, stakeholder theorists, like John Mackey or Edward Freeman, argue that business has an ethical obligation to all stakeholders, including employees, suppliers, costumers, society and any other groups of people that the business has a relationship with. Personally, I am more inclined to Milton Friedman’s sentiment for various reasons demonstrated as below. First of all, when business becomes more profitable, the whole society may indirectly benefit from it. As the companies grow larger, they spontaneously need to hire more people and thus create more job opportunities. Moreover, they will also pay more tax a s they earn more money, which is beneficial for reallocation of wealth and social equity. Most of all, businesses themselves are sometimes the best gifts to the society. For example, I don’t really care about how much money Microsoft donates to charity, but I do appreciate that it makes personal computers accessible for every individual in a reasonable price. If it hadn’t â€Å"focused so relentlessly on increasing its profits, cutting his costs in the process†, I would not be able even toShow MoreRelatedShareholder Theory Vs. The Competing Ideas Of Stakeholders Theories946 Words   |  4 Pagesrelevance to shareholder theories versus the competing ideas of stakeholders theories. I will not only develop a basis of each, I will take a deeper look into what the sole responsibility and how these action may affect business as a whole. Finally I will take time to examine each and conclude with a personal justification to each. To make a profit, that s what most would say is the end goal in every business for the most part. Shareholder theory also related with stockholder theory providing aRead MoreCompeting Models Of Corporate Governance1398 Words   |  6 Pages2.1 Corporate governance There are two main competing models in corporate governance. Stakeholder method Under the stakeholder model of corporate governance, firms owned and controlled by small number of major shareholders. This model of corporate governance often called as the relationship based method due to the close relationship maintained between companies and their major shareholders. This close relationship, little separation of ownership and control minimises the agency problem. HoweverRead MoreStakeholder Theory and Competing Concept1707 Words   |  7 PagesIntroduction Stakeholder theory was given by R. Edward Freeman, which was expressed many ways to represent the stakeholder as an important part of the corporate responsibility. According to Stenberg (1996), this stakeholder theory, is basically not capable to provide better corporate governance. He also stated that, this theory is unable to provide a better view of business performance (Edward Reed, 1983). Currently, the stakeholder theory has been grown up from its origin and seen as the conceptRead MoreThe Maximisation Of Shareholder Value Essay1691 Words   |  7 PagesAlhalboni The maximisation of shareholder value is a corporate objective that has become increasingly popular since the 1980’s. Many companies explicitly state that maximising shareholder value is one of their key business objectives; an example of this is Coca-Cola, who state in their Coca-Cola Company Vision (2016) that â€Å"maximising long-term return to shareholders† is one of their business goals. In this essay, I will consider the extent to which maximising shareholder value is a reasonable objectiveRead MoreCorporate Ethics Theory And Stakeholder Theory1309 Words   |  6 Pagessolely to the company’s shareholders. However, this notion is seen as immoral. This is because according to the notion of corporate social responsibility, business must behave ethically, represents a broader recognition of stakeholders and must take into account economic, social and environmental inputs in the way it operates. Hence, people against the notion of shareholder primacy sugges t that the director should also take into account the interest of a wide range of shareholders (e.g. customers, employeesRead MoreIssues with the Stakeholders Theory885 Words   |  4 Pagesof the â€Å"Stakeholder’s Theory† of organizational management and business ethics. Through the theory he gave his view on the ethics and values in managing a corporation as well as defining the role of management. In his â€Å"Stakeholder’s Theory† Freeman said that it is management’s duty to protect and take care of the welfare of the corporation. He mention the top management to take care of the corporation that involves managing the different claims of the conflicting stakeholders. According to PhillipsRead MoreTransparency Is Key Aspect of Corporate Governance1331 Words   |  6 Pagescorporate governance this will allow stakeholders and shareholders to review and evaluate performance of management and the company this ensures that the board of directors and the executive directors of corporations act in the best interest of shareholders and the corporations. It is implemented like a form of company law it is put in place so shareholders are protected and also so that the company is run up to standards is making profits and it is a way shareholders and potential investors know theyRead MoreThe Management Of A Company1238 Words   |  5 Pagesmajority of the company decide to hire mangers to make important decisions on your company. This is a general example on how shareholders run their company. Now wouldn t you rather help make decision, or be able to factor in ideas from the employees and community that has helped the business grow? If so, you might want to consider the stakeholders theory.   Different stakeholders can hold varying amounts of influence and interest, within the organization. For example, consider a factory worker. An individualRead MoreThe Business World Of 21st Century1488 Words   |  6 Pagesorganisations. In traditional view, the shareholders were the main stakeholders in the company. This traditional view has started to be challenged in the late 20th century. Freeman (2010) stated that ‘the business world of 21st century has undergone dramatic change’. In corporate governance theory, there are mainly two kinds of arguments. The first one is that a firm should focus on the shareholder wealth maximisation, which is called theory of shareholder. This one might be considered as the traditionalRead MoreCorporate Governance and Financial Performance739 Words   |  3 Pagesinterested in the well-being of the firm (the stakeholders) attempt to ensure that managers and other insiders take measures or adopt mechanisms that safeguard the interests of the stakeholders. Such measures are necessitated by the separation of ownership from management, an increasingly vital feature of the modern firm. A typical firm is characterized by numerous owners having no management function, and managers with no equity interest in the firm. Shareholders, or owners of equity, are generally large