Stakeholder theory and competing concept essay

First, consider the assertion that the theories converge — that if managers take care of the stakeholders, they will wind up maximizing profits and shareholder returns in the long run. Thus, the executives who broke the law were not operating according to the shareholder theory.

Thirdly, before it was mostly managed and planned against people and also without taking into account local opinions what is changing into management for and with local people answering in the needs of local people as well ibid; ibid. This is undoubtedly essential to save potentially massive costs from legal action, boycotts etc, but is also necessary for growth, and for moral and ethical reasons.

Essay UK - http: The fundamental distinction is that the stakeholder theory demands that interests of all stakeholders be considered even if it reduces company profitability. It is sometimes claimed that the stakeholder theory does not demand that a company focus on profitability.

Therefore, the dispute seems to be with us for the time being and the suggestions that recent financial scandals prove the failure of the shareholder theory deserve careful scrutiny before they can be accepted.

Just complete our simple order form and you could have your customised Business work in your email box, in as little as 3 hours. Lastly it will not be financed by the taxpayer only anymore but from several recourses such as tourism ibid; ibid.

The year saw a good deal of corporate executive behavior that was at best disruptive to the free flow of commerce and, at worst, illegal. Still, even if one generously concedes that many recent linkages of executive misbehavior to the theory are misplaced, it is hard to claim that the shareholder theory has done anything to help the situation.

Many of the more strident critics of shareholder theory seem to claim that as executives are charged with maximizing shareholder value and are given large incentives to do so through stock options or other schema, they will respond by embracing whatever manipulations are necessary to achieve that goal.

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 Merrill Lynch have all provided rich fodder for those who question the premise of shareholder supremacy.

Third, it is sometimes claimed that the shareholder theory prohibits giving corporate funds to things such as charitable projects or investing in improved employee morale. About the Author H.

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The stakeholder theory demands that stakeholder interests be considered as an end in themselves. Essay UK - http: Stakeholder Analysis techniques provide the tools to quickly identify important stakeholders and stakeholder engagement research helps businesses to effectively engage with their stakeholders.

Stakeholder Theory

However, none of these assertions can withstand logical scrutiny. Some have argued that the large number of mergers and acquisitions in the late s provides evidence that this assumption is accurate. That argument is more compelling. Its executives have recently concluded that they can no longer afford to manufacture the products domestically, and the most cost-effective solution is to outsource the manufacturing to another country.

Sign up Please enter a valid email address Thank you for signing up Privacy Policy To be sure, many would prefer that the shareholder-stakeholder dispute simply go away.

Finally, consider the assertion that companies have no choice but to follow the shareholder theory, on the basis of law and market forces.

Stanford University Press, That could be one of the reasons of management failure, however, critics argue that involving stakeholders with different interests could cause problem or slow down the decision making process, but there is not directly a negative effect of local participation even when saying that the quality of management plans or actions will not improve directly De Brucker, et al.Since stakeholder theory provides no criteria for what is better or worse, it leaves boards of directors with no criterion for problem solving and firms that try to follow the theory will eventually fail if they are competing with firms that are behaving so as to maximize value.

There is, however, a third usage of 'stakeholding' that is advocated by modern proponents of stakeholder theory: this characteristic usage is not about motivation, or functional relationships, but about entitlements. All the mentioned thoughts and principles of the stakeholder concept are known as normative stakeholder theory in literature.

Normative Stakeholder theory contains theories of how managers or stakeholders should act and should view the purpose of organization, based on some ethical principle (Friedman ).

Part A Section (i) The articles chosen for this essay paper were “Corporate Environmental Reporting: A test of legitimacy theory” by Trevor D. Wilmshurst and Geoffrey R.

Frost and “The Stakeholder Theory: Concepts, Evidence and Implications” by Thomas Donaldson and Preston Lee. Shareholder V Stakeholder Essay The Stakeholder theory on the other hand suggests that managers have fiduciary duties to all stakeholders whom are positively or negatively affected by the decisions of the firm; On the other side there is the stakeholder’s concept which is centered around balancing the objectives of the stakeholders.

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 shareholders’ financial interests against the interests of other.

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Stakeholder theory and competing concept essay
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