Stakeholders and Shareholders Debate - 4838 Words

The Shareholders vs. Stakeholders Debate T he stakeholder theorists smell blood. Scandals at Enron, Global Crossing, ImClone, Tyco International and WorldCom, concerns about the independence of accountants who are charged with auditing financial statements, and questions about the incentive schema and investor recommendations at Credit Suisse First Boston and iMerrill Lynch have all provided rich fodder for those who question the premise of shareholder supremacy. Many observers have claimed that these scandals serve as evidence of the failure of the shareholder theory— that managers primarily have a duty to maximize shareholder returns — and the victory of stakeholder theory, which says that a manager s duty is to balance the†¦show more content†¦However, more thoughtful shareholder theorists often refer to a need for enlightened self-interest, which — if embraced — would lead a corporation s managers to take a long-term orientation. Third, it is sometimes claimed that the shareholder theo ry prohibits giving corporate funds to things such as charitable projects or investing in improved employee morale. In fact, however, the shareholder theory supports those efforts —- insofar as those initiatives are, in the end, the best investments of capital that are available.^ Similarly, the stakeholder theory is sometimes misunderstood. It is sometimes claimed that the stakeholder theory does not demand that a company focus on profitability. Even though the stakeholder theory s ultimate objective is the concern s continued existence, it must be achieved by balancing the interests of all stakeholders, including the shareholders, whose interests are usually addressed through profits. Also, because many stakeholder theory descriptions pro86 MIT SLOAN MANAGEMENT REVIEW vide no formula for adjudicating among the stakeholders disparate interests, some have claimed that the theory cannot be implemented. While it is true that some versions of the theory provide no guidance in this regard, many stakeholder theorists have provided algorithms for trade-offs among stakeholders interests. For example, one might assess the level of risk that each stakeholder has embraced and rank their interests accordingly, orShow MoreRelatedClimate Change Is An Environmental And Business Issue1454 Words   |  6 Pagescomplex relations between climate change and business by exploring on: first, the interaction between business and climate change with a brief stakeholder analysis; second, analyzing the business debates underpinning this issue consisting of stakeholders/shareholders debates and long term/short term debates and the way how business, and other stakeholders address the issue; third, figuring out potential solutions to address the issue and its obstacles. Interaction Business has complex relations withRead 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 Importance Of A Good Corporate Governance Framework1680 Words   |  7 PagesIntroduction This paper will discuss why a good corporate governance framework must incorporate stakeholder accountability. For the purpose of this paper, the term stakeholder governance will be used to incorporate all aspects of stakeholder accountability and engagement, that is; dialogue, decision making, transparent operations and implementation of solutions to common problems or goals. The first part of this paper will describe how the landscape has changed for business operations due to environmentalRead MoreCadbury Corporate Governance Essay1236 Words   |  5 Pagesis the framework by which the various stakeholder interests are balanced, or, as the IFC (International Finance Corporation) states, the relationships among the management, Board of Directors, controlling shareholders, minority shareholders and other stakeholders. The OECD Principles of Corporate Governance states that: Corporate governance involves a set of relationships between a company’s management, its board, its shareholders and other stakeholders. Corporate governance also provides theRead MoreEthical Leadership Debate1654 Words   |  7 PagesReflective Statement Seminar Four: Ethical Leadership Debate Guiding Reflective Question | Student Reflection | What was the definition of ‘ethical leadership’ adopted by the participants in the debate?What is the role of the directors as envisaged by Codes of Corporate Governance and wider society?Are these expectations consistent with the ideas of ethical leadership? | The four characters, Mike, Jan, Mei-Hua and Deshi were portrayed as individuals with starkly differing views on ethical leadershipRead MoreThe Social Capital Theory ( Sct ) And Stakeholder Theory1168 Words   |  5 Pages Despite the conflicting nature between the social-capital theory (SCT) and stakeholder theory (ST), the role of ‘Corporate social responsibility’ (CSR) is a factor for a majority of organisations to gain an economic advantage amongst its competitors. Through globalisation, aspects involving profit maximisation and business reputation have become the primary influences of the ST. Alternatively, the minority of organisations engaging in CSR with the altruistic concern for the stability ofRead MoreIn 1960, Frederick Wrote That Social Responsibility In1742 Words   |  7 Pagesbe possible to gauge any direct measurable economic returns (Walton, 1967). The modern debate on CSR starts in the USA in 1970, when Nobel Prize winning economist Milton Friedman’s ‘minimalist’ view of corporate responsibility (Lucas, et al, 2001) came out in his article where he stated that any company should not deal with issues which do not directly belong to its core mission of increasing its shareholder value and maximizing profit. For Friedman, CSR was a fundamentally subversive doctrineRead 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 MoreDear Silent Partners Of Chocoholics Anonymous1238 Words   |  5 PagesDear silent partners of Chocoholics Anonymous, The purpose of this memo is to discuss the opposing views of shareholders and stakeholders, evaluating our decision based on multiple ethical principles, focusing on Chocoholics Anonymous profitability and ethical integrity. Chocoholics Anonymous has a decline of sales and decrease of profits during the economic downturn, and so do the other companies in town; and those companies fired employees to save money which caused a rapidly growing unemploymentRead 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 objective