Shareholder and stakeholder theory

It involves the problem of directors controlling a company whilst shareholders own the company. In the past, a problem was identified whereby the directors might not act in the shareholders or other stakeholders best interests. Agency theory considers this problem and what could be done to prevent it. What is agency theory?

Shareholder and stakeholder theory

Shareholder vs. Stakeholder Value

Born in Columbus, GeorgiaFreeman received a B. He is one of the executive editors of the journal Philosophy of Management and he serves as the editor for the Ruffin Series in Business Ethics from Oxford University Press.

Shareholder and stakeholder theory

Work[ edit ] Freeman is particularly known for his work on stakeholder theory originally published in his book Strategic Management: He has co authored other books on corporate strategy and business ethics. His latest book, Managing for Stakeholders, was published Stakeholder theory[ edit ] Stakeholder theory is a theory of organizational management and business ethics that addresses morals and values in managing an organization.

It was originally detailed by Freeman in the book Strategic Management: However, stakeholder theory argues that there are other parties involved, including governmental bodiespolitical groupstrade associationstrade unionscommunitiesfinancierssuppliers, employeesand customers.

Shareholder & Stakeholder Theories Of Corporate Governance

Sometimes even competitors are counted as stakeholders - their status being derived from their capacity to affect the firm and its other morally legitimate stakeholders.

The nature of what is a stakeholder is highly contested Miles,[3] with several definitions existing in the academic literature Miles, CSR policy functions as a built-in, self-regulating mechanism whereby a business monitors and ensures its active compliance within the spirit of the law, ethical standards, and international norms.

CSR is a process with the aim to embrace responsibility for the company's actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere who may also be considered as stakeholders.

The term "corporate social responsibility" came into common use in the late s and early s after many multinational corporations formed the term stakeholdermeaning those on whom an organization's activities have an impact. It was used to describe corporate owners beyond shareholders as a result of an influential book by Freeman, Strategic management: Others argue CSR is merely window-dressingor an attempt to pre-empt the role of governments as a watchdog over powerful multinational corporations.

Anticipation of such concepts appear in a publication that appeared in [6] by Italian economist Giancarlo Pallavicini, creator of the "Method of the decomposition of the parameters" for the calculation of the results does not directly cost of business, regarding ethical issues, moral, social, cultural and environmental.Agency theory suggests that the firm can be viewed as a nexus of contracts (loosely defined) between resource holders.

The Instrumental Approach

An agency relationship arises whenever one or more individuals, called principals, hire one or more other individuals, called agents, to perform some service and then delegate decision-making authority to the agents.

The Cadbury Committee defined corporate governance as "the system by which companies are directed and controlled." Numerous theories have been proposed on corporate governance best practice, none more popular than the shareholder and stakeholder theories. Since corporations are owned by their shareholders, theory suggests that directors and executives do what owners/shareholders want; and what shareholders generally want is to maximize share price.

most companies strike a balance somewhere between the perspectives of shareholder and stakeholder value. Government agencies and non-profits, of.

Summary of the Instrumental Approach to Stakeholder Management. Abstract

Agency theory. Agency theory is part of the bigger topic of corporate governance.. It involves the problem of directors controlling a company whilst shareholders own the company.

The second theme – the need to attend to stakeholder dynamics – stems from the extensive literature on social networks that focus on the relationships between stakeholders, and can reveal both responses and counter responses to organizational actions. 2 ABSTRACT Social welfare, or the good society, is of central concern to the Academy of Management.

We begin by observing that, in theory and practice, social welfare appears to be a multifarious, multi-.

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