The shareholder and stakeholder theory management essay

pros and cons of shareholder theory

This approach states that for a business to reach its full potential, the business must consider the needs of broader stakeholders Argenti, P. Unlike Friedman states, socially responsible businesses do not enage in CSR only to better their profits and their bottom line but rather also to give back and improve the community in which they operate Newman, D.

Investor relations professionals will have to carry out the very important task of keeping the shareholders informed and ensuring that investors have a positive image and perception of the organisation D, Saint, A, Tripathi.

The challenges and changes that organisations face today in terms of investor relations will also be explored. How to cite this page Choose cite format:.

Advantages of shareholder theory

For example, consider a factory worker. However if the manager ignored the role of other stakeholders, only respond to the shareholders requirement and focus on the pursuit of the short-term benefits, in the usual sense, it will damage the long-run profit and the enterprise will be obsoleted by the society. This approach states that for a business to reach its full potential, the business must consider the needs of broader stakeholders Argenti, P. To be more specific, if the employees do not satisfied about the salary and the work condition, this group of stakeholders will leave, after that, the shareholders will sell their stocks, then the bank will stop providing credit to the enterprise and do not lend loan or overdraft, in the meantime customers will search for other goods or service. Shareholder Theory Shareholder theory is the idea that businesses work for the shareholders. Academy of Management Review. Friedman believed that an organisations sole responsibbilty is to maximize profits for sharholders and engaging in any other form of social responsibility would detracting from the sole purpose of the business Coleman, T. Investors, just as other stakeholders, are impacted and can have an impact on the business. Firstly, providing the employees a good pay, better working conditions and further training in career path in order to encourage them to work harder. Donaldson taught at Australian National University for years. Some socially responsible organisations only do business with other socially responsible organisations and will refuse to buy from businesses who are unethical or harmful to society Nurse, S. Many businesses also offer training programmes, internships and learnerships to induviduals. Reference list: David, B

To truly adopt this approach a business will need to think carefully about how they do business and develop business values that is known and accepted by all staff Coleman, T. It can also attract investors to invest in the enterprise, build corporate reputation as well as media coverage.

These different viewpoints and the implications that they hold for stakeholder management as well as investor relations will be discussed in detail in this essay.

The shareholder and stakeholder theory management essay
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Essay on The Stakeholder Theory by Thomas Donaldson