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Stakeholder Theory by Emily Hunsaker - Updated June 28, There is a longstanding debate among business analysts as to the business and social responsibilities of corporations. Stockholder theory and stakeholder theory map out these two paths, allowing each business to decide which ethical path it will choose to take.
Both stockholder and stakeholder theories are normative theories of corporate social responsibility that outline the ethical responsibilities of a corporation. Although each theory has its roots in business ethics, the foundation of the two theories differs greatly. According to the theory, which was first introduced by Milton Friedman in the s, a corporation is primarily responsible to its stockholders due to the cyclical nature of business hierarchy.
According to this theory, a company must consider the interests of all stakeholders when making business decisions. While maximizing profits is at the root of the theory, managers are encouraged to increase profits legally and through nondeceptive practices. Additionally, many understand the stockholder theory to prohibit charitable giving altogether.
Misconceptions surround the stakeholder theory, as well. Some believe that profit must be completely disregarded when adhering to this theory.
In reality, profit is a piece of the larger ethical puzzle that should be considered when determining what impact the company has on the stakeholders in question. The Role of Stakeholders in Your Business About the Author Emily Hunsaker is a writer and marketing consultant with diverse employment background, ranging from journalism to nonprofit marketing.
Cite this Article A tool to create a citation to reference this article Cite this Article.Shareholder Theory vs Stakeholder approach. According to the Stakeholder theory, managers are agents of stakeholders who must ensure that the ethical rights of stakeholders are not violated and their legitimate interests are balanced while making decisions.
Supervalu is also seeking shareholder support for restructuring itself into a holding company, a move that may ease some logistics as it seeks to sell more of its retail operations in the future.
Stakeholder Theory vs. Shareholder Theory. Economist Milton Friedman, whose work shaped much of 20th-century corporate America, was a believer in the free-market system and no government intervention.
Shareholders approve the salary of a corporation’s business managers, who, in turn, are in charge of the corporation’s spending, which should also be in line with the wishes of the shareholders. Understanding Stakeholder Theory.
A - Z Dictionary of terms for ITIL. C - call to customer-facing service. This is the official Dictionary of terms for ITIL, which is a set of practices for IT Service Management.
Since the financial year , the Bank has formulated and adopted several Employee Stock Option Schemes (ESOS) for the benefit of the eligible Directors/Employees of the Bank and that of its subsidiary companies, in terms of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) .